<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1996
REGISTRATION NO. 333-10161
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SYGNET WIRELESS, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
Ohio 4812 34-1689165
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
6550-B Seville Drive
Canfield, Ohio 44406
(330) 565-1000
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
------------------------
Albert H. Pharis, Jr.
President and Chief Executive Officer
Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
(330) 565-1000
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
THOMAS F. DOWD, ESQ. BRYANT B. EDWARDS, ESQ.
Bryan Cave LLP Latham & Watkins
700 Thirteenth Street, N.W. 633 W. Fifth Street, Suite 4000
Washington, D.C. 20005-3960 Los Angeles, California 90071
(202) 508-6000 (213) 485-1234
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1996
PROSPECTUS
, 1996
$110,000,000
[SYGNET LOGO]
% SENIOR NOTES DUE 2006
The % Senior Notes due 2006 (the "Notes") are being offered (the
"Offering") by Sygnet Wireless, Inc. (the "Company"). The net proceeds of the
Offering will be used to directly or indirectly finance the acquisition (the
"Horizon Acquisition") of certain cellular telephone systems. See "Use of
Proceeds." If the proceeds are not used for such purpose within 120 days of the
Offering, the Company must offer to repurchase the Notes at 101% of the
principal amount thereof plus accrued interest. Use of such proceeds is also
conditioned upon the receipt by the Company of not less than $19.0 million in
net proceeds from the Preferred Stock Investment (as defined). See "Description
of Notes -- Limitation on Use of Proceeds; Proceeds Purchase Offer."
Interest on the Notes will be payable semi-annually on October 1 and April 1
of each year, commencing on April 1, 1997. The Notes will be redeemable, in
whole or in part, at the option of the Company, at any time on or after October
1, 2001 at the redemption prices set forth herein plus accrued and unpaid
interest, if any, to the date of redemption. In addition, at any time during the
first 36 months after the date of the original issuance of Notes, the Company
may redeem up to an aggregate of $38.5 million in principal amount of Notes at a
redemption price of % of the principal amount thereof, plus accrued and
unpaid interest thereon, with the net proceeds of an offering of Qualified
Capital Stock (as defined) of the Company; provided that at least $71.5 million
in aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption. See "Description of Notes."
The Notes will be general unsecured obligations of the Company and will rank
pari passu in right of payment with all future senior indebtedness of the
Company, if any, and senior in right of payment to all future subordinated
indebtedness of the Company, if any. However, the Company is a holding company
with no direct operations or assets other than the stock of Sygnet
Communications, Inc. (the "Subsidiary"), which holds substantially all of the
operating assets. The Notes will not be guaranteed by the Subsidiary. As a
result, all indebtedness of the Subsidiary, including the Subsidiary's secured
borrowings under the Bank Credit Facility (as defined below), will be
structurally senior to the Notes. In addition, borrowings under the Bank Credit
Facility are secured by a pledge of the stock of the Subsidiary and by all of
its operating assets. As of June 30, 1996, after giving effect to the Horizon
Acquisition and the related financing, the Subsidiary would have had $211.8
million of total outstanding liabilities which would have been structurally
senior to the Notes. See "Risk Factors -- Holding Company Structure; Structural
Subordination." The Company has no debt at the holding company level other than
the Notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 HEREOF FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note...................................... % % %
Total......................................... $ $ $
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting" for the indemnification arrangement with the
Underwriters.
(3) Before deducting expenses of the Offering payable by the Company, estimated
at $ .
The Notes are offered by the several Underwriters subject to prior sale,
when, as and if delivered to and accepted by them, and subject to various prior
conditions, including the right to reject any order in whole or in part. It is
expected that delivery of the Notes will be made against payment therefor in New
York, New York on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
TORONTO DOMINION SECURITIES
<PAGE> 3
<TABLE>
<CAPTION>
PAGE # DESCRIPTION
- ------ -----------
<S> <C>
INSIDE FRONT COVER SPREAD The map depicts an enlargement of the Company's
cellular telephone service areas, which include
The Youngstown, OH MSA, Sharon, PA MSA, Erie,
PA MSA, OH-11 RSA, NY-3 RSA, PA-6 RSA, PA-7 RSA
and PA-2 RSA.
The map differentiates the properties The
Company currently owns from those it intends to
acquire pursuant to the Horizon Acquisition.
</TABLE>
<PAGE> 4
CERTAIN TERMS
For regulatory purposes, the Federal Communications Commission ("FCC") has
designated regions of the United States as either a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA"). Interests in cellular markets are
commonly measured on the basis of the population of the MSA or RSA served, with
each person in the market area referred to as a "Pop." The number of Pops (or
"Net Pops") owned is not the same as the number of subscribers, or even
potential subscribers. As used in this Prospectus, unless otherwise indicated,
the term "Pops" means the estimate of the population of an MSA or RSA, as
derived from the Rand McNally Commercial Atlas and Marketing Guide population
estimates. The term "Net Pops" means the estimated population with respect to a
given service area multiplied by the percentage interest that the Company owns
in the entity licensed in such service area (except in the case of the PA-2 RSA
which the Company does not own, but operates under an FCC grant of Interim
Operating Authority ("IOA")). Because the Company owns 100% of the interest in
each of its MSAs and RSAs, at this point in time, Net Pops equal Pops. Except
for historical financial information and unless otherwise indicated, all
references herein to Pops, Net Pops and the Company's systems give effect to
consummation of the Horizon Acquisition, which will occur simultaneously with
the closing of the Offering. The term "non-wireline" license refers to the
license for any market that was initially awarded to a company, individual or
group, not affiliated with any landline carrier providing service in the market.
The term "wireline" license refers to the license for any market that was
initially awarded to a company, individual or group, affiliated with a landline
carrier providing service in the market. There is, however, no technical
distinction between a wireline and a non-wireline license. The term "system"
means an FCC-licensed cellular telephone system. The term "cell" refers to the
service area of an individual transmitter location in a cellular system. The
term "footprint" refers to the total system coverage area represented by an MSA
or RSA served under FCC license by a given licensee. The term "TDMA" means a
digital technology that uses time division multiple access. The term "PCS" means
personal communications services. The term "churn" refers to the ratio of
disconnected monthly subscribers to average monthly subscribers. The term "CTIA"
means the Cellular Telecommunications Industry Association. The term "NACN"
means the North American Cellular Network.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 (the "Registration Statement") under
the Securities Act with respect to the Notes offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration Statement as
permitted by the rules and regulations of the SEC. Any statements contained
herein concerning the provisions of any document filed as an Exhibit to the
Registration Statement or otherwise filed with the SEC are not necessarily
complete and, in each instance, reference is made to the copy of such document
so filed. Each such statement is qualified in its entirety by such reference.
The Company intends to furnish holders of the Notes annual reports
containing audited financial statements and quarterly reports for the first
three quarters of the fiscal year containing unaudited financial statements.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information (including the Company's combined financial statements and notes
thereto) contained elsewhere in this Prospectus. Unless the context otherwise
requires, references to the "Company" are to Sygnet Wireless, Inc., an Ohio
corporation, its wholly-owned subsidiary, Sygnet Communications, Inc., and their
respective predecessors prior to the corporate restructuring described elsewhere
in this Prospectus and include the operations to be acquired in part with the
proceeds of the Offering. The term "Horizon Acquisition" refers to the
acquisition under the agreement to purchase five RSAs in western Pennsylvania
and New York (PA-1, PA-2, PA-6, PA-7 and NY-3) from three Horizon Cellular
Telephone Company affiliates, as described more fully below under "Business --
The Horizon Acquisition."
THE COMPANY
Upon consummation of the Horizon Acquisition, the Company will own and
operate cellular telephone systems serving one large cluster with approximately
2.4 million Pops in northeastern Ohio, western Pennsylvania and western New
York. The Horizon Acquisition will add five RSAs (the "Horizon Systems") to the
three MSAs and one RSA currently operated by the Company (the "Existing
Systems"), providing the Company with over 89,000 subscribers. The Company's
cellular systems are located in Youngstown, Ohio and Erie, Pennsylvania and in
primarily suburban and rural areas between the Cleveland, Akron-Canton,
Pittsburgh, Buffalo and Rochester metropolitan areas. The Company believes that
its mix of suburban and rural locations provides it with advantages over
cellular operators in predominately urban areas, including greater roaming
revenue opportunities, lower distribution costs and higher costs of entry for
new competitors. The Company has converted all of its Existing Systems to TDMA
digital technology and will selectively convert the more densely populated
portions of the Horizon Systems to digital technology in early 1997. For a
general description of the cellular telephone industry and the regulation
thereof, see "Business -- Overview of the Cellular Telephone Industry" and
"Business -- Regulatory Overview."
The Company began operating cellular systems in 1985 in Youngstown, Ohio
and has expanded to cover nine contiguous markets through a series of
acquisitions. The Company is owned and controlled by the Williamson family,
which has owned and operated broadcast and other communications companies in
northeastern Ohio and western Pennsylvania since 1926. The following table
summarizes the Existing Systems and the Horizon Systems.
<TABLE>
<CAPTION>
DATE OF
TOTAL POPS OWNERSHIP NET POPS ACQUISITION
<S> <C> <C> <C> <C>
EXISTING SYSTEMS(1)
Youngstown, OH MSA............................... 491,900 100% 491,900 1985
Sharon, PA MSA................................... 122,100 100% 122,100 1987
Erie, PA MSA..................................... 280,600 100% 280,600 1995
Columbiana, OH, OH-11 RSA........................ 111,700 100% 111,700 1991
HORIZON SYSTEMS(1)(2)
Chautauqua, NY, NY-3 RSA......................... 485,200 100% 485,200 1996
Crawford, PA, PA-1 RSA........................... 197,200 100% 197,200 1996
Lawrence, PA, PA-6 RSA........................... 376,400 100% 376,400 1996
Indiana, PA, PA-7 RSA............................ 217,100 100% 217,100 1996
McKean, PA, PA-2 RSA(3).......................... 89,400 100% 89,400 1996
---------- ---------
Total.................................... 2,371,600 2,371,600
</TABLE>
- -----------------------------
(1) All of the Existing Systems and Horizon Systems licenses are non-wireline
licenses.
(2) To be acquired as described under "Business -- The Horizon Acquisition."
(3) The Horizon Acquisition includes the Pops in the PA-2 RSA where the Company
has IOA pending the FCC's final determination of the qualifications of the
initial lottery winner to hold the permanent license for the PA-2 RSA. The
Company will not be issued the permanent license to provide cellular service
in this RSA (unless the Company were to reach an agreement to purchase the
license from the eventual recipient of the license) and the Company's IOA
from the FCC will expire upon selection of the new licensee and the
commencement of operations by that licensee. Until the expiration of the
IOA, however, the Company is entitled to all revenue and income generated by
the PA-2 RSA. The Company believes that the expiration of such authority
will not have a material adverse effect on its results of operations,
financial position or cash flows.
3
<PAGE> 6
BUSINESS STRATEGY
The Company's goal is to become the leading full service provider of mobile
telecommunications services in its cluster by offering technically advanced
cellular service, superior coverage and a high level of customer service at
competitive prices. Specifically, the Company's business objectives are to
increase penetration and improve profitability in both the Horizon Systems and
its Existing Systems by taking advantage of its ability to operate in a much
larger regional footprint. In addition, the Company may in the future acquire
additional systems that provide the Company with the ability to further its
strategic objectives.
- Developing the Horizon Systems. The Company believes that the Horizon
Systems are underdeveloped and underpenetrated compared to its Existing
Systems and represent a substantial growth opportunity for the Company.
By taking advantage of marketing, operating and engineering synergies
arising from the Horizon Acquisition, the Company believes that it will
be able to decrease overall per subscriber operating costs and rapidly
increase penetration in the Horizon Systems to levels comparable to those
achieved in its Existing Systems. Immediately upon consummation of the
Horizon Acquisition, the Company will apply its business strategy to the
Horizon Systems, which strategy has generated significant subscriber and
revenue growth in its Existing Systems, including the Erie, PA MSA
acquired in September 1995 (the "Erie Acquisition").
- Aggressive Marketing and Promotion of Cellular Services. The Company
plans to implement the aggressive marketing programs that it has been
using in its Existing Systems to increase subscriber activations in the
Horizon Systems. These include competitive rate plans which provide low
priced regional roaming rates tailored for individual markets and
attractive equipment prices. In addition, the Company will use a mix of
advertising media such as television, radio and outdoor advertising to
reach potential new subscribers.
- Local Retail Outlets and Superior Customer Service. The Company strives
to provide a high level of customer service and the Company's use of
local retail stores is a key element of this local subscriber service
strategy. The Company's stores are staffed with sales and customer
service representatives who provide a more direct, specifically targeted
level of customer service than is ordinarily offered by larger
competitors relying on centralized customer service operations. By having
a permanent local retail presence, the sales staff can cultivate local
market knowledge that allows them to focus their efforts on the specific
demands of the market or markets in which they operate. This improves
their ability to establish relationships with customers, to understand
the customer's needs and to reduce churn. The sales team's ability to
promote the Company's services both inside and outside of its cluster is
enhanced by its license to market under the CELLULAR ONE(R) brand name
and its continuing participation in the NACN, a national cellular network
comprised principally of non-wireline carriers whose goal is to make
cellular service "seamless" throughout North America by facilitating
automatic roaming to and from member systems.
- Advanced Systems Design. The Company's system design and the TDMA
digital technology it employs provide the foundation for technically
superior cellular service. The Company has deployed a large number of
cell sites in each service area. Consequently, subscribers in the
Existing Systems enjoy a high level of local and regional coverage,
resulting in high quality hand-held coverage throughout most of its
population centers, minimal call blocking, seamless call delivery through
NACN and the availability of digital voice and data services. All of the
Company's existing cells have already been upgraded to offer TDMA digital
services and the Company intends to selectively improve the technology
being used in the Horizon Systems to match this high quality level. The
Company believes it is well positioned to address new technologies that
might become available in its markets.
- Decentralized Marketing Management. The Company has assembled
management, sales and operating staff with extensive experience and
relationships within each market. The decentralized market management
structure adopted by the Company allows it to tailor its service to meet
the needs of each market. This local approach to marketing is coordinated
with senior management of the Company and allows each market to benefit
from shared corporate resources.
4
<PAGE> 7
- Acquisition Strategy. The Company's primary external growth strategy has
been to develop its cellular system by pursuing acquisitions that expand
its regional footprint, can be operated efficiently, enhance its
reciprocal relationships with other cellular telephone carriers and
provide an opportunity to gain significant competitive advantages. As it
has done successfully in the past, the Company intends to pursue
acquisition opportunities which permit the Company to achieve these
strategic objectives either with respect to its current cluster or
elsewhere.
- Future Competition. The Company is preparing for what is expected to be
an increasingly competitive telecommunications environment by
aggressively working to attract new subscribers. The Company believes it
is prepared for this competition because it is not dependent on high
roaming or local rates. In addition, the Company believes that it can
effectively face this competition from its position as an incumbent in
the cellular field with a high quality network that is not capacity
constrained. The Company also has an extensive footprint, strong
distribution channels, superior customer service capabilities and an
experienced management team. Because the Company operates in medium to
small markets, the new PCS licensees may be unable or unwilling to offer
commercially viable wireless service in much of the Company's area in the
near term. The Company believes the extensive capital expenditures
required to deploy the infrastructure for PCS is more readily justifiable
from an economic standpoint in larger, more densely populated urban
areas. This constraint of PCS may position the Company to offer roaming
services to PCS customers, as well as to provide bulk lines of service
for resale to certain PCS companies. For example, the Company's existing
Youngstown and Erie systems are equipped to provide TDMA digital roaming
to AT&T Wireless PCS subscribers when AT&T Wireless introduces dual band
TDMA phones in the adjacent Cleveland and Buffalo-Rochester MTAs.
THE HORIZON ACQUISITION
On July 11, 1996, the Company signed an agreement with Horizon Cellular
Telephone Company of Chautauqua, L.P., Horizon Cellular Telephone Company of
Crawford, L.P. and Horizon Cellular Telephone Company of Indiana, L.P. (the
"Horizon Companies") to purchase for $250.0 million in cash (subject to net
working capital adjustment) the Horizon Systems, which consist of the PA-1,
PA-2, PA-6, PA-7 and NY-3 RSAs. Under the agreement, the Company is to become
the cellular licensee serving contiguous markets representing approximately 1.3
million Pops and covering over 16,125 square miles in western Pennsylvania and
New York. The PA-2 RSA, which represents 89,400 Pops, currently operates under
IOA pending the FCC's final determination of the qualifications of the initial
lottery winner to hold the permanent license for the PA-2 RSA. While the Company
is not acquiring a permanent license for the PA-2 RSA, it is entitled to all
revenue and income generated by the cellular system until the FCC resolves the
dispute. The Company is unable to predict when or how the FCC will resolve this
matter.
Simultaneously with the closing of the Horizon Acquisition, the Subsidiary
will obtain secured financing from a number of commercial lenders (the
"Lenders") under a $300.0 million revolving line of credit (the "Bank Credit
Facility"), the agents for which will be Toronto Dominion (Texas), Inc. and PNC
Bank, National Association. In addition, the Company will issue (the "Preferred
Stock Investment") $20.0 million liquidation amount of Cumulative Preferred
Stock (the "Preferred Stock") to Toronto Dominion Investments, Inc. or one or
more other affiliates of Toronto Dominion (Texas), Inc. Dividends on the
Preferred Stock will accrue at a rate of 15% per annum for the first four
quarters and will increase by 2% for each four quarter period thereafter until
reaching a maximum rate of 21% per year, and such dividends will be payable
solely through the issuance of additional Preferred Stock. If any event of
default under the terms of the Preferred Stock occurs and is continuing or if
the Company's Annualized Operating Cash Flow Ratio (using substantially the same
definition as that used in the Indenture) exceeds 12.0-to-1.0, then the
otherwise applicable dividend rate for the Preferred Stock will be increased by
5% per annum. In addition, Toronto Dominion Investments, Inc. is entitled to
warrants to purchase Class A Common Stock (as defined) of the Company unless the
Preferred Stock is redeemed with the proceeds of an initial public offering of
Class A Common Stock or from other permitted sources within nine months of the
date of the Preferred Stock Investment. See "Description of Capital
Stock -- Preferred Stock."
5
<PAGE> 8
Proceeds of the Offering, the Preferred Stock Investment and borrowings
under the Bank Credit Facility will be used to pay the purchase price in the
Horizon Acquisition and the related fees and expenses. See "Use of Proceeds." If
the proceeds of the Offering have not been so applied within 120 days of the
closing of the sale of the Notes, the Company will offer to purchase the Notes
at 101% of the principal amount thereof, plus accrued interest to the purchase
date. See "Description of Notes -- Limitation on Use of Proceeds; Proceeds
Purchase Offer." The remainder of availability under the Bank Credit Facility
will be used for working capital purposes, to refinance $71.5 million in
existing debt (unless repaid earlier using proceeds of the Offering) and for
system expansion. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of Bank Credit Facility."
6
<PAGE> 9
THE OFFERING
The following summary description of the Notes is qualified in its entirety
by the more detailed information set forth under the caption "Description of
Notes" contained elsewhere in this Prospectus.
Notes Offered...................... $110,000,000 aggregate principal amount
of % Senior Notes due 2006.
Maturity Date...................... October 1, 2006.
Interest Payment Dates............. April 1 and October 1 of each year,
commencing April 1, 1997.
Mandatory Redemption............... None.
Optional Redemption................ The Notes will be redeemable, in whole or
in part, at the option of the Company at
any time on or after October 1, 2001 at
the redemption prices set forth herein,
plus accrued and unpaid interest, if any,
to the date of redemption. In addition,
at any time during the first 36 months
after the date of the original issuance
of Notes, the Company may redeem up to an
aggregate of $38.5 million in principal
amount of Notes at a redemption price of
% of the principal amount thereof,
plus accrued and unpaid interest thereon,
with the net proceeds of an offering of
Qualified Capital Stock (as defined) of
the Company; provided that at least $71.5
million in aggregate principal amount of
Notes remain outstanding immediately
after the occurrence of such redemption.
See "Description of Notes -- Optional
Redemption."
Limitations on Use of Proceeds;
Proceeds Purchase Offer............ All net proceeds received by the Company
from the sale of the Notes shall be
applied to the purchase of assets in the
Horizon Acquisition or, as set forth
below, to repay indebtedness under the
Subsidiary's existing bank credit
facility pending such acquisition;
provided, however, that no such proceeds
may be applied to the purchase of assets
in Horizon Acquisition until the Company
has received at least $19.0 million in
proceeds from the Preferred Stock
Investment and the Trustee has received
certain opinions and certificates
regarding the Horizon Acquisition.
Pending the consummation of the Horizon
Acquisition, all such proceeds shall be
held by the Company in a separate bank
account, except that up to $71.5 million
of the net proceeds from the sale of the
Notes may be contributed to the
Subsidiary to repay indebtedness under
the Subsidiary's existing bank credit
facility, but only to the extent that the
banks thereunder consent to allow the
amounts repaid to be reborrowed and paid
as a dividend to the Company for the sole
purpose of funding a repurchase of the
Notes in the event that the Horizon
Acquisition does not occur within 120
days following the closing of the sale of
the Notes.
In the event that all of the net proceeds
of the sale of the Notes have not been so
applied, directly or indirectly, to the
purchase of assets in the Horizon
Acquisition within
7
<PAGE> 10
120 days of the closing of the sale of
the Notes, the Company will make an offer
(a "Proceeds Purchase Offer") to all
holders of Notes to purchase on a pro
rata basis, at a price of 101% of the
principal amount thereof plus accrued
interest to the purchase date, all Notes
that may be purchased at such price with
such unapplied net proceeds.
Ranking............................ The Notes will be general unsecured
obligations of the Company and will rank
pari passu with all senior indebtedness
of the Company, if any, and senior in
right of payment to all subordinated
indebtedness of the Company, if any. The
Company is a holding company with no
direct operations and assets other than
the stock of the Subsidiary. The Notes
will not be guaranteed by the Subsidiary,
therefore the Notes will be structurally
subordinated to all liabilities of the
Subsidiary. After giving effect to the
Horizon Acquisition and the other
transactions described under "Unaudited
Pro Forma Condensed Consolidated
Financial Data" (the "Related
Transactions") as if such transactions
had occurred on June 30, 1996, the
Subsidiary would have had $211.8 million
of total outstanding indebtedness
(including $204.4 million of secured
borrowings under the Bank Credit
Facility), all of which is structurally
senior in right of payment to the Notes.
The indenture governing the Notes (the
"Indenture") will allow the Company and
the Subsidiary to incur additional
indebtedness. See "Description of
Notes -- Certain Covenants."
Certain Covenants.................. The Indenture imposes certain limitations
on the ability of the Company and its
Restricted Subsidiaries (as defined) to,
among other things, incur Indebtedness
(as defined), make Restricted Payments
(as defined), effect certain Asset Sales
(as defined), enter into certain
transactions with Related Persons (as
defined), merge or consolidate with any
other person or transfer all or
substantially all of their properties and
assets. See "Description of Notes --
Certain Covenants."
Change of Control.................. Upon the occurrence of a Change of
Control (as defined in the Indenture),
each holder of Notes will have the right
to require the Company to repurchase such
holder's Notes at 101% of the principal
amount thereof plus accrued and unpaid
interest thereon, if any, to the
repurchase date. In addition, a Change in
Control (as defined in the Bank Credit
Facility) will result both in an event of
default under the Bank Credit Facility
permitting the Lenders to accelerate such
indebtedness and in a Mandatory
Redemption Event under the terms of the
Preferred Stock (as defined in the
Preferred Stock Investment). Under such
circumstances, the Company may be
obligated to redeem, repurchase or
otherwise satisfy up to as much as $110.0
million in principal under the Notes,
$300.0 million in principal under the
Bank Credit Facility, and $20.0 mil-
8
<PAGE> 11
lion face amount of the Preferred Stock
(plus, as applicable, associated accrued
interest, dividends, penalties, premiums
and expenses). The Bank Credit Facility
may restrict the ability of the Company
to obtain the funds necessary to
repurchase the Notes in the event of a
Change of Control, and the Company may
not have sufficient funds or financing
available to satisfy its obligations to
repurchase the Notes. See "Description of
Notes -- Certain Covenants -- Change of
Control" and "Description of Bank
Facility" and "Description of Capital
Stock -- Preferred Stock."
Events of Default.................. Events of Default under the Indenture
include failure to pay principal or
interest on the Notes, failure to make
payments on other indebtedness, breach of
certain covenants, certain events of
bankruptcy and insolvency and other
customary events. See "Description of
Notes -- Events of Default and Remedies."
Use of Proceeds.................... The Company intends to use the net
proceeds of the Offering to finance a
portion of the Horizon Acquisition. See
"Use of Proceeds" and "Business -- The
Horizon Acquisition."
RISK FACTORS
Certain factors should be considered in connection with an investment in
the Notes. See "Risk Factors."
9
<PAGE> 12
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT OPERATING DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
------------------------------------------- ---------------------------------
AS ADJUSTED
YEAR ENDED DECEMBER 31, SIX MONTHS SIX MONTHS
--------------------------- ENDED YEAR ENDED ENDED
1993 1994 1995 JUNE 30, 1996 DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue....................... $14,474 $18,048 $24,577 $17,227 $56,577 $ 32,803
Cost of services.................... 2,515 3,452 3,366 2,331 9,028 4,919
Cost of equipment sales............. 930 1,624 4,164 2,003 7,688 3,445
General and administrative
expense........................... 4,412 4,467 5,141 3,613 9,514 5,816
Selling and marketing expense....... 2,166 2,555 3,505 2,356 9,082 4,542
Depreciation and amortization....... 1,951 2,639 3,487 2,483 14,456 7,505
Operating income.................... 2,500 3,311 4,914 4,441 6,809 6,576
Interest expense, net............... 652 964 2,613 2,633 28,397 14,213
Other expense....................... 188 553 286 229 351 348
Net income (loss)................... 1,523 1,722 1,950 1,460 (21,939) (7,985)
Ratio of earnings to fixed
charges(2)........................ 3.11 2.60 1.67 1.56
OTHER FINANCIAL DATA:
EBITDA(3)........................... $ 4,451 $ 5,950 $ 8,401 $ 6,924 $21,265 $ 14,081
<CAPTION>
PRO FORMA(1)
HISTORICAL AS ADJUSTED
AS OF AS OF
JUNE 30, 1996 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $ 3,484 $ 6,265
Property and equipment, net......... 22,430 43,267
Cellular licenses, net.............. 48,824 277,987
Total assets........................ 80,181 344,539
Long-term debt...................... 70,500 313,393
Total liabilities................... 74,695 321,834
Preferred stock..................... 19,000
Shareholders' equity................ 5,485 3,705
SELECTED OPERATING DATA:
Existing Systems(4)
Ending subscribers................ 18,037 24,124 44,665 50,797
Penetration(5).................... 2.5% 3.3% 4.4% 5.0%
Churn(6).......................... 1.3% 1.5% 1.4% 1.3%
Subscriber revenue per average
subscriber...................... $ 50 $ 45 $ 46 $ 45
Selling & marketing costs (all in)
per gross additional
subscriber(7)................... $ 416 $ 418 $ 396 $ 391
Horizon Systems(4)
Ending subscribers................ 9,530 17,188 33,226 38,371
Penetration(5).................... 0.9% 1.6% 2.4% 2.8%
Churn(6).......................... n/a 1.0% 1.1% 1.5%
Subscriber revenue per average
subscriber...................... n/a $ 38 $ 36 $ 36
Selling & market costs (all in)
per gross additional
subscriber(7)................... n/a $ 337 $ 328 $ 350
</TABLE>
- -----------------------------
n/a -- Information not available
(1) The unaudited pro forma statement of operations data and EBITDA for the year
ended December 31, 1995 and the six months ended June 30, 1996 include the
historical operations of the Company and give effect to the following as if
they occurred as of January 1, 1995, (i) the Erie Acquisition, (ii) the
Horizon Acquisition, (iii) the Offering, (iv) the repayment of existing
debt, (v) the borrowings under the Bank Credit Facility, (vi) the Preferred
Stock Investment and (vii) the corporate restructuring of the
10
<PAGE> 13
Company. The unaudited pro forma balance sheet data as of June 30, 1996
includes the historical accounts of the Company and gives effect to the
following as if they occurred as of June 30, 1996, (i) the Horizon
Acquisition, (ii) the Offering, (iii) the repayment of existing debt, (iv)
the borrowings under the Bank Credit Facility, (v) the Preferred Stock
Investment, (vi) the corporate restructuring of the Company and (vii) the
termination of Subchapter S status of the predecessor corporations for
federal and state income tax purposes. The unaudited pro forma condensed
consolidated financial information gives effect to the Erie and Horizon
Acquisitions under the purchase method of accounting.
(2) For the purposes of computing the ratio of earnings to fixed charges and pro
forma deficiency of earnings to fixed charges, "earnings" are defined as
earnings before extraordinary items and accounting changes, interest
expense, amortization of deferred financing costs, taxes and a portion of
rent expense representative of interest. Fixed charges consist of interest
expense, amortization of deferred financing costs and a portion of rent
expense representative of interest. On a pro forma basis, the Company would
include preferred stock dividend requirements in computing its ratio of
earnings to combined fixed charges and preferred stock dividends. The pro
forma deficiency of earnings to combined fixed charges and preferred stock
dividends was $29.5 million for the year ended December 31, 1995 and $12.4
million for the six months ended June 30, 1996.
(3) EBITDA means income before interest expense, income tax expense,
depreciation and amortization expense, minority interest and other non-cash
expenses. EBITDA is not intended to represent cash flows from operating
activities, as determined in accordance with generally accepted accounting
principles, nor has it been presented as an alternative to operating income
as an indicator of operating performance and should not be considered as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
(4) Existing Systems, which include the Company on a historical basis and Erie
Cellular Telephone Company for the period from September 30, 1993 through
December 31, 1995, represent certain operating data for the years ended
December 31, 1993, 1994 and 1995. Horizon Systems include certain operating
data for the Horizon Companies for the years ended December 31, 1993, 1994
and 1995.
(5) Represents the ratio of ending subscribers to total Pops of system.
(6) Represents the average of the monthly churn rates during the periods
presented. Churn equals the ratio of disconnected monthly subscribers to
average monthly subscribers.
(7) Includes selling and marketing expense, cost of equipment sales (net of
revenue) and cost of equipment rentals.
11
<PAGE> 14
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing the Notes offered hereby.
LEVERAGE AND ABILITY TO MEET REQUIRED DEBT SERVICE
The Company considers itself highly leveraged. On a pro forma basis, after
giving effect to the Horizon Acquisition and the debt incurred to finance such
acquisition, including the Notes, the Company's ratio of EBITDA to total
interest expense would have been 0.8 and 1.0, for the year ended December 31,
1995 and the six months ended June 30, 1996, respectively, and the Company's net
loss and deficiency of earnings to combined fixed charges and preferred stock
dividends would have been $29.5 million and $12.4 million. The Company's high
degree of leverage could significantly limit its ability to make acquisitions,
withstand competitive pressures, weather adverse economic conditions, finance
its operations or take advantage of business opportunities that may arise.
The Company intends for the Subsidiary to finance its planned capital
expenditures and ongoing operations primarily using cash flow from operations
and credit availability under the Bank Credit Facility. Aggregate capital
expenditure levels are expected to range from approximately $25.0 million to
$30.0 million from the date of the Offering through December 31, 1997. While the
Company believes that the Subsidiary will have sufficient credit availability
under the Bank Credit Facility and its cash flow from operations to fund such
activities, if the Subsidiary is unable to satisfy any one of its covenants
under the Bank Credit Facility, including its five financial performance
covenants, then the Subsidiary will not be able to borrow under the Bank Credit
Facility during such time period to fund planned capital expenditures, its
ongoing operations or other permissible uses (including payment of dividends to
service interest on the Notes). See "Description of Bank Credit Facility." The
ability of the Subsidiary to fund its planned capital expenditures using credit
availability under the Bank Credit Facility and its cash flow from operations
will also be limited by the requirement under that Bank Credit Facility that, on
an annual basis beginning March 31, 2000, the Subsidiary must make additional
payments of principal thereunder equal to 50% of excess cash flow, which
payments will permanently reduce the amount of credit availability.
The Company's ability to service its debt will require significant and
sustained growth in the Company's cash flow. There can be no assurance that the
Company will be successful in improving its cash flow by a sufficient magnitude
or in a timely manner or in raising additional equity or debt financing to
enable the Company to meet its debt service requirements.
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Company is a holding company with no direct operations and no
significant assets other than the stock of the Subsidiary. The Notes will be
general unsecured obligations of the Company and will rank pari passu in right
of payment with all future senior indebtedness of the Company, if any, and
senior in right of payment to all future subordinated indebtedness of the
Company, if any. The Company does not currently have any other existing debt
other than debt of the Subsidiary. The Notes will not be guaranteed by the
Subsidiary. As a result, all indebtedness of the Subsidiary, including the
Subsidiary's borrowings under the Bank Credit Facility, will be structurally
senior to the Notes. In addition, the Company will pledge the stock of the
Subsidiary to secure the borrowings under the Bank Credit Facility and the
Subsidiary and any other subsidiaries will grant liens on substantially all of
their assets as security for the obligations under the Bank Credit Facility.
Because the Notes are not secured by any assets, in the event of a dissolution,
bankruptcy, liquidation or reorganization of the Subsidiary, holders of the
Notes may receive less ratably than the secured creditors under the Bank Credit
Facility. As of June 30, 1996, after giving effect to the Horizon Acquisition
and the Related Transactions, the Subsidiary would have had $211.8 million of
total outstanding liabilities (including $204.4 million of secured borrowings
under the Bank Credit Facility), all of which is structurally senior in right of
payment to the Notes. See "Capitalization" and "Unaudited Pro Forma Condensed
Consolidated Financial Statements." The Company is dependent on the cash flow of
the Subsidiary to meet its obligations, including the payment of interest and
principal obligations on the Notes when due. Accordingly, the Company's ability
to make principal, interest and other payments to holders of the Notes when due
is dependent on the receipt of sufficient funds from the Subsidiary. Receipt of
such funds will be
12
<PAGE> 15
restricted by the terms of existing and future indebtedness of the Subsidiary,
including the Bank Credit Facility. See "Description of Bank Credit Facility."
BUSINESS RISKS ASSOCIATED WITH THE HORIZON ACQUISITION
The Company will be subject to risks that the Horizon Systems will not
perform as expected and that the returns from such systems will not support the
indebtedness incurred to acquire, or the capital expenditures needed to develop,
such systems. See "Business -- The Horizon Acquisition."
The Company has filed applications seeking FCC approval to assign each of
the licenses to be acquired by the Company as part of the Horizon Acquisition.
The Company may consummate such acquisition after the FCC grants the
applications, but prior to the time the FCC grants are no longer subject to
reconsideration or review. If the Company consummates such acquisition prior to
the time the grants become final orders, there can be no assurance that any or
all such grants will not be reconsidered, reviewed or revoked. In the event any
such grant is revoked, the Company could be required to refile its applications,
rescind the acquisition or otherwise dispose of the licenses acquired pursuant
to the Horizon Acquisition.
COMPETITION
In each of its markets, the Company competes with one other cellular
licensee, most of which are larger and have greater financial resources than the
Company. See "Business -- Cellular Markets and Systems -- Competitors and
Adjoining Systems." The Company also competes, although to a lesser extent, with
paging companies and landline telephone service providers. Many of the Company's
current and potential competitors have financial, personnel and other resources
substantially greater than those of the Company, as well as other competitive
advantages over the Company. See "Business -- Competition" for more detailed
information on the competitive environment faced by the Company. Current
policies of the FCC authorize only two cellular licensees to operate in each
license area and the Company expects there will continue to be competition from
the other licensee authorized to serve each cellular market in which the Company
operates. Competition for subscribers between cellular licensees in a given
license area is based principally upon the services and enhancements offered,
the technical quality of the cellular system, customer service, system coverage
and capacity and price.
As a result of recent regulatory and legislative initiatives, the Company's
cellular operations may face increased competition from entities using or
proposing to use other comparable communications technologies. The Company is
unable to predict whether such competing technologies will be successful and as
a result will provide significant competition for the Company. While some of
these technologies and services using them are currently operational, most are
still in the process of development and commercialization. For example, the
Company's cellular operations are expected to face additional competition from
new market entrants once systems designed to provide PCS have been constructed
and become operational and may face competition from other technologies
developed in the future including, but not limited to, satellite systems. The
Company believes the likelihood of near-term competition from such services is
reduced because the areas in which it operates are less densely populated. There
can be no assurance, however, that one or more of the technologies currently
utilized by the Company in its business will not become inferior or obsolete at
some time in the future. See "Business -- Competition."
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology, including advancements protected by intellectual property laws.
While the Company believes that for the foreseeable future these changes will
not materially hinder the Company's ability to acquire necessary technologies,
the effect of technological changes on the businesses of the Company cannot be
predicted. Thus, there can be no assurance that technological developments will
not have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its ability to manage its
planned growth successfully will depend in large part on its continued ability
to attract
13
<PAGE> 16
and retain highly skilled and qualified personnel. Each of the Company's key
executives will enter into written employment agreements with the Company. See
"Management."
RELIANCE ON USE OF THIRD-PARTY SERVICE MARK
The Company intends to continue to use the registered service mark CELLULAR
ONE(R) to promote the services it offers in all of its license areas, including
the Horizon Systems. The Company's use of this service mark is governed by
five-year contracts between the Company and Cellular One Group, the owner of the
service mark. Such contracts expire on various dates and each is renewable at
the option of the Company for three additional five-year terms, subject to the
attainment of certain customer satisfaction ratings. See "Business -- Service
Marks." Under these agreements, the Company must meet a consistent set of
operating and service quality standards for its systems. If these agreements are
not renewed upon expiration or if the Company fails to meet the applicable
operating or service quality standards, the Company's ability both to attract
new subscribers and retain existing subscribers could be impaired. The Company
does not anticipate any difficulty in obtaining renewal of its agreements with
Cellular One Group or in continuing to meet such standards. Recently, McCaw/AT&T
Wireless, which had been the single largest user of the CELLULAR ONE(R) name,
has significantly reduced its use of the brand name as a primary service mark.
If for this or some other reason beyond the Company's control, the name CELLULAR
ONE(R) were to suffer diminished marketing appeal, the Company's ability both to
attract new subscribers and retain existing subscribers could be materially
impaired.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The Notes are new securities for which there is currently no market.
Although the Company has been advised by the Underwriters that, following
completion of the Offering, they currently intend to make a market in the Notes,
they are not obligated to do so and any such market-making activities may be
discontinued at any time without notice. Accordingly, there can be no assurance
as to the development or liquidity of any market for the Notes. If a market for
the Notes were to develop, the Notes could trade at prices that may be higher or
lower than their initial offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. Historically, the market for non-investment grade debt has
been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the Notes. There can be no assurance that if a
market for the Notes were to develop, such a market would not be subject to
similar disruptions.
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness and other obligations in connection with
the Horizon Acquisition, including the issuance of the Notes. If a court were to
find in a lawsuit by an unpaid creditor or representative of creditors of the
Company that the Company did not receive fair consideration or reasonably
equivalent value for incurring such indebtedness or obligation and, at the time
of such incurrence, the Company: (i) was insolvent; (ii) was rendered insolvent
by reason of such incurrence; (iii) was engaged in a business or transaction for
which the assets remaining in the Company constituted unreasonably small
capital; or (iv) intended to incur or believed it would incur obligations beyond
its ability to pay such obligations as they mature, such court, subject to
applicable statutes of limitation, could determine to invalidate, in whole or in
part, such indebtedness and obligations as fraudulent conveyances or subordinate
such indebtedness and obligations to existing or future creditors of the
Company.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction which is being applied. Generally, however, the
Company would be considered insolvent at a particular time if the sum of its
debts was then greater than all of its property at a fair valuation or if the
present fair saleable value of its assets was then less than the amount that
would be required to pay its probable liabilities on its existing debts as they
became absolute and matured. On the basis of its historical financial
information, its recent operating history as discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other factors, the Company's management believes that, after giving effect to
indebtedness incurred in connection with the Horizon Acquisition and other
related financings, the Company
14
<PAGE> 17
will not be rendered insolvent, will have sufficient capital for the business in
which it will be engaged and will be able to pay its debts as they mature;
however, management has not obtained any independent opinion regarding such
issues. In addition, there can be no assurance as to what standard a court would
apply in making such determinations.
POTENTIAL FOR ADVERSE REGULATORY CHANGE AND THE NEED FOR REGULATORY APPROVALS
The licensing, construction, operation, acquisition and sale of cellular
systems, as well as the number of cellular and other wireless licensees
permitted in each market, are regulated by the FCC. Changes in the regulation of
cellular activities and other wireless carriers or the loss of any license could
have a material adverse effect on the Company's operations. In addition, all
cellular licenses in the United States are subject to renewal upon expiration of
their initial 10-year term. The Company's Youngstown, OH MSA cellular license
expired in 1995 and was renewed by the FCC in due course. The Company's Sharon,
PA MSA, Erie, PA MSA and OH-11 RSA initial licenses expire in 1996, 1998 and
2001, respectively. The licenses for PA-6 and PA-7 both expire on October 1,
2000 and the licenses for PA-1 and NY-3 expire one year later. In each case the
Company will apply for renewal of its license, and while the Company believes
that each of these licenses will be renewed based upon FCC rules establishing a
presumption in favor of licensees that have complied with their regulatory
obligations during the initial license period, there can be no assurance that
all of the Company's licenses will be renewed. See "Business -- Regulatory
Overview."
FLUCTUATIONS IN MARKET VALUE OF LICENSES
A substantial portion of the Company's assets are intangible and primarily
consist of the Subsidiary's interests in cellular licenses. The future value of
the Company's interest in its cellular licenses will depend significantly upon
the success of the Company's business. While there is a current market for the
licenses, such market may not exist in the future or the values obtainable may
be significantly lower than at present. The transfer of interests in such
licenses is also subject to prior FCC approval. As a consequence, there can be
no assurance that the proceeds from the liquidation or sale of the Company's
assets would be sufficient to pay the Company's obligations and a significant
reduction in the value of the licenses could require a charge to the Company's
results of operations.
EQUIPMENT FAILURE AND NATURAL DISASTER
Although the Company carries "business interruption" insurance, a major
equipment failure or a natural disaster affecting the Company's central
switching office, its microwave links or certain of its cell sites could have a
material adverse effect on the Company's operations.
RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones may be linked to cancer. Concerns over RF
emissions may have the effect of discouraging the use of cellular telephones,
which could have a material adverse effect on the Company's business. On August
1, 1996, the FCC released a report and order that updates the guidelines and
methods it uses for evaluating RF emissions from radio equipment, including
cellular telephones. While the FCC's new rules impose more restrictive standards
on RF emissions from low power devices such as portable cellular telephones, the
Company believes that all cellular telephones currently provided by the Company
to its customers comply with the proposed new standards.
15
<PAGE> 18
USE OF PROCEEDS
The net proceeds to be received by the Company from the issuance and sale
of the Notes are estimated to be approximately $105.0 million (after estimated
fees and expenses of approximately $5.0 million). The Company intends to use
such net proceeds, borrowings under the Bank Credit Facility and the net
proceeds from the Preferred Stock Investment, to finance the Horizon
Acquisition. If the proceeds are not applied to the purchase of assets in the
Horizon Acquisition within 120 days of the closing of the sale of the Notes, the
Company will make an offer to purchase the Notes at a price of 101% of the
principal amount thereof, plus accrued interest to the purchase date. See
"Description of Notes -- Limitation on Use of Proceeds; Proceeds Purchase
Offer." See "Business -- The Horizon Acquisition" and "Description of Capital
Stock -- Preferred Stock."
SOURCES AND USES OF FUNDS
(IN THOUSANDS)
<TABLE>
<S> <C>
SOURCES:
Bank Credit Facility................................................. $204,393
Senior Notes due 2006................................................ 110,000
Preferred Stock Investment........................................... 20,000
--------
Total sources................................................... $334,393
========
USES:
Acquisition of Horizon Systems....................................... $250,000
Purchase of Horizon net current assets............................... 2,468(1)
Repayment of long-term bank debt..................................... 71,500(2)
Estimated fees and expenses.......................................... 10,425(3)
--------
Total uses...................................................... $334,393
========
</TABLE>
- -----------------------------
(1) Represents estimated net current assets of the Horizon Companies (exclusive
of cash), based upon historical June 30, 1996 amounts.
(2) Includes additional amounts borrowed subsequent to June 30, 1996 totaling
$1,000.
(3) Represents estimates of $4,975 for underwriting and other expenses related
to the Offering, $4,450 for fees related to the Bank Credit Facility and
$1,000 for fees related to the Preferred Stock Investment.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of June 30, 1996 on (i) an actual basis and (ii) on a pro forma as adjusted
basis after giving effect to the Horizon Acquisition and the Related
Transactions (which includes the Offering). This table should be read in
conjunction with the combined financial statements of the Company, including the
notes thereto, and the "Unaudited Pro Forma Condensed Consolidated Financial
Data" and notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL AS ADJUSTED
<S> <C> <C>
Long-term debt.................................................. $70,500 $ --
Bank Credit Facility............................................ -- 204,393
Senior Notes due 2006........................................... -- 110,000
------- -----------
Total long-term debt.................................. 70,500 314,393
Preferred Stock(1).............................................. -- 19,000
Shareholders' equity:(2)
Common stock(3)............................................ 1,331 62
Additional paid-in capital................................. 3,920 5,291
Treasury stock............................................. (1,719) --
Retained earnings (deficit)................................ 1,953 (1,647)
------- -----------
Total shareholders' equity............................ 5,485 3,706
------- -----------
Total capitalization.................................. $75,985 $ 337,099
======= =========
</TABLE>
- -----------------------------
(1) Net of issuance fees of $1,000.
(2) Excludes options to purchase 504,000 shares of Class A Common Stock granted
under the Company's 1996 Stock Option Plan ("SOP"), none of which are
presently exercisable and contingent warrants related to the Preferred Stock
Investment.
(3) Consists of Class A Common Stock, $0.01 par value per share: 60,000,000
shares authorized; none of which are issued or outstanding; Class B Common
Stock, $0.01 par value per share: 10,000,000 shares authorized; 6,170,630
shares issued and outstanding.
17
<PAGE> 20
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31, 1995 and the six
months ended June 30, 1996 include the historical operations of the Company and
give effect to the following as if they occurred as of January 1, 1995, (i) the
Erie Acquisition, (ii) the Horizon Acquisition, (iii) the Offering, (iv) the
repayment of existing debt, (v) the borrowings under the Bank Credit Facility,
(vi) the Preferred Stock Investment and (vii) the corporate restructuring of the
Company.
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1996 includes the historical accounts of the Company and gives
effect to the following as if they occurred as of June 30, 1996, (i) the Horizon
Acquisition, (ii) the Offering, (iii) the repayment of existing debt, (iv) the
borrowings under the Bank Credit Facility, (v) the Preferred Stock Investment,
(vi) the corporate restructuring of the Company and (vii) the termination of
Subchapter S status of the predecessor corporations for federal and state income
tax purposes. The unaudited pro forma condensed consolidated financial
information gives effect to the Erie and Horizon Acquisitions under the purchase
method of accounting and to the assumptions in the accompanying notes to the
unaudited pro forma condensed consolidated financial data.
The unaudited pro forma condensed consolidated balance sheet at June 30,
1996 and statements of operations for the year ended December 31, 1995 and six
months ended June 30, 1996 have been prepared by the Company based in part on
information provided by (i) AT&T Wireless (former majority owner of the Erie, PA
MSA) for periods prior to the consummation of the Erie Acquisition in September
1995 with respect to the historical results of operations of Erie (as a whole)
and (ii) the Horizon Companies for periods prior to the consummation of the
Horizon Acquisition with respect to the historical results of the operations and
balance sheet of the Horizon Companies. The related pro forma adjustments have
been prepared by the Company's management based on its assumptions and using the
best available information provided by AT&T Wireless and the Horizon Companies.
The unaudited pro forma condensed consolidated financial data has been
prepared by the Company's management. The unaudited pro forma data is not
designed to represent and does not represent what the Company's financial
position or results of operations actually would have been had the
aforementioned transactions been completed as of the date or the beginning of
the periods indicated, or to project the Company's results of operations at any
future date or for any future period. The unaudited pro forma condensed
consolidated financial information should be read in conjunction with the 1995
combined financial statements and notes of the Company and the Horizon Systems
and the financial statements of Erie Cellular Telephone Company for the period
from January 1, 1995 to September 29, 1995, contained elsewhere in this
Prospectus.
18
<PAGE> 21
SYGNET WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ERIE ADJUSTMENTS
ACQUISITION FOR ERIE PRO FORMA
HISTORICAL HISTORICAL(a) ACQUISITION COMBINED
<S> <C> <C> <C> <C>
Revenue:
Cellular services................... $ 21,367 $ 4,638 $26,005
Equipment sales..................... 1,529 916 2,445
Other............................... 1,681 -- 1,681
------- ------ ------ -------
Total revenue................... 24,577 5,554 30,131
Costs and expenses:
Cost of cellular services........... 3,366 1,367 4,733
Cost of equipment sold.............. 4,164 887 5,051
General and administrative.......... 5,141 1,273 $ (772)(b) 5,642
Selling and marketing............... 3,505 1,634 (161)(c) 4,978
Depreciation and amortization....... 3,487 362 1,054(d) 4,903
------- ------ ------ -------
Total costs and expenses........ 19,663 5,523 121 25,307
Income from operations.................. 4,914 31 (121) 4,824
Other:
Interest expense, net............... 2,613 2,613
Other............................... 351 351
------- ------ ------ -------
Total other..................... 2,964 2,964
------- ------ ------ -------
Net income (loss)(1).................... $ 1,950 $ 31 $ (121) $ 1,860
======= ====== ====== =======
Preferred stock dividend requirements
and accretion.........................
Net loss applicable to common
shareholders..........................
Pro forma net loss per share applicable
to common shareholders................
Number of shares used to compute pro
forma per share data..................
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE HORIZON ACQUISITION PRO FORMA
OFFERING ----------------------------- ADJUSTMENTS
AND BANK HORIZON AMC FOR
CREDIT COMPANIES CELLULAR HORIZON PRO FORMA
FACILITY HISTORICAL(g) ASSOCIATES(g) ACQUISITION AS ADJUSTED
<S> <C> <C> <C> <C> <C>
Revenue:
Cellular services................... $22,871 1,352 130 (h) $ 50,358
Equipment sales..................... 1,602 62 4,109
Other............................... -- 33 396 (h) 2,110
-------- ------- ------- ------ ---------
Total revenue................... 24,473 1,447 526 56,577
Costs and expenses:
Cost of cellular services........... 3,572 197 526 (h) 9,028
Cost of equipment sold.............. 2,544 93 7,688
General and administrative.......... 3,577 445 (150)(h) 9,514
Selling and marketing............... 4,016 88 9,082
Depreciation and amortization....... $ 872 (e) 6,650 166 1,865 (i) 14,456
-------- ------- ------- ------ ---------
Total costs and expenses........ 872 20,359 989 2,241 49,768
Income from operations.................. (872) 4,114 458 (1,715) 6,809
Other:
Interest expense, net............... 25,784 (f) 3,830 166 (3,996)(j) 28,397
Other............................... 351
-------- ------- ------- ------ ---------
Total other..................... 25,784 3,830 166 (3,996) 28,748
-------- ------- ------- ------ ---------
Net income (loss)(1).................... $(26,656) $ 284 $ 292 $ 2,281 $ (21,939)
======== ======= ======= ======= =========
Preferred stock dividend requirements
and accretion......................... (4,642)(2)
Net loss applicable to common =========
shareholders.......................... $ (26,581)
Pro forma net loss per share applicable =========
to common shareholders................ $ (4.31)
Number of shares used to compute pro =========
forma per share data.................. 6,170,630
=========
</TABLE>
- -----------------------------
(1) The pro forma statement of operations for the year ended December 31, 1995
does not include a tax benefit related to the pro forma losses. Such losses
would be carried forward and their realization would be dependent upon
future taxable income.
(2) The Preferred Stock dividend, which is payable solely through the issuance
of additional shares of Preferred Stock, represents the effective annual
dividend rate compounded quarterly on the $20,000 Preferred Stock
Investment. The accretion related to issuance fees is $100 per annum and
represents the amount required to accrete the Preferred Stock Investment to
its redemption value (including dividends) upon the tenth anniversary of the
issuance of the stock.
19
<PAGE> 22
SYGNET WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR PRO FORMA
THE OFFERING HORIZON ADJUSTMENTS FOR
AND BANK CREDIT COMPANIES HORIZON PRO FORMA
HISTORICAL FACILITY HISTORICAL(g) ACQUISITION AS ADJUSTED
<S> <C> <C> <C> <C> <C>
Revenue:
Cellular services.............. $ 15,728 $14,216 290(h) $ 30,234
Equipment sales................ 743 893 1,636
Other.......................... 756 177(h) 933
---------- ------------- --------------- -----------
Total revenue............. 17,227 15,109 467 32,803
Costs and expenses:
Cost of cellular services...... 2,331 2,121 467(h) 4,919
Cost of equipment sold......... 2,003 1,442 3,445
General and administrative..... 3,613 2,278 $ (75)(h) 5,816
Selling and marketing.......... 2,356 2,186 4,542
Depreciation and
amortization................. 2,483 $ 425(e) 3,918 679(i) 7,505
---------- --------------- ------------- --------------- -----------
Total costs and
expenses................ 12,786 425 11,945 1,071 26,227
Income from operations............. 4,441 (425) 3,164 (604) 6,576
Other:
Interest expense, net.......... 2,633 11,580(f) 1,796 (1,796)(j) 14,213
Other.......................... 348 348
---------- --------------- ------------- --------------- -----------
Total..................... 2,981 11,580 1,796 (1,796) 14,561
---------- --------------- ------------- --------------- -----------
Net income (loss)(1)............... $ 1,460 $ (12,005) $ 1,368 $ 1,192 $ (7,985)
========= ============== ============ ============== ===========
Preferred stock dividend
requirements and accretion....... (2,695) (2)
-----------
Net loss applicable to common
shareholders..................... $ (10,680)
===========
Pro forma net loss per share
applicable to common
shareholders..................... $ (1.73)
===========
Number of shares used to compute
pro forma per share data......... 6,170,630
===========
</TABLE>
- -----------------------------
(1) The pro forma statement of operations for the six months ended June 30, 1996
does not include a tax benefit related to the pro forma losses. Such losses
would be carried forward and their realization would be dependent upon
future taxable income.
(2) The Preferred Stock dividend, which is payable solely through the issuance
of additional shares of Preferred Stock, represents the effective annual
dividend rate compounded quarterly on the $20,000 Preferred Stock
Investment. The accretion related to issuance fees is $100 per annum and
represents the amount required to accrete the Preferred Stock Investment to
its redemption value (including dividends) upon the tenth anniversary of
the issuance of the shares.
20
<PAGE> 23
SYGNET WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
OFFERING,
BANK CREDIT
FACILITY, AND PRO
HORIZON PREFERRED FORMA
COMPANIES STOCK AS
HISTORICAL HISTORICAL INVESTMENT ADJUSTED
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 1,661 $ 1,019 $ (1,019)(n) $ 1,661
Accounts receivable.................... 4,755 5,574 10,329
Inventory.............................. 738 397 1,135
Prepaid expenses and deferred taxes.... 550(k) 185 735
---------- ---------- ------------- -------
Total current assets.............. 7,704 7,175 (1,019) 13,860
Property and equipment -- net............... 22,430 20,837 43,267
Cellular licenses -- net.................... 48,824 90,289 138,874 (m)(o) 277,987
Deferred financing costs.................... 1,537 7,888 (p) 9,425
---------- ---------- ------------- -------
Total assets...................... $ 80,495 $ 118,301 $ 145,743 $344,539
======= ======== ========== =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 913 $ 1,446 $ 2,359
Other current liabilities.............. 822 694 1,516
Accrued expenses....................... 2,172 1,548 3,720
---------- ---------- -------
Total current liabilities......... 3,907 3,688 7,595
Deferred tax liability...................... 557(l) 557
Long-term debt.............................. 70,500 31,981 $ 210,912 (q) 313,393
Other long-term liabilities................. 289 289
---------- ---------- ------------- -------
Total liabilities................. 75,253 35,669 210,912 321,834
Preferred stock............................. 19,000 (r) 19,000
Shareholders' equity........................ 5,242 82,632 (84,169)(s) 3,705
---------- ---------- ------------- -------
Total liabilities & shareholders'
equity.......................... $ 80,495 $ 118,301 $ 145,743 $344,539
======= ======== ========== =========
</TABLE>
21
<PAGE> 24
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions described
in the previous pages on the Company's Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended December 31, 1995 and
the six months ended June 30, 1996, the following adjustments have been made:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C> <C>
(a) Represents the results of operations of Erie Cellular
Telephone Company ("Erie") for the period from January
1, 1995 through September 29, 1995. Erie was acquired by
the Company from AT&T Wireless on September 29, 1995.
</TABLE>
<TABLE>
<S> <C> <C> <C>
(b) General and administrative expenses have been adjusted
to eliminate certain allocated technical and
administrative shared services costs charged by AT&T
Wireless to Erie during the period from January 1, 1995
through September 29, 1995. The Company has not incurred
similar incremental costs subsequent to its acquisition
of Erie and has not allocated any such general and
administrative expenses. ............................... $ (772)
=============
(c) Selling and marketing expenses have been adjusted to
eliminate certain allocated marketing shared services
costs charged by AT&T Wireless to Erie during the period
from January 1, 1995 through September 29, 1995. The
Company has not incurred similar incremental costs
subsequent to its acquisition of Erie and has not
allocated any such selling and marketing expenses. ..... $ (161)
=============
(d) Represents incremental amortization and depreciation for
the period from January 1, 1995 through September 29,
1995 due to (i) the application of purchase accounting
resulting from increases in the basis of intangible
assets and (ii) the upgrade of certain property and
equipment in the Erie Acquisition. Intangible assets
include cellular licenses that are amortized over 40
years. Property and equipment includes cell site
equipment that is depreciated over 5 to 12 years.
Elimination of historical amortization expense
related to cellular licenses....................... $ (171)
Amortization of cellular licenses.................. 755
Depreciation of new cell site equipment............ 470
-------------
$ 1,054
=============
(e) Represents the amortization of estimated deferred
financing costs resulting from the (i) sale of the
Notes, (ii) borrowings under the Bank Credit Facility
and (iii) elimination of historical amortization
relating to the repayment of existing debt. Deferred
financing costs are amortized over the life of the
related debt.
Amortization of deferred financing costs related to
the sale of the Notes.............................. $ 498 $ 249
Amortization of deferred financing costs related to
borrowings under the Bank Credit Facility.......... 557 279
Elimination of amortization of deferred financing
costs related to existing debt..................... (183) (103)
------------- -------------
$ 872 $ 425
============= =============
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C> <C>
(f) Represents the net effect on interest expense resulting
from (i) the sale of the Notes assuming an interest rate
of 11% per annum, (ii) borrowings of $204.4 million
under the Bank Credit Facility with a variable interest
rate (assumed to be 8% per annum) and (iii) elimination
of historical interest expense relating to the repayment
of existing debt.
Interest expense related to the sale of the
Notes.............................................. $12,100 $ 6,050
Interest expense related to borrowings under the
Bank Credit Facility............................... 16,344 8,172
Elimination of historical interest expense on
existing debt...................................... (2,660) (2,642)
------------- -------------
$25,784 $ 11,580
============= =============
If the interest rate on the variable rate Bank Credit
Facility were to change by 1/8 of one percent, interest
expense would change by approximately $255 for the year
ended December 31, 1995 and $128 for the six months
ended June 30, 1996.
(g) Represents the results of operations of the Horizon
Companies for the year ended December 31, 1995 and six
months ended June 30, 1996 and the results of operations
of AMC Cellular Associates (Indiana, PA-7 RSA) for the
period from January 1, 1995 through June 15, 1995. The
Horizon Companies acquired the operating license and
certain operating assets and liabilities of PA-7 on June
15, 1995.
(h) Represents reclassifications of certain revenues, costs
and expenses of the Horizon Companies to conform to the
Company's historical presentation.
Revenue Cellular services:
Reclassified to cost net roaming incollect
expenses recorded by the Horizon Companies as a
reduction from revenue........................... $ 526 $ 467
Other revenue.................................... (396) (177)
------------- -------------
$ 130 $ 290
============= =============
Other revenue...................................... $ 396 $ 177
============= =============
Cost of cellular services:
To include as a cost net roaming incollect
expenses......................................... $ 526 $ 467
============= =============
General and administrative expenses have been adjusted
to eliminate certain corporate costs charged to the
Horizon Companies that will not be incurred subsequent
to the Horizon Acquisition.............................. $ (150) $ (75)
============= =============
(i) Represents the incremental amortization due to the
application of purchase accounting resulting from an
increase in the basis of intangible assets in the
Horizon Acquisition. Intangible assets include cellular
licenses and customer lists that are amortized over 40
and 5 years, respectively.
Elimination of historical amortization expense
related to cellular licenses and customer lists.... $(3,860) $ (2,184)
Amortization of cellular licenses and customer
lists.............................................. 5,725 2,863
------------- -------------
$ 1,865 $ 679
============= =============
(j) Represents the elimination of historical interest
expense as a result of debt not assumed as part of the
Horizon Acquisition. ................................... $(3,996) $ (1,796)
============= =============
</TABLE>
23
<PAGE> 26
For the purposes of determining the pro forma effect of the transactions
described in the previous pages on the Company's Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of June 30, 1996, the following adjustments have
been made:
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
<S> <C> <C> <C>
(k) Prepaid expenses and deferred taxes include a pro forma
adjustment for a deferred tax asset to be recorded as a
result of the termination of Subchapter S status for
federal and state income tax purposes assuming it
occurred as of June 30, 1996. Before this adjustment,
prepaid expenses and deferred taxes totaled $236.
Deferred tax assets are primarily attributable to
certain accrued expenses. .............................. $ 314
=============
(l) Represents the deferred tax liability to be recorded as
a result of the pro forma adjustment for a termination
of Subchapter S status for federal and state income tax
purposes assuming it occurred as of June 30, 1996. The
deferred tax liability is primarily attributable to
accelerated methods of depreciation for income tax
purposes. .............................................. $ 557
=============
(m) Reflects adjustments to assets acquired and liabilities
assumed of the Horizon Companies based on their
estimated fair values under the purchase method of
accounting. The allocation of the aggregate purchase
cost below is preliminary and assumes the historic net
book value of tangible assets approximates their fair
value. The actual allocation will be based on
management's final evaluation of such assets and
liabilities. Some portion of the excess of purchase cost
over the historical cost of the net assets acquired may
ultimately be allocated to specific tangible and
intangible assets and liabilities. The final allocation
of purchase cost and the resulting effect on net income
may differ significantly from the pro forma amounts
included herein.
(n) Represents the net adjustment to cash and cash
equivalents as a result of the following:
Proceeds from sale of the Notes.................... $ 110,000
Proceeds from borrowings under the Bank Credit
Facility........................................... 204,393
Purchase of net current assets of the Horizon
Companies (exclusive of cash), based upon
historical June 30, 1996 amounts................... (2,468)
Acquisition of the Horizon Companies............... (250,000)
Proceeds of the Preferred Stock Investment net of
issuance fees of $1,000............................ 19,000
Payment of deferred financing costs related to the
sale of the Notes, borrowings under the Bank Credit
Facility........................................... (9,425)
Repayment of existing debt including additional
amounts borrowed subsequent to June 30, 1996
totaling $1,000.................................... (71,500)
Cash as of June 30, 1996 not acquired in connection
with the Horizon Acquisition....................... (1,019)
-------------
$ (1,019)
=============
(o) Represents the net increase in cellular licenses and
customer lists due to the application of purchase price
accounting for assets to be acquired in the Horizon
Acquisition.
Elimination of historical cellular licenses and
customer
lists.............................................. $ (90,289)
Fair value of cellular licenses and customer lists
to be acquired as a result of the Horizon
Acquisition........................................ 229,163
-------------
$ 138,874
=============
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
<S> <C> <C> <C>
(p) Represents the net adjustment to deferred financing
costs as a result of:
Deferred financing costs related to the sale of the
Notes.............................................. $ 4,975
Deferred financing costs related to borrowings
under the Bank Credit Facility..................... 4,450
Estimated write-off of deferred financing costs as
of June 30, 1996 as a result of the early
extinguishment of existing
debt............................................... (1,537)
-------------
$ 7,888
=============
(q) Represents the net effect on long-term debt resulting
from:
Sale of the Notes.................................. $ 110,000
Borrowings under the Bank Credit Facility.......... 204,393
Repayment of existing debt including additional
amounts borrowed subsequent to June 30, 1996
totaling $1,000.................................... (71,500)
Elimination of Horizon Companies debt not assumed
as part of the Horizon Acquisition................. (31,981)
-------------
$ 210,912
=============
(r) Proceeds of the Preferred Stock Investment net of
issuance fees of $1,000................................. $ 19,000
=============
(s) Represents the net adjustment to shareholders' equity as
a result of:
Elimination of net equity in connection with
pending Horizon Acquisition........................ $ (82,632)
Represents the effect on shareholders' equity of
the write-off of deferred financing costs
associated with the early extinguishment of
existing debt...................................... (1,537)
-------------
$ (84,169)
=============
</TABLE>
25
<PAGE> 28
SELECTED FINANCIAL DATA
THE COMPANY
The following selected financial data are derived from the historical
financial statements of the Company. The combined financial statements for the
three years ended December 31, 1995 have been audited by Ernst & Young LLP,
independent auditors. Prior to December 31, 1992, the Company's Selected
Financial Data does not include the selected financial data of Wilcom
Corporation, which consists of paging operations. Prior to such date, the
operations of Wilcom Corporation were not significant and would not impact
comparability of the financial data. The financial statements for the two years
ended December 31, 1992 have been audited by other independent auditors. The
financial data for the six month periods ended June 30, 1996 and 1995 are
derived from unaudited financial statements. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1996. The data should be
read in conjunction with the combined financial statements, related notes and
other financial information included herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.............. $ 2,098 $11,487 $14,474 $18,048 $24,577 $10,719 $17,227
Cost of services........... 204 1,270 2,515 3,452 3,366 1,505 2,331
Cost of equipment sales.... 262 1,207 930 1,624 4,164 1,676 2,003
General and administrative
expense................. 825 3,612 4,412 4,467 5,141 2,411 3,613
Selling and marketing
expense................. 436 2,089 2,166 2,555 3,505 1,415 2,356
Depreciation and
amortization............ 289 1,441 1,951 2,639 3,487 1,387 2,483
Operating income........... 82 1,868 2,500 3,311 4,914 2,325 4,441
Interest expense, net...... 192 888 652 964 2,613 829 2,633
Other expense, net......... (6) (114) (325) (625) (351) (111) (348)
Net income (loss).......... (116) 866 1,523 1,722 1,950 1,385 1,460
Ratio of earnings to fixed
charges(1).............. 1.84 3.11 2.60 1.67 2.52 1.56
BALANCE SHEET DATA:
Working capital
(deficit)............... $ 4,285 $ 1,756 $ 4 $ (331) $ 1,880 $ 778 $ 3,484
Net fixed assets........... 8,355 9,276 11,127 14,084 21,049 16,448 22,430
Total assets............... 20,488 20,431 20,553 27,418 79,618 29,783 80,181
Long-term debt............. 13,774 12,064 10,928 18,264 69,500 22,414 70,500
Total liabilities.......... 15,618 15,024 15,224 22,649 75,332 25,609 74,695
Shareholders' equity....... 4,869 5,407 5,329 4,769 4,286 4,174 5,485
</TABLE>
- -----------------------------
(1) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items and accounting changes, interest
expense, amortization of deferred financing costs, taxes and a portion of
rent expense representative of interest, by the sum of interest expense,
amortization of deferred financing costs and a portion of rent expense
representative of interest. The ratio of earnings to fixed charges is not
meaningful for periods that result in a deficit. For the year ended December
31, 1991, the deficiency of earnings to fixed charges was $116.
26
<PAGE> 29
HORIZON COMPANIES
The following selected financial data are derived from the combined
Statements of Operations, included elsewhere herein, of the Horizon Systems
which consist of selected systems of Horizon Cellular Telephone Company, L.P.
The Statements of Operations for each of the three years in the period ended
December 31, 1995 have been audited by Ernst & Young LLP, independent auditors.
The financial data for the six month periods ended June 30, 1996 and 1995 are
derived from unaudited financial statements. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1996. The data should be
read in conjunction with the combined financial statements, related notes, and
other financial information included herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.................................. $6,584 $14,908 $24,473 $9,758 $15,109
Cost of services............................... 1,567 2,807 3,572 1,569 2,121
Cost of equipment sales........................ 717 1,690 2,544 918 1,443
General and administrative..................... 848 2,097 3,577 1,476 2,278
Selling........................................ 1,344 2,550 4,016 1,635 2,186
Depreciation and amortization.................. 2,294 4,484 6,650 2,788 3,918
Operating income (loss)........................ (186) 1,280 4,114 1,372 3,163
</TABLE>
27
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's and Horizon Systems' audited combined financial statements and the
notes thereto appearing elsewhere in this Prospectus. As a result of the Erie
Acquisition and the Horizon Acquisition, the Company's operating results for the
periods discussed may not be indicative of future performance. The Horizon
Systems' operating results exclude all corporate charges and corporate overhead.
THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
For the six months ended June 30, 1996, revenues totalled $17.2 million, a
60.7% increase over total revenue of $10.7 million for the comparable period in
1995. Net income for the six months ended June 30, 1996 was $1.5 million, a 7.1%
increase over net income of $1.4 million for the first half of 1995. Earnings
before interest, taxes, depreciation and amortization, minority interest and
other non-cash expenses ("EBITDA") grew to $6.9 million (40.1% of total revenue)
in the six months ended June 30, 1996 from $3.7 million (34.6% of total revenue)
in the comparable 1995 period. Subscriber revenue grew by 80.6% to $13.0 million
in the six months ended June 30, 1996 compared to $7.2 million in the first six
months of 1995 as a result of continued subscriber growth in the Company's
markets and from the inclusion of results from the Erie Acquisition for all of
1996. Consistent with industry trends, the Company's subscribers continue to
increase and at June 30, 1996 ending subscribers had grown 13.7% since December
31, 1995. However, on a per subscriber basis revenue is down slightly, due in
part to competitive market pressures and the mix of subscribers reflecting
safety and security subscribers, who typically have fewer minutes of use per
month. Roamer revenue grew by 47.4% to $2.8 million during the six months ended
June 30, 1996 compared to $1.9 million during the same period in 1995. This
increase was a result of greater volume of roaming traffic in the Existing
Systems versus the comparable 1995 period and the inclusion of the results for
Erie for 1996 after the Erie Acquisition. Roamer rates during the first half of
1996 have remained flat in comparison to the first half of 1995. Equipment sales
were flat period to period at approximately $0.7 million as retail prices of
equipment continued to decline but were offset by increased accessory sales.
Throughout the industry, to attract subscribers cellular telephone equipment is
frequently provided to subscribers at no cost as part of promotions to sell
access, airtime and cellular service. Consistent with this industry practice the
Company is selling fewer telephones, however, sales of accessories continue to
grow. Other revenue declined to $756,000 in the first six months of 1996 from
$839,000 in the comparable 1995 period as equipment rental revenue continued to
decrease as rental programs continued to be phased out.
Cost of services increased to $2.3 million during the six months ended June
30, 1996 from $1.5 million in the comparable 1995 period. Although cost of
services has increased 53.3%, subscriber revenue grew 80.6% during the same
period, which was the result of additional usage generated from a larger
subscriber base, primarily Erie, and operating efficiencies gained from the Erie
Acquisition. Cost of equipment sales increased by 17.6% to $2.0 million in the
first half of 1996 from $1.7 million in the comparable 1995 period. The primary
reasons for the rise in cost include an increased number of telephones
distributed as new subscriber acquisitions increased, the higher level of swaps
and upgrades of telephones by existing customers and the inclusion of the Erie
Acquisition. The increased cost of equipment sold resulting from the rise in
gross activations is somewhat offset by the declining cost to acquire new
telephones. General and administrative costs increased by 50.0% to $3.6 million
in the first half of 1996 from $2.4 million in the first half of 1995. This
increase is due primarily to the Erie Acquisition. Other operating costs also
generally increased as the Company grew. Selling and marketing costs grew by
over 71.4% to $2.4 million in the first six months of 1996 from $1.4 million in
the comparable 1995 period. This increase is due to a higher level of new
subscribers added period to period and the Erie Acquisition. Selling and
marketing cost (all in) per gross new subscriber decreased to $391 in the first
half of 1996 from $422 in the comparable 1995 period. Depreciation and
amortization increased to $2.5 million in the first six months of 1996 from $1.4
million in the comparable 1995 period due to the higher levels of fixed assets
purchased for system growth and the Erie Acquisition. The Company continues to
expand its systems by adding cell sites and in the first half of 1996 four new
cell sites
28
<PAGE> 31
were constructed at a cost of $0.9 million. The amortization of the Erie
cellular license also contributed $0.8 million to this increased cost.
Interest expense more than tripled to $2.6 million for the first six months
of 1996 from $0.8 million in the comparable 1995 period. This increase was
primarily a result of increased borrowings associated with the Erie Acquisition.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
For the year ended December 31, 1995, the Company's total revenue increased
to $24.6 million, which was 36.7% higher than 1994 total revenue of $18.0
million. Net income for the year ended December 31, 1995 was $2.0 million, which
was 17.6% higher than the prior year's net income of $1.7 million. EBITDA grew
to $8.4 million or 34.1% of total revenue in 1995 from $6.0 million or 33.3% of
total revenue in 1994. Subscriber revenue grew by 52.2% to $17.2 million in the
year ended December 31, 1995 from $11.3 million in the prior year as a result of
continued growth in the number of subscribers in the Existing Systems and from
the Erie Acquisition. Roamer revenue was flat year to year at $4.1 million.
During 1995, the Company reduced roaming rates in certain key areas to be more
competitive which increased its roaming traffic volume. However, the decrease in
rates was offset by the increased roaming traffic volume that occurred.
Equipment sales grew by 25.0% to $1.5 million in 1995 from $1.2 million in 1994
as the Company's retail stores continued to emphasize accessory sales and
because of increased subscriber acquisition levels somewhat offset by continued
cellular telephone promotion programs. Other revenue grew by 21.4% to $1.7
million in 1995 from $1.4 million in 1994, as the paging subscriber base
continued to increase.
Cost of services decreased by 2.9% to $3.4 million during the year ended
December 31, 1995 from $3.5 million in the prior year. This was a result of the
Company's ability to negotiate reduced roaming rates charged by its key roaming
partners. This rate reduction more than offset the additional costs associated
with increased traffic from internal growth and the Erie Acquisition. Cost of
equipment sales more than doubled to $4.2 million in 1995 from $1.6 million in
1994. The primary reasons for the rise in cost include an increased number of
phones distributed on a promotional basis to new activations, a higher level of
swaps and upgrades of phones by existing customers, the continued phase-out of
phone rental programs and the Erie Acquisition. General and administrative costs
increased 13.3% to $5.1 million in 1995 from $4.5 million in 1994. This increase
was primarily due to the Erie Acquisition, partially offset by a decrease in
personal property tax rates for public utilities.
Selling and marketing costs grew by 34.6% to $3.5 million in the year ended
December 31, 1995 from $2.6 million in the comparable 1994 period. This increase
is due to the growth of new subscribers added to the system in 1995 compared to
1994, the Erie Acquisition and increased advertising levels. Selling and
marketing cost (all in) per gross new subscriber decreased to $396 in 1995 from
$418 in 1994. Depreciation and amortization increased to $3.5 million in 1995
from $2.6 million in 1994 due to the increased fixed assets purchased for system
growth and the Erie Acquisition. In 1995, the Company spent approximately $9.1
million in capital expenditures, primarily for additional cell sites which will
enable it to further penetrate its Existing Markets and $3.0 million to convert
the acquired Erie equipment to conform with the Company's technology. The Erie
cellular license was acquired at a cost of $42.5 million resulting in $0.3
million of additional amortization expense in 1995.
Interest expense, net more than doubled to $2.6 million for the year ended
December 31, 1995 from $1.0 million in the year ended December 31, 1994. During
1995 the Company borrowed approximately $52.0 million primarily associated with
the Erie Acquisition, which resulted in additional interest expense.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
For the year ended December 31, 1994, the Company's revenue totalled $18.0
million, a 24.1% increase over 1993 total revenue of $14.5 million. Net income
for the year ended December 31, 1994 was $1.7 million, which was 13.3% higher
than the prior year net income of $1.5 million. EBITDA grew to $6.0 million or
33.3% of total revenue in 1994 from $4.5 million or 31.0% of total revenue in
1993. Subscriber revenue grew by 27.0% to $11.3 million in 1994 from $8.9
million in the prior year due primarily to the growth in the number of
subscribers. Roamer revenue increased by 32.3% to $4.1 million during 1994 from
$3.1 million in 1993 due to
29
<PAGE> 32
higher levels of roaming traffic volume, partially offset by slight reductions
in roaming rates. Throughout the industry, there was competitive pressure on
roaming rates. Equipment sales grew slightly to $1.2 million in 1994 from $1.1
million in 1993 as the Company opened two retail stores, which stimulated
accessory sales and increased subscriber acquisition levels.
Cost of services increased by 40.0% to $3.5 million during the year ended
December 31, 1994 from $2.5 million in 1993. This was a result of increased
usage levels associated with the continually growing subscriber base. Cost of
equipment sales increased by 77.8% to $1.6 million in 1994 from $0.9 million in
fiscal 1993. This was largely due to the increase in subscriber activation
levels, equipment purchases and increased accessory sales. Selling and marketing
costs grew by 18.2% to $2.6 million in the year ended December 31, 1994 from
$2.2 million in the prior year. This increase was due to a higher level of new
subscribers added in 1995 compared to 1994, despite reductions in dealer and
agent per unit costs. Selling and marketing cost (all in) per gross new
subscriber increased slightly to $418 in 1994 from $416 in 1993.
Depreciation and amortization increased to $2.6 million in 1994 from $2.0
million in 1993 due to the depreciation on higher levels of fixed assets
purchased for system growth. Interest expense, net increased by 42.9% to $1.0
million for the year ended December 31, 1994 from $0.7 million in 1993 primarily
associated with the purchase of a partnership interest as well as borrowings for
additional system expansion.
Other expense increased to $0.6 million in 1994 from $0.2 million in 1993
due to the write-off of obsolete subscriber equipment.
HORIZON SYSTEMS HISTORICAL RESULTS OF OPERATIONS
The following discussion and analysis is based upon information obtained
from the Horizon Companies and reflects management's current understanding of
the Horizon Systems, which the Company has not yet acquired.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Total revenues and sales increased 54.1% to $15.1 million for the six
months ended June 30, 1996 from $9.8 million for the comparable period in 1995.
Of this increase, $3.0 million was due to an increase in subscriber revenues,
$2.1 million was due to an increase in roaming revenues and $0.3 million was due
to an increase in equipment sales. The growth in subscriber revenues was due
primarily to the growth in the number of subscribers associated with continued
internal expansion as well as the acquisition of PA-2 and PA-7. The growth in
roaming revenues was due primarily to increased coverage of the licensed service
area through the construction of additional cell sites. The growth in equipment
sales was due primarily to the increase in the number of subscriber additions,
somewhat offset by continued decreases in cellular telephone equipment prices.
Consistent with industry practices, the Horizon Companies frequently sold
cellular equipment at significant discounts, resulting in a negative gross
margin. Such practices are designed to attract and retain subscribers to allow
the Horizon Companies to focus on its primary business of selling airtime,
access and other cellular services.
Cost of services increased 31.3%, to $2.1 million (13.9% of total revenues
and sales) for the six months ended June 30, 1996 from $1.6 million (16.3% of
total revenues and sales) for the comparable period in 1995. The growth in the
Horizon Companies' subscriber base and the expansion of its cellular coverage
areas led to greater cost of services, primarily in the areas of system network,
billing and administration. The decrease in cost of services as a percentage of
total revenues excluding equipment sales resulted from continued operational
efficiencies as well as the fact that certain costs are fixed in nature and are
spread over an increasing revenue base. Cost of equipment sales increased 55.6%,
to $1.4 million for the six months ended June 30, 1996 from $0.9 million for the
comparable period in 1995. The increase was due primarily to the increase in the
number of subscriber additions and their associated equipment purchases.
General and administrative expenses increased 53.3%, to $2.3 million (15.2%
of total revenues and sales) for the six months ended June 30, 1996 from $1.5
million (15.3% of total revenues and sales) for the comparable period in 1995.
The increase was due primarily to the overall growth of the Horizon Companies as
well as the acquisition of PA-2 and PA-7. The decrease in general and
administrative expenses as a percentage of total revenues and sales resulted
from efficiencies in the Horizon Companies' operations. Selling expenses
30
<PAGE> 33
increased 37.5%, to $2.2 million (14.6% of total revenues and sales) for the
three months ended June 30, 1996 from $1.6 million (16.3% of total revenues and
sales) for the comparable period in 1995. The increase was due primarily to the
increase in the number of subscribers added.
EBITDA increased 69.0% to $7.1 million (47.0% of total revenues and sales)
for the six months ended June 30, 1996 from $4.2 million (42.9% of total
revenues and sales) for the comparable period in 1995, primarily as a result of
increased subscriber and roaming revenue and efficiencies in cost of services
and general and administrative expenses, as previously discussed.
Depreciation and amortization increased approximately 39.3%, to $3.9
million for the six months ended June 30, 1996 from $2.8 million for the
comparable period in 1995. The increase was primarily the result of amortization
of license costs associated with the acquisition in 1995 of PA-2 and PA-7, as
well as an increase in depreciation related to additional cellular equipment
placed into service throughout 1995 and the first quarter of 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues and sales increased 64.4% to $24.5 million for the year
ended December 31, 1995 from $14.9 million in 1994. Of this increase, $5.2
million was due to an increase in subscriber revenues, $3.9 million was due to
an increase in roaming revenues and $0.5 million was due to an increase in
equipment sales. The growth in subscriber revenues was due primarily to the
growth in number of subscribers associated with continued internal expansion as
well as the acquisition of PA-2 and PA-7. The growth in roaming revenues was due
primarily to increased coverage of the licensed service area through the
addition of cell sites as well as the acquisition of PA-2 and PA-7. The growth
in equipment sales was due primarily to the increase in the number of
subscribers as noted above, somewhat offset by continued decreases in cellular
telephone equipment prices.
Cost of services increased 28.6%, to $3.6 million (14.7% of total revenues
and sales) for the year ended December 31, 1995 from $2.8 million (18.8% of
total revenues and sales) in 1994. The growth in the Horizon Companies'
subscriber base and the expansion of its cellular coverage areas has led to
greater cost of services, primarily in the areas of system network, billing and
administration. Cost of equipment sales increased 47.1%, to $2.5 million for the
year ended December 31, 1995 from $1.7 million in 1994. The increase was due
primarily to the increase in the number of subscribers and their associated
equipment purchases, as noted above.
General and administrative expenses increased 71.4% to $3.6 million (14.7%
of total revenues and sales) for the year ended December 31, 1995 from $2.1
million (14.1% of total revenues and sales) in 1994. The increase was due
primarily to the increase in the number of subscribers as well as the
acquisition of PA-2 and PA-7. Selling expenses increased 53.8%, to $4.0 million
(16.3% of total revenues and sales) for the year ended December 31, 1995 from
$2.6 million (17.4% of total revenues and sales) in 1994. The increase was due
primarily to the growth in the number of subscribers added.
EBITDA increased 86.2% to $10.8 million (44.1% of total revenues and sales)
for the year ended December 31, 1995 from $5.8 million (38.9% of total revenues
and sales) in 1994, primarily as a result of increased subscriber and roaming
revenue as noted above.
Depreciation and amortization increased 46.7%, to $6.6 million for the year
ended December 31, 1995 from $4.5 million in 1994. The increase was primarily
the result of amortization of license costs associated with the acquisition of
PA-2 and PA-7 during 1995, a full year's amortization of license cost associated
with NY-3, which was acquired during 1994, as well as an increase in
depreciation related to additional cellular equipment placed into service
throughout 1995 and 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Total revenues and sales increased 125.8% to $14.9 million for the year
ended December 31, 1994 from $6.6 million in 1993. Of this increase, $4.1
million was due to an increase in subscriber revenues, $3.6 million was due to
an increase in roaming revenues and $0.6 million was due to an increase in
equipment sales. Subscriber revenues increased 151.9% to $6.8 million for the
year ended December 31, 1994 from $2.7 million in 1993. The growth in subscriber
revenues was due primarily to the growth in the number of subscribers
31
<PAGE> 34
associated with continued internal expansion as well as the acquisition of new
systems. Roaming revenues increased 109.1% to $6.9 million for the year ended
December 31, 1994 from $3.3 million in 1993. The growth in roaming revenues was
due primarily to an increase in the number of systems as well as increased cell
site coverage of the licensed service area. Equipment sales increased 83.3% to
$1.1 million for the year ended December 31, 1994 from $0.6 million in 1993. The
growth in equipment sales was due primarily to the increase in the number of
subscribers as noted above, somewhat offset by continued decreases in cellular
telephone equipment prices. The Horizon Companies' frequently sold cellular
equipment at significant discounts, resulting in a negative gross margin. Such
practices were designed to attract and retain subscribers and to allow the
Horizon Companies to focus on its primary business of selling airtime, access
and other cellular services.
Cost of services increased 75.0%, to $2.8 million (18.8% of total revenues
and sales) for the year ended December 31, 1994 from $1.6 million (24.2% of
total revenues and sales) in 1993. The growth in the Horizon Companies'
subscriber base and the expansion of its cellular coverage areas led to greater
cost of services, primarily in the areas of system network, billing and
administration. Cost of equipment sales increased, to $1.7 million for the year
ended December 31, 1994 from $0.7 million in 1993. The increase was due
primarily to the increase in the number of subscribers and their associated
equipment purchases, as noted above.
General and administrative expenses more than doubled to $2.1 million
(14.1% of total revenues and sales) for the year ended December 31, 1994 from
$0.8 million (12.1% of total revenues and sales) in 1993. The increase was due
primarily to the increase in the number of systems in operation throughout 1994.
Selling expenses doubled to $2.6 million (17.4% of total revenues and
sales) for the year ended December 31, 1994 from $1.3 million (19.7% of total
revenues and sales) in 1993. The increase was due primarily to the increase in
the number of systems in operation as well as the growth in number of
subscribers added.
EBITDA more than doubled to $5.8 million (38.9% of total revenues and
sales) for the year ended December 31, 1994 from $2.1 million (31.8% of total
revenues and sales) in 1993, primarily as a result of increased subscriber and
roaming revenue as noted above. Cost efficiencies, particularly in general and
administrative expenses, also contributed to the increase.
Depreciation and amortization increased to $4.5 million for the year ended
December 31, 1994 from $2.3 million in 1993. The increase was primarily the
result of amortization of license costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on internally generated funds to fund
debt service and a substantial portion of its capital expenditures. Bank credit
facilities have been used for additional support of capital expenditure programs
and to fund acquisitions. The Company plans to use the $110.0 million of
proceeds of the Offering, the $20.0 million of proceeds of the Preferred Stock
Investment and approximately $204.4 million of borrowings under the Bank Credit
Facility to fund the $250.0 million Horizon Acquisition, to pay the fees
associated with the above transactions and to refinance $71.5 million of
existing bank debt.
The Company projects a rapid buildout of the Horizon Systems in order to
improve coverage and increase usage. During the first 15 month period through
December 31, 1997, the Company expects to add 35 to 40 new cell sites to the
Horizon Systems, which is approximately a 50% increase over the existing 70 cell
sites. The Company also plans to continue to add cell sites in its Existing
Systems and to convert cell sites from Ericsson to Northern Telecom equipment to
more efficiently serve communities of interest that expand the existing Northern
Telecom systems in Youngstown and Erie. In addition, the Company will continue
to upgrade switches and other network equipment. Aggregate capital expenditure
levels are expected to range from approximately $25 to $30 million from the date
of the Offering through December 31, 1997.
The Company plans to use internally generated funds plus funds available
under the Bank Credit Facility to finance this capital expenditure program.
After completion of the Offering and the Horizon Acquisition, the Company
expects to have approximately $95.6 million in remaining revolver availability
under the Bank Credit Facility, subject to meeting certain financial tests. See
"Description of Bank Credit Facility." The Company expects that these resources
will be sufficient to meets its needs.
32
<PAGE> 35
EFFECT OF NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which will require the Company to review
for the impairment of long-lived assets and certain identifiable intangibles to
be held and used by the Company when events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company adopted
the provisions of SFAS No. 121 effective January 1, 1996. The impact of adopting
SFAS No. 121 did not have a material effect on the Company's combined financial
position or results of operations.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which establishes a fair value based method of accounting for
stock-based employee compensation plans, including stock option plans. However,
the new standard allows compensation to continue to be measured as prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, but requires expanded disclosures. At this time, management
expects to account for stock options in accordance with APB Opinion No. 25. The
disclosure requirements of SFAS No. 123, which are required if an entity elects
to continue to use the accounting method in APB Opinion No. 25, will be adopted
as required for the financial statements of the Company for the year ending
December 31, 1996.
INFLATION
The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations.
33
<PAGE> 36
BUSINESS
GENERAL
Upon consummation of the Horizon Acquisition, the Company will own and
operate cellular telephone systems serving one large cluster with approximately
2.4 million Pops in northeastern Ohio, western Pennsylvania and western New
York. The Horizon Acquisition will add the five Horizon System RSAs to the
Existing Systems (three MSAs and one RSA), providing the Company with over
89,000 subscribers. The Company's cellular systems are located in Youngstown,
Ohio and Erie, Pennsylvania and in primarily suburban and rural areas between
the Cleveland, Akron-Canton, Pittsburgh, Buffalo and Rochester metropolitan
areas. The Company believes that its mix of suburban and rural locations
provides it with advantages over cellular operators in predominately urban
areas, including greater roaming revenue opportunities, lower distribution costs
and higher costs of entry for new competitors. The Company has converted all of
its Existing Systems to TDMA digital technology and will selectively convert the
more densely populated portions of the Horizon Systems to digital technology in
early 1997.
The Company was incorporated under the laws of the State of Ohio in August
1991. Youngstown Cellular Telephone Company, which is one of the Company's
predecessor partnerships, has operated the Youngstown system since 1985 with
substantially the same management that operates the Company today. The principal
executive offices of the Company are located at 6550-B Seville Drive, Canfield,
Ohio 44406 and its telephone number is (330) 565-1000.
CORPORATE RESTRUCTURING
To facilitate implementation of its business strategy, the Company is in
the process of being restructured, which restructuring will be completed prior
to consummation of the Offering (the "Restructuring"). Prior to the
Restructuring, SYGNET Communications, Inc., has been operating as a Close
Corporation with S corporation tax status. Its cellular business has been
operated through three partnerships: Youngstown Cellular Telephone Company, Erie
Cellular Telephone Company and Wilcom Cellular, each of which has two other
corporate partners -- Wilcom Corporation and Sharon-Youngstown Cellular, Inc. As
a result of the Restructuring, Wilcom has been merged into SYGNET
Communications, Inc. which has been renamed Sygnet Wireless, Inc. and now is a
holding company with Sharon-Youngstown, renamed Sygnet Communications, Inc., now
its wholly-owned subsidiary and the operating company. The existence of the
Youngstown Cellular Telephone Company, Erie Cellular Telephone Company and
Wilcom Cellular will automatically terminate once all partnership interests are
transferred to the Subsidiary, which will occur prior to the Offering.
Completion of the restructuring is contingent upon FCC approval of the transfer
of the FCC microwave licenses held by the partnerships.
THE HORIZON ACQUISITION
On July 11, 1996, the Company signed an agreement with the Horizon
Companies to purchase for $250.0 million in cash (subject to net working capital
adjustment) the Horizon Systems, which consist of the PA-1, PA-2, PA-6, PA-7 and
NY-3 RSAs. Under the agreement, the Company is to become the cellular licensee
serving contiguous markets representing approximately 1.3 million Pops and
covering over 16,125 square miles in western Pennsylvania and New York. The PA-2
RSA, which represents 89,400 Pops, currently operates under IOA pending the
FCC's final determination of the qualifications of the initial lottery winner to
hold the permanent license for the PA-2 RSA. While the Company will not be
issued a permanent license for the PA-2 RSA (unless the Company were to reach an
agreement to purchase the license from the eventual recipient of the license),
it is entitled to all revenue and income generated by the cellular system until
the FCC resolves the dispute. The Company is unable to predict when or how the
FCC will resolve this matter or the likelihood that a purchase agreement will be
reached with the eventual license winner.
The four contiguous Pennsylvania RSAs to be acquired from the Horizon
Companies include 880,100 Pops and cover over 10,243 square miles in western
Pennsylvania. The New York system represents 485,200 Pops and covers over 5,882
square miles in the western portion of the state. When combined with the
Existing Systems, the Company will serve one large cluster representing
approximately 2.4 million Pops and covering 19,164 square miles. Pittsburgh and
Erie, Pennsylvania; Buffalo, Elmira and Rochester, New York; and
34
<PAGE> 37
Cleveland, Akron, Canton and Youngstown, Ohio are the major urban centers
encompassed by or bordering on the Company's service area.
BUSINESS STRATEGY
The Company's goal is to become the leading full service provider of mobile
telecommunications services in its cluster by offering technically advanced
cellular service, superior coverage and a high level of customer service at
competitive prices. Specifically, the Company's business objectives are to
increase penetration and improve profitability in both the Horizon Systems and
its Existing Systems by taking advantage of its ability to operate in a much
larger regional footprint. In addition, the Company may in the future acquire
additional systems that provide the Company with the ability to further its
strategic objectives.
- Developing the Horizon Systems. The Company believes that the Horizon
Systems are underdeveloped and underpenetrated compared to its Existing
Systems and represent a substantial growth opportunity for the Company. By
taking advantage of marketing, operating and engineering synergies arising
from the Horizon Acquisition, the Company believes that it will be able to
decrease overall per subscriber operating costs and rapidly increase
penetration in the Horizon Systems to levels comparable to those achieved
in its Existing Systems. Immediately upon consummation of the Horizon
Acquisition, the Company will apply its business strategy to the Horizon
Systems, which strategy has generated significant subscriber and revenue
growth in its Existing Systems, including the Erie Acquisition in
September 1995.
- Aggressive Marketing and Promotion of Cellular Services. The Company
plans to implement aggressive marketing programs that it has been using in
its Existing Systems to increase subscriber activations in the Horizon
Systems. These include competitive rate plans which include low priced
regional roaming rates tailored for individual markets and attractive
equipment prices. In addition, the Company will use a mix of advertising
media such as television, radio and outdoor advertising to reach potential
new subscribers.
- Local Retail Outlets and Superior Customer Service. The Company strives
to provide a high level of customer service and the Company's use of local
retail stores is a key element of this local subscriber service strategy.
The Company's stores are staffed with sales and customer service
representatives who provide a more direct, specifically targeted level of
customer service than is ordinarily offered by larger competitors relying
on centralized customer service operations. By having a permanent local
retail presence, the sales staff can cultivate local market knowledge that
allows them to focus their efforts on the specific demands of the market
or markets in which they operate. This improves their ability to establish
relationships with customers, to understand the customer's needs and to
reduce churn. The sales team's ability to promote the Company's services
both inside and outside of its cluster is enhanced by its license to
market under the CELLULAR ONE(R) brand name and its continuing
participation in the NACN, a national cellular network comprised
principally of non-wireline carriers whose goal is to make cellular
service "seamless" throughout North America by facilitating automatic
roaming to and from member systems.
- Advanced Systems Design. The Company's system design and the TDMA
digital technology it employs provide the foundation for technically
superior cellular service. The Company has deployed a large number of cell
sites in each service area. Consequently, subscribers in the Existing
Systems enjoy a high level of local and regional coverage, resulting in
high quality hand-held coverage throughout most of its population centers,
minimal call blocking, seamless call delivery through NACN and the
availability of digital voice and data services. All of the Company's
existing cells have already been upgraded to offer TDMA digital services
and the Company intends to selectively improve the technology being used
in the Horizon Systems to match this high quality level. The Company
believes it is well positioned to address new technologies that might
become available in its markets.
- Decentralized Marketing Management. The Company has assembled
management, sales and operating staff with extensive experience and
relationships within each market. The decentralized market management
structure adopted by the Company allows it to tailor its service to meet
the needs of each
35
<PAGE> 38
market. This local approach to marketing is coordinated with senior
management of the Company and allows each market to benefit from shared
corporate resources.
- Acquisition Strategy. The Company's primary external growth strategy has
been to develop its cellular system by pursuing acquisitions that expand
its regional footprint, can be operated efficiently, enhance its
reciprocal relationships with other cellular telephone carriers and
provide an opportunity to gain significant competitive advantages. As it
has done successfully in the past, the Company intends to pursue
acquisition opportunities which permit the Company to achieve these
strategic objectives either with respect to its current cluster or
elsewhere.
- Future Competition. The Company is preparing for what is expected to be
an increasingly competitive telecommunications environment by aggressively
working to attract new subscribers. The Company believes it is prepared
for this competition because it is not dependent on high roaming or local
rates. In addition, the Company believes that it can effectively face this
competition from its position as an incumbent in the cellular field with a
high quality network that is not capacity constrained. The Company also
has an extensive footprint, strong distribution channels, superior
customer service capabilities and an experienced management team. Because
the Company operates in medium to small markets, the new PCS licensees may
be unable or unwilling to offer commercially viable wireless service in
much of the Company's area in the near term. The Company believes the
extensive capital expenditures required to deploy the infrastructure for
PCS is more readily justifiable from an economic standpoint in larger,
more densely populated urban areas. This constraint of PCS may position
the Company to offer roaming services to PCS customers, as well as to
provide bulk lines of service for resale to certain PCS companies. For
example, the Company's existing Youngstown and Erie systems are equipped
to provide TDMA digital roaming to AT&T Wireless PCS subscribers when AT&T
Wireless introduces dual band TDMA phones in the adjacent Cleveland and
Buffalo-Rochester MTAs.
CELLULAR MARKETS AND SYSTEMS
After giving effect to the Horizon Acquisition, the Company will operate in
eight license areas in northeastern Ohio and western New York and Pennsylvania.
This does not include the PA-2 IOA. The following table summarizes the Existing
Systems and the Horizon Systems. See "-- The Horizon Acquisition."
<TABLE>
<CAPTION>
DATE OF
TOTAL POPS OWNERSHIP NET POPS ACQUISITION
<S> <C> <C> <C> <C>
EXISTING SYSTEMS(1)
Youngstown, OH MSA........................... 491,900 100% 491,900 1985
Sharon, PA MSA............................... 122,100 100% 122,100 1987
Erie, PA MSA................................. 280,600 100% 280,600 1995
Columbiana, OH, OH-11 RSA.................... 111,700 100% 111,700 1991
HORIZON SYSTEMS(1)(2)
Chautauqua, NY, NY-3 RSA..................... 485,200 100% 485,200 1996
Crawford, PA, PA-1 RSA....................... 197,200 100% 197,200 1996
Lawrence, PA, PA-6 RSA....................... 376,400 100% 376,400 1996
Indiana, PA, PA-7 RSA........................ 217,100 100% 217,100 1996
McKean, PA, PA-2 RSA(3)...................... 89,400 100% 89,400 1996
--------- ---------
Total................................ 2,371,600 2,371,600
</TABLE>
- -----------------------------
(1) All of the Existing Systems and Horizon Systems licenses are non-wireline
licenses.
(2) To be acquired as described under "-- The Horizon Acquisition."
(3) The Horizon Acquisition includes the Pops in the PA-2 RSA where the Company
has IOA pending the FCC's final determination of the qualifications of the
initial lottery winner to hold the permanent license for the PA-2 RSA. The
Company will not be issued the permanent license to provide cellular
service in this RSA (unless the Company were to reach an agreement to
purchase the license from the eventual
36
<PAGE> 39
recipient of the license) and the Company's IOA from the FCC will expire
upon selection of the new licensee and the commencement of operations by
that licensee. Until the expiration of the IOA, however, the Company is
entitled to all revenue and income generated by the PA-2 RSA. The Company
believes that the expiration of such authority will not have a material
adverse effect on its results of operations.
The Company's operations are conducted in a single large cluster
representing approximately 2.4 million contiguous Pops in Ohio, Pennsylvania and
New York. It spans three MSAs and six RSAs and over 19,164 square miles. The
area includes 25 counties and 479 total interstate highway miles. Eight
airports, Cleveland, Pittsburgh, Youngstown, Akron, Erie, Corning, Rochester and
Buffalo, provide access to the systems.
YOUNGSTOWN-WARREN OHIO, COLUMBIANA, OHIO AND SHARON, PENNSYLVANIA
The Youngstown, Ohio area is an important economic area for eastern Ohio
and western Pennsylvania. Located at a midway point approximately 50 miles from
both Pittsburgh and Cleveland along the Ohio Turnpike and Interstate 76, the
Youngstown market is a key roaming corridor between these two cities. Interstate
80, a major transportation access route from the Midwest to New York City, is
also a source of roaming traffic.
The median household income for the Youngstown MSA is $29,982, with 22.8%
of the population with household income in excess of $50,000. Selected major
employers in the area include Delphi Packard Electric Systems, General
Motors-Lordstown Assembly, St. Elizabeth Health Center, WCI Steel, Youngstown
State University and Youngstown Air Reserve Base. The area is also served by
Youngstown State University and Pennsylvania State University Sharon Campus. The
population of the Youngstown-Warren Metro Area has increased throughout the
1990's.
Notable cultural and recreation attractions include the Youngstown
Symphony, Butler Institute of American Art and the Youngstown-Warren LPGA
Classic. The area's proximity to Cleveland and Pittsburgh also allows residents
to enjoy the attractions of these cities, including professional sports and
additional cultural activities.
ERIE, PENNSYLVANIA
Located on Lake Erie, Erie County is noted for manufacturing,
transportation and recreation. The Port of Erie handles imports and exports
through the St. Lawrence Seaway and is supported by excellent rail service. Erie
County exports more per capita than any other Pennsylvania county. Included in
Erie County is Interstate 90, which connects Buffalo and Cleveland. Interstate
79 connects Erie and Interstate 90 directly to Pittsburgh. Both of the routes
are important roaming corridors. There are 66 total interstate highway miles in
a market comprised of 802 square miles.
The Erie County median household income is $32,363 with 24.8% of the
population having household incomes in excess of $50,000. Major Erie County
employers include General Electric, Hamot Health Foundation, St. Vincent Health
Center, Plastek Industries and Erie Insurance Group. Pennsylvania State
University at Erie, Mercyhurst College, Edinboro University of Pennsylvania and
Gannon University are located in the license area.
Travel and tourism is Erie's second largest industry with millions of
vacationers attracted annually to Presque Isle State Park and other recreational
and historical sites. Residents and visitors enjoy the Erie Philharmonic,
professional baseball and hockey and a number of zoos and museums.
PENNSYLVANIA 1
PA-1 is located between the Company's existing Erie and Sharon MSAs. The
primary population center is Meadville which is located along the 42 miles of
Interstate 79 that runs through the market. Interstate 80 also crosses the RSA,
extending east from Sharon. The market's median household income in $28,593 with
18.8% of households having income over $50,000.
Major employers include Quaker State, Penzoil and Joy Technologies.
Allegheny College is located in the region and Conneaut Lake and the Allegheny
National Forest serve as key recreation areas.
37
<PAGE> 40
PENNSYLVANIA 6 AND 7
The license areas of the PA-6 and PA-7 RSAs are located in the western part
of Pennsylvania just north of Pittsburgh to approximately the middle of the
state. The market is characterized by substantial levels of roaming, as it
includes significant traffic flow between its market areas and surrounding major
cities such as Pittsburgh, Pennsylvania, Youngstown, Ohio and Erie,
Pennsylvania. In particular, Butler County (located in PA-6) has a strong
community of interest with nearby Pittsburgh. Butler County contains 43% of the
RSA's total population, of which 50,000 people commute out of the county to
Pittsburgh. The population in all counties comprising both RSAs has grown during
the 1990-1995 timeframe. Butler County population experienced the greatest
growth at 7.2%. Median household income for PA-6 is $30,172 and for PA-7 is
$25,930, with 21.9% and 15.8% of households in each RSA above $50,000.
Pennsylvania State University DuBois, Clarion University of Pennsylvania and
Indiana University of Pennsylvania are examples of the educational institutions
in the area.
The major highways serving these RSAs are Interstate 79 and Interstate 80
that link the major population centers in north-central Pennsylvania. In
addition, Route 60, a recently completed toll road, serves as an expressway to
Pittsburgh International Airport. Indiana County, located in PA-7, also contains
several well-traveled state highways (Routes 119, 22 and 422) that are major
regional commuting routes for the Pittsburgh region. The are 145 combined
interstate highway miles within these RSAs.
NEW YORK 3
The NY-3 RSA is located in the western part of New York State and includes
six counties in an area that covers 5,882 square miles that represents 22.5% of
the area of New York State. It is the largest geographic RSA in the United
States. The system borders Buffalo and Rochester to the north, Erie,
Pennsylvania to the west and Binghamton/Elmira to the east. This large area
includes bedroom communities for Buffalo and Rochester, primarily in Genesee
County (61,300 Pops), strong core communities along Lake Erie and in Jamestown
in Chautauqua County (142,100 Pops) and the growing economic region of Corning
and Bath in Steuben County (100,700 Pops). Population growth statistics for the
period of 1990-1995 show that each county comprising the RSA grew, with Wyoming
County experiencing the highest growth rate of 4.0%.
Major employers include Corning, Inc., Dresser Rand and Morrison Knudsen.
The area is also home to many recreational destinations, including various lakes
such as the Finger Lakes region, portions of New York's wine country and certain
of New York's ski areas. The State University of New York at Fredonia and St.
Bonaventure are two of the colleges and universities located in the license
area. Health care services are available through WCA Hospital and Brooks
Memorial Hospital.
NY-3 is also a strong roaming market, containing 1.7 million interstate
vehicle miles and 3.6 million total highway vehicle miles. The primary
interstates are Interstate 90 (the New York Thruway) which connects Buffalo,
Rochester and Erie and yields traffic counts averaging over 21,000 cars per day
and Interstate 390 which connects Rochester, Corning and Binghamton/Elmira and
yields traffic counts averaging 9,600 cars per day (including over 15,000 cars
per day across Steuben County). Route 17, known as the Southern Tier Expressway,
is a four lane U.S. highway that traverses the entire RSA from Corning to the
Pennsylvania state line. There are 94 interstate highway miles within the area.
COMPETITORS AND ADJOINING SYSTEMS
The Company competes with various companies in each of its markets.
Management believes that the integrated network of its contiguous cellular
systems operating as CELLULAR ONE(R) affords it significant advantages over many
of its competitors. Overall, the Company competes against four distinct cellular
system operators.
38
<PAGE> 41
The following chart lists the Company's cellular competitors in each of its
communities of interest.
<TABLE>
<CAPTION>
MARKETS COMPETITORS
<S> <C>
Youngstown, OH MSA....................... 360() Communications
Erie, PA MSA............................. GTE Mobilnet
Columbiana, OH (OH-11 RSA)............... 360() Communications
Sharon, PA MSA........................... 360() Communications
Crawford, PA (PA-1 RSA).................. 360() Communications
Lawrence, PA (PA-6 RSA).................. Bell Atlantic/NYNEX and 360() Communications
Indiana, PA (PA-7 RSA)................... Bell Atlantic/NYNEX
Chautauqua, NY (NY-3 RSA)................ Frontier
McKean, PA (PA-2 RSA).................... Bell Atlantic/NYNEX
</TABLE>
MARKETING
The systems acquired from the Horizon Companies promote their respective
cellular products and services under the name CELLULAR ONE(R), as does the
Company for its operations in the Erie vicinity. See "-- Service Marks."
CELLULAR ONE(R), the first national brand name in the cellular industry is
currently utilized in over 400 service areas throughout the United States.
CELLULAR ONE(R) ranks as the nation's most recognized cellular service provider.
The national advertising campaign conducted by the Cellular One Group enhances
the Company's advertising exposure. The Company also obtains substantial
marketing benefits from the name recognition associated with this widely used
service mark, both with existing subscribers traveling outside the Company's
service areas and with potential new subscribers moving into the Company's
service areas. In addition, travelers who subscribe to CELLULAR ONE(R) service
in other markets may be more likely to use the Company's service when they
travel in the Company's service areas. This is primarily due to the technical
operation of the cellular telephone. Cellular telephones of non-wireline
subscribers are programmed to select the non-wireline carrier (such as the
Company) when roaming, unless the subscriber either dials a special code or has
a cellular telephone equipped with an "A/B" (non-wireline/ wireline) switch and
selects the wireline carrier.
As part of its growth strategy, the Company expects to expand its use of
the CELLULAR ONE(R) name to include Youngstown, Ohio, where it currently
operates under the name "Wilcom Cellular." Several competing systems bordering
the Youngstown market historically operated under the CELLULAR ONE(R) name, thus
creating the opportunity for customer confusion. With the Horizon Acquisition,
almost all of the bordering systems using the CELLULAR ONE(R) name will be owned
by the Company, thus the need for differentiation will be eliminated. By
adopting the CELLULAR ONE(R) name, the Company will be able to leverage the
brand recognition for the mark in the sale of all its own services.
Management has also implemented its marketing strategy by training and
compensating its sales force in a manner designed to stress the importance of
customer service and high penetration levels. The Company's sales staff has a
two-tier structure. A retail sales force handles walk-in traffic and a targeted
sales staff solicits certain corporate and government subscribers. The Company's
management believes that its internal sales force is better able to select and
screen new subscribers and select pricing plans that realistically match
subscriber means and needs than are independent agents. As a result, the
Company's use of an internal sales force keeps marketing costs low both directly
because commissions are lower and indirectly because subscriber retention is
higher than when using independent agents.
The Company's sales force works principally out of its own retail stores in
which the Company offers a full line of cellular products and services. As of
June 30, 1996, the Company maintained four retail stores in the Youngstown area
and three in the Erie area. Horizon has 10 retail stores supporting the Horizon
Systems.
ROAMING
Roaming is an important service component for many subscribers. The Company
believes that attractively priced regional roaming is important to the
development of customers for all regional non-wireline cellular carriers.
Accordingly, where possible, the Company attempts to arrange reciprocal roaming
rates that allow customers to roam at competitive prices. The Company believes
this increases usage on all non-wireline
39
<PAGE> 42
systems, including the Company's. Roaming revenue is a substantial source of
incremental revenue for the Company due, in part, to the fact that a number of
the Company's cellular systems are located along major travel and commuting
corridors and because certain of the Horizon Systems are in the early stages of
their growth cycle. While there is an industry trend to reduce roaming rates,
the Company is addressing this trend through its roaming agreements which are
usually reciprocal in nature and are at or near home rates. Roaming yield for
the 12 months ended December 31, 1995 was $0.57 and for the six months ended
June 30, 1996 was $0.54 per minute, including long distance toll charges.
Roaming yield is defined as roamer service revenue, which includes airtime,
tolls and surcharges divided by the roaming minutes of use.
The Company is also a member of NACN. NACN is the largest wireless
telephone network system in the world, linking non-wireline cellular operators
throughout the United States and Canada. NACN connects key areas across North
America so that customers can use their cellular phones to place and receive
calls in these areas as easily as they do in their home areas. Through NACN,
customers receive calls automatically without the use of complicated roaming
codes as they "roam" in more than 5,000 cities and towns in the United States
and Canada. By dialing a subscriber's cellular telephone number, the caller can
reach the subscriber without knowing his or her location or having to dial
additional roaming access numbers. In addition, special services such as call
forwarding and call waiting automatically follow subscribers as they travel.
Through its membership in NACN, the Company provides extended regional and
national service to subscribers, thereby allowing them to easily make and
receive calls while in other cellular service areas. This service distinguishes
the Company's service and call delivery features from those of some of its
competitors.
PRODUCTS AND SERVICES
In addition to providing high-quality cellular telephone service in each of
its markets, the Company also offers various custom-calling features such as
voicemail, call forwarding, call waiting, three-way conference calling and no
answer and busy transfer. The Company also sells cellular equipment at no cost
or at discount prices as a way to encourage use of its mobile services.
Several rate plans are presented to prospective customers so that they may
choose the plan that will best fit their expected calling needs. Unlike some of
its competitors, the Company designs rate plans on a market-by-market basis. The
Company's local market managers are given the ability to market from a wide
variety of existing rate plans and are encouraged to propose to the Company new
rate plans that respond to market and competitive conditions. These rate plans
include a high user plan, a medium user plan, a basic plan and an economy plan.
Most rate plans combine a fixed monthly access fee, per minute usage charges and
additional charges for custom-calling features in a package which offers value
to the customer while enhancing airtime use and revenues for the Company. In
general, rate plans that include a higher monthly access fee typically include a
lower usage rate per minute. An ongoing review of equipment and service pricing
is conducted to ensure the Company's competitiveness. As appropriate, revisions
to the pricing of service plans and equipment are made to meet the demands of
the local marketplace.
CUSTOMER SERVICE
Customer service is an essential element of the Company's marketing and
operating philosophy. The Company is committed to attracting significant numbers
of new subscribers and retaining existing subscribers by providing consistently
high quality customer service and coverage. In each of its cellular service
areas, the Company maintains a local staff, including a market manager, to serve
as customer service representatives. Local offices and installation and repair
facilities enable the Company to service customers better and schedule
installations and make repairs on a timely basis.
SYSTEM DEVELOPMENT AND EXPANSION
The Company has 47 cell sites in operation in the Company's Existing
Systems and expects to add 35 to 40 new cell sites to the Horizon Systems. The
Company develops or builds out its cellular service areas by adding channels to
existing cell sites and by building new cell sites. Such development is done for
the purpose of increasing capacity and improving coverage in direct response to
projected subscriber demand and in response to actions taken by the Company's
competitors. Projected subscriber demand is calculated for each cellular service
area on a cell-by-cell basis. These projections involve a traffic analysis of
usage by existing
40
<PAGE> 43
subscribers, coverage quality analysis and an estimate of the number of
additional subscribers in each such area. In calculating projected subscriber
demand, the Company builds into its design assumptions an extremely low call
"blockage" rate (percentage of calls that are not connected on first attempt at
peak usage time during the day). After calculating projected subscriber demand,
the Company determines the most cost-efficient manner of meeting such projected
demand. The Company has historically met such demand through a combination of
augmenting channel capacity in existing cell sites and building new cell sites.
Cell site expansion is expected to enable the Company to continue to add
subscribers, enhance use of the systems by existing subscribers, increase roamer
traffic due to the larger geographic area covered by the cellular network and
further enhance the overall efficiency of the network. The Company believes that
the high level of coverage provided by its Existing Systems and the increased
cellular coverage it intends to attain will have a positive impact on market
penetration and subscriber usage.
In addition to its cellular operations, the Company also operates two small
paging systems in the Youngstown Area with 9,559 subscribers. Paging revenue for
the first six months of 1996 was approximately $0.5 million. The Company does
not view ownership of its paging systems as a significant element of its
business and does not have any plans to expand such ownership to include
additional paging systems.
DIGITAL TECHNOLOGY
The Company has selected TDMA digital for its Existing Systems. All cell
sites in the Existing Systems were converted to digital in early 1996. Each cell
site handles analog service as well. The Company's systems are also equipped to
provide cellular digital packet data ("CDPD"). Additionally, TDMA ensures the
services provided by the Company will be compatible with the cellular systems
operated by AT&T Wireless in Pittsburgh, Pennsylvania and Southwestern Bell
Mobile in Buffalo and Rochester, New York, as well as the PCS systems being
developed by AT&T Wireless in Cleveland, Ohio and Buffalo and Rochester, New
York.
The Company expects to install digital cells in the more densely populated
areas of the Horizon Systems beginning in early 1997. Horizon's existing
analog-only equipment will be redeployed when replaced with digital to improve
coverage in the more rural portions of these systems. Digital can be added to
these areas when demand for digital services or capacity warrants the added
capital costs.
SERVICE MARKS
CELLULAR ONE(R) is a federally registered service mark, owned by Cellular
One Group, a Delaware general partnership of Cellular One Marketing, Inc., a
subsidiary of Southwestern Bell Mobile Systems, Inc., together with Cellular One
Development, Inc., a subsidiary of AT&T Wireless Services, Inc. and Vanguard
Cellular Systems, Inc. The Company currently uses the CELLULAR ONE(R) service
mark to identify and promote its cellular telephone service for the Erie system
pursuant to a licensing agreement with Cellular One Group (the "Licensor").
Licensing and advertising fees are determined based upon the population of the
licensed areas. The licensing agreements require the Company to provide high
quality cellular telephone service to its customers and to maintain a certain
minimum overall customer satisfaction rating in surveys commissioned by the
Licensor. The licensing agreements which the Company has entered into are for
original five-year terms expiring on various dates. These agreements may be
renewed at the Company's option for three additional five-year terms. The
Company's use of the CELLULAR ONE(R) service mark will be expanded to include
the NY-3, PA-1, PA-2, PA-6 and PA-7 RSAs under licensing agreements assumed by
the Company as part of the Horizon Acquisition.
COMPANY PATENT
The Company is the owner of U.S. Patent No. 5,235,633 (the "Dennison
Patent") relating to a cellular telephone system that uses the position of a
mobile unit to make call management decisions. The Company is evaluating whether
the technology involved should be pursued and, if so, whether it should be
developed using internal resources, by a third party under a license arrangement
or in a joint effort with one or more third parties. The Company's policy is to
apply for and obtain U.S. patents with respect to technology it has developed
when management determines that it may be competitively advantageous and cost
effective to do so. The Company is currently prosecuting continuations and
continuations-in-part of the application which matured into the Dennison Patent.
Because the technology is still at an early stage of its development, the
41
<PAGE> 44
Company is unable to determine the ultimate value of the Dennison Patent or the
continuations filed with regard thereto, and there is no assurance that it will
ever prove to be of any significant economic or strategic value.
EMPLOYEES AND AGENTS
As of June 30, 1996, the Company had approximately 175 employees. In
addition, as of such date the Company had agreements with numerous independent
sales agents, including car dealerships, electronics stores, paging services
companies and independent contractors. None of the Company's employees are
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 Canfield, Ohio. The
Company leases this space, which is approximately 6,000 square feet. As of June
30, 1996, the Company's cellular operations lease eight and own one sales and
administrative offices. The Company anticipates that it will review these leases
from time to time and may, in the future, lease or acquire new facilities as
needed. The Company does not anticipate that it will encounter any material
difficulties in meeting its future needs for any leased space.
LEGAL PROCEEDINGS
The Company is not currently involved in any pending legal proceedings that
individually or in the aggregate are material to the Company.
OVERVIEW OF THE CELLULAR TELEPHONE INDUSTRY
The following table sets forth information published by CTIA with respect
to the number of subscribers served by cellular telephone systems in the United
States and the combined penetration rate of such wireline and non-wireline
systems as of the dates indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Subscribers (in thousands)..................... 7,500 11,000 16,000 24,000 35,000
Ending penetration(1).......................... 2.8% 4.2% 6.2% 9.2% 13.5%
</TABLE>
- -----------------------------
(1) Determined by dividing the aggregate number of subscribers by estimated
population. Rates reflect combined penetration of both wireline and
non-wireline cellular operators. CTIA estimates that the total number of
subscribers will surpass 40 million in 1996, thus yielding a penetration
rate of at least 15.4%.
Cellular telephone service is a form of telecommunications capable of
providing high quality, high capacity voice and data communications to and from
vehicle-mounted and hand-held radio telephones. Cellular telephone systems
generally offer customers the features offered by the most technologically
advanced landline telephone services. Two significant features of cellular
telephone systems are frequency reuse, which enables the simultaneous use of the
same frequency in two adequately separated cells and call handoff. A cellular
telephone system's frequency reuse and call handoff features result in highly
efficient use of available frequencies and enable cellular telephone systems to
process more simultaneous calls and service more users over a greater area than
conventional mobile telephone systems.
Cellular telephone technology is based upon the division of a given market
area into a number of smaller geographic areas or "cells." Each cell has a "base
station" or "cell site" that is equipped with a relatively low power
transmitter, a receiver and other equipment that communicates by radio signal
with cellular telephones located within range of the cell. Cells generally have
a maximum operating range of up to 25 miles, while the standard cell size is
four to ten miles in radius. Cells are typically designed on a grid, although
terrain factors, including natural and man-made obstructions, signal coverage
patterns and capacity constraints may result in irregularly shaped cells and
overlaps or gaps in coverage.
Each cell site is connected by microwave link or telephone line to a mobile
telephone switching office ("MTSO"), which, in turn, is connected to the local
landline telephone network. Because cellular communications systems are fully
interconnected with the landline telephone network and long distance systems,
42
<PAGE> 45
customers can receive and originate both local and long-distance calls from
their cellular telephones on a worldwide basis. When a customer in a particular
cell dials a number, the cellular telephone sends the call by radio signal to
the cell's transmitter-receiver, which in turn transmits it to the MTSO. The
MTSO then completes the call by connecting it with the landline telephone
network or another cellular telephone unit. Incoming calls are received by the
MTSO from the landline telephone office, which instructs the appropriate cell to
complete the communications link by radio signal between the cell's
transmitter-receiver and the cellular telephone.
The MTSO and the base stations periodically monitor the signal strength of
calls in progress. The signal strength of the transmission between a subscriber
and the base station in any cell declines as the unit moves away from the base
station. When the signal strength of a call declines to a predetermined level,
the MTSO automatically determines if the signal strength is greater in an
adjacent cell and, if so, hands off the call in a fraction of a second to the
base station of the other cell. This handoff is virtually unnoticeable to the
user. If the subscriber leaves the service area of the cellular system, the call
is disconnected unless an appropriate technical interface and roaming
arrangement has been established with an adjacent system.
Cellular telephone systems operate under interconnection agreements with
various local exchange carriers ("LECs") and interexchange (long distance)
carriers. The interconnection agreements establish the manner in which the
cellular telephone system integrates with other telecommunications systems. The
cellular operator and the local landline telephone company must cooperate in the
interconnection between the cellular and landline telephone systems to permit
cellular customers to call landline customers and vice versa. The technical and
financial details of such interconnection arrangements are subject to
negotiation, vary from system to system and to the present time, generally have
not been subject to FCC regulation or oversight. However, the implementation of
the Telecommunications Act of 1996 (the "1996 Act") by the FCC is expected to
result in arrangements between cellular carriers and local exchange carriers for
interconnection services at rates more closely related to cost. On August 1,
1996, the FCC adopted rules implementing the interconnection policies imposed by
the 1996 Act. Various aspects of the order are being appealed in federal court.
While it is too soon to predict the actual effect of the FCC's order, the
Company believes that the new rules are likely to reduce the interconnection
expenses incurred by the Company.
FCC rules require that all cellular telephones be functionally compatible
with cellular telephone systems in all markets within the United States and with
all frequencies allocated for cellular use, allowing a cellular telephone to be
used wherever a customer is located, subject to appropriate arrangements for
service charges. Changes to cellular telephone numbers or other technical
adjustments to cellular telephones by the manufacturer or local cellular
telephone service businesses may be required, however, to enable the customer to
change from one cellular service provider to another within a service area.
However, the FCC recently announced that it will require LECs to implement
"number portability" in the top 100 MSAs by December 31, 1998. Number
portability allows customers to retain their telephone numbers, including
cellular telephone numbers, when they switch to another service provider. See
"-- Regulatory Overview." Cellular system operators may provide service to
roamers temporarily located in, or travelling through, their service area. The
cellular system providing service to the roamer generally receives 100% of the
revenues from such service and such roaming charges are billed to the roamer's
local service provider.
The rapid growth of the cellular customer base has begun to strain the
call-processing capacity of many existing analog systems, especially in densely
populated urban areas. Each cellular network is designed to meet a certain level
of customer density and traffic demand. Once these traffic levels are exceeded,
the operator must take steps to increase the network capacity. Capacity can be
increased initially by using techniques such as sectorization and cell
splitting. Network operators and infrastructure manufacturers are developing a
number of additional solutions which are expected to increase network capacity
and coverage.
Within certain limitations, increasing demand may be met by simply adding
available frequency capacity to cells as required, or by using directional
antennae to divide a cell into discrete multiple sectors or coverage areas (also
known as sectorization), thereby reducing the required distance between cells
using the same frequency. Furthermore, an area within a cellular telephone
system may be served by more than one cell through procedures that utilize
available channels in adjacent cells. When all possible channels are in use,
further growth can be accomplished through a process called "cell splitting."
Cell splitting entails dividing a
43
<PAGE> 46
single cell into a number of smaller cells served by lower-power transmitters,
thereby increasing the reuse factor and the number of calls that can be handled
in a given area.
Network capacity can also be enhanced through the development of newer
network technologies like N-AMPS analog technology (which triples call carrying
capacity over conventional analog technology) and TDMA or code division multiple
access ("CDMA") digital technology (which increases call carrying capacity by an
estimated factor of 10). In each case, these advanced technologies allow
cellular carriers to add customers without degrading service quality. Digital
technology offers advantages including improved voice quality, larger system
capacity and perhaps lower incremental costs for additional customers. The
conversion from analog to digital radio technology is expected to be an
industry-wide process that will take a number of years. The Company has
installed TDMA digital technology throughout its Existing Systems and intends to
deploy it selectively in the Horizon Systems. The Company believes that its
Existing Systems have sufficient capacity to handle the Company's customer
growth rate in the near term.
COMPETITION
CELLULAR CARRIERS
Cellular carriers such as the Company compete primarily against one other
facilities-based cellular carrier in each MSA and RSA market. See "-- Cellular
Markets and Systems -- Competitors and Adjoining Systems." Competition for
customers between cellular licensees is based principally upon the services and
enhancements offered, the quality of the cellular system, customer service,
system coverage, capacity and price. Such competition may increase to the extent
that licenses are transferred from smaller, stand-alone operators to larger,
better capitalized and more experienced cellular operators who may be able to
offer consumers certain network advantages.
Cellular carriers also face to a lesser extent competition from Personal
Communications Service ("PCS"), Enhanced Specialized Mobile Radio ("ESMR") and
mobile satellite service ("MSS") systems, as well as from resellers of these
services and cellular service. In the future, cellular operators may also
compete more directly with traditional landline telephone service providers.
Continuing technological advances in telecommunications make it impossible to
predict the extent of future competition. However, due to the depth and breadth
of these competitive services offered by operators using these other
technologies, such competition could be significant and expected to become more
intense.
The FCC requires that all cellular system operators must provide service to
resellers on a nondiscriminatory basis. A reseller provides cellular service to
customers but does not hold an FCC license or own cellular facilities. Instead,
the reseller buys blocks of cellular telephone numbers from a licensed carrier
and resells service through its own distribution network to the public.
Therefore, a reseller may be both a customer of a cellular licensee's services,
a competitor of that licensee, or both. Recently, several well-known
telecommunications companies have begun reselling cellular service as a
complement to their long distance, local telephone, paging, cable television or
Internet offerings.
NEW TECHNOLOGIES
The most likely future source of direct competition to cellular providers
in the near term from a new technology is broadband PCS. Broadband PCS services
consist of wireless two-way telecommunications services for voice, data and
other transmissions employing digital micro-cellular technology. PCS operates in
the 1850 to 1990 Mhz band. PCS technology utilizes a network of small,
low-powered transceivers placed throughout a neighborhood, business complex,
community or metropolitan area to provide customers with mobile and portable
voice and data communications. PCS customers have dedicated personal telephone
numbers and communicate using small digital radio handsets that could be carried
in a pocket or purse. Many PCS licensees who will compete with the Company have
access to substantial capital resources. In addition, many of these companies,
or their predecessors and affiliates, already operate large cellular telephone
systems and thus bring significant wireless experience to this new marketplace.
ESMR is a wireless communications service supplied by converting analog SMR
services into an integrated, digital transmission system. The ESMR system
incorporates characteristics of cellular technology, including multiple low
power transmitters and interconnection with the landline telephone network. ESMR
44
<PAGE> 47
service may compete with cellular service by providing higher quality digital
communication technology, lower rates, enhanced privacy and additional features
such as electronic mail and built-in paging. ESMR handsets are likely to be more
expensive than cellular telephones and there may be other differences between
cellular and ESMR.
A consortium of telecommunications providers known as American Mobile
Satellite Corporation has been licensed by the FCC to provide mobile satellite
service. In addition, Motorola filed for a license from the FCC for a low-orbit
satellite system, called "Iridium," that would provide mobile communications to
subscribers throughout the world. Other proposals for MSS are pending before the
FCC. The FCC is developing rules for these services and international and
foreign regulatory authorities must also approve aspects of some mobile
satellite systems and services. Mobile satellite systems could augment or
replace communications within land-based cellular systems.
The commercial development and deployment of these new technologies remain
in an early phase. The Company expects this activity to be focused initially in
relatively large markets in view of the substantial costs involved in building
and launching systems using these technologies. The Company is preparing for
this new competitive environment by aggressively working to attract new
subscribers, expanding its area and reducing its dependency on high roaming and
local rates. The Company believes that by leveraging the above actions, it can
effectively face this competition from its position as an incumbent in the
cellular field with a high quality network and extensive area that is not
capacity constrained, strong distribution channels, superior customer service
capabilities and an experienced management team. Since the Company operates in
medium to small markets, the new PCS licensees may be unable to offer viable
wireless service in many of the Company's properties in the near term because
the extensive capital expenditure required to deploy the infrastructure for PCS
are more readily justifiable from an economic standpoint in larger, more densely
populated urban areas. This may position the Company to offer roaming services
to PCS customers, as well as to provide bulk lines of service for resale to
certain PCS companies. The Company's existing Youngstown and Erie systems are
equipped to provide TDMA digital roaming to AT&T Wireless PCS subscribers when
AT&T Wireless introduces dual band TDMA phones in the adjacent Cleveland and
Buffalo-Rochester MTAs.
REGULATORY OVERVIEW
The cellular telephone industry is subject to extensive governmental
regulation on the federal level and to varying degrees on the state level. Many
aspects of such regulation have recently been impacted by the enactment of the
1996 Act and are currently the subject of administrative rulemakings that are
significant to the Company. Neither the outcome of these rulemakings nor their
impact upon the cellular telephone industry or the Company can be predicted at
this time. The following is a summary of the federal laws and regulations that
currently materially affect the cellular communications industry and a
description of certain state laws. This "Regulatory Overview" section does not
purport to be a summary of all present and proposed federal, state and local
regulations and legislation relating to the cellular communications industry.
FEDERAL REGULATION
The licensing, construction, modification, operation, ownership and
acquisition of cellular telephone systems are subject to regulations and
policies of the FCC under the Communications Act of 1934, as amended (the
"Communications Act"). The FCC has promulgated rules and regulations governing,
among other things, applications to construct and operate cellular
communications systems, applications to transfer control of or assign cellular
licenses and technical and operational standards for the operation of cellular
systems (such as maximum power and antenna height).
The FCC licenses cellular systems in accordance with 734 geographically
defined market areas comprised of 306 MSAs and 428 RSAs. In each market, the
frequencies allocated for cellular telephone use are divided into two equal 25
MHz blocks and designated as wireline and non-wireline. Block A licenses
initially were reserved for non-wireline entities, such as the Company, while
wireline licenses initially were reserved for entities affiliated with a
wireline telephone company. Apart from the different frequency blocks, there is
no technical difference between wireline and non-wireline cellular systems and
the operational requirements imposed on each by the FCC are the same. Under
current FCC rules, with FCC approval, wireline and non-wireline licenses may be
transferred without restriction as to wireline affiliation, but generally, no
entity may
45
<PAGE> 48
own a substantial interest in both systems in any one MSA or RSA. The FCC may
prohibit or impose conditions on transfers of licenses.
Under FCC rules, the authorized service area of a cellular provider in each
of its markets is referred to as the "Cellular Geographic Service Area" or
"CGSA". The CGSA may conform exactly with the boundaries of the FCC designated
MSA or RSA, or it may be smaller, subject to certain minimum service
requirements. A cellular licensee has the exclusive right to expand its CGSA
boundaries within the licensee's MSA or RSA for a period of five years after
grant of the licensee's initial construction permit. At the end of this
five-year build-out period, however, any entity may apply to serve portions of
the MSA or RSA outside the licensee's CGSA. The five year build-out period has
expired for some licensees and the FCC has granted several "unserved area"
applications filed by parties. The Company's five year build-out period has
expired in all markets. With respect to the Youngstown and Erie systems, 100% of
the geographical area was covered by the Company prior to the expiration of the
five year build-out period. The Horizon Systems have one area that was not
covered prior to the expiration of the five year build-out period. It consists
of a portion of Forest County, Pennsylvania that has a total population of less
than 5,000. The Company does not believe the potential for a fill-in application
for this property to be significant.
Cellular service 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 cellular users,
permittees and licensees in order to avoid interference between adjacent
systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. The Company is obligated to pay certain annual regulatory fees to
the FCC in connection with its cellular operations.
The Company also regularly applies for FCC authority to use additional
frequencies, to modify the technical parameters of existing licenses, to expand
its service territory and to provide new services. The Communications Act
requires prior FCC approval for transfers to or from the Company of a
controlling interest in any license or construction permit, or any rights
thereunder. Although there can be no assurance that any future requests for
approval of applications filed will be approved or acted upon in a timely manner
by the FCC, the Company has no reason to believe such requests or applications
would not be approved or granted in due course.
The FCC also regulates a number of other aspects of the cellular business.
For example, the FCC regulates cellular resale practices and recently extended
the resale requirement to broadband PCS and ESMR licensees. Under the new FCC
policy, all resale obligations for cellular, broadband PCS and ESMR operators
will terminate five years after the date that the last group of initial PCS
licenses are granted. The FCC will issue a public notice announcing commencement
of the five year sunset period. Another FCC requirement that cellular operators
provide "manual" roaming where technically possible also was recently extended
to broadband PCS and ESMR licensees. Further, the FCC recently proposed that
cellular, broadband PCS and ESMR licensees be required to offer "automatic"
roaming agreements on a nondiscriminatory basis. The FCC has also proposed that
these roaming obligations sunset five years after the last group of initial
licenses for currently allocated broadband PCS spectrum is awarded.
In addition, the FCC regulates the ancillary service offerings that
cellular licensees can provide and recently revised its rules to permit
cellular, PCS, paging and SMR licensees to offer fixed services on a primary
basis along with mobile services. This rule change may facilitate the provision
of wireless local loop service, which involves the use of wireless links to
provide telephone service by cellular licensees, as well as broadband PCS and
ESMR licensees. In this regard, the FCC also recently adopted telephone number
portability rules for LECs, as well as cellular, broadband PCS and ESMR
licensees, that could facilitate the development of local exchange competition,
including wireless local loop service. The new number portability rules
generally require cellular, broadband PCS and ESMR licensees to have the
capability to deliver calls from their systems to ported numbers by December 31,
1998 and to offer number portability and roaming to ported numbers by June 30,
1999. These requirements may result in added capital expenditures for the
Company to make necessary system changes.
Initial cellular licenses are generally granted for terms of up to 10
years, beginning on the date of the grant of the initial operating authority and
are renewable upon application to the FCC. Licenses may be
46
<PAGE> 49
revoked and license renewal applications denied for cause after appropriate
notice and hearing. Near the conclusion of the license term, licensees must file
applications for renewal of licenses to obtain authority to operate for up to an
additional 10-year term. The FCC will award a renewal expectancy to a cellular
licensee that meets certain standards of past performance. If the existing
licensee receives a renewal expectancy, it is very likely that the existing
licensee's cellular license will be renewed without becoming subject to
competing applications. To receive a renewal expectancy, a licensee must show
that it (i) has provided "substantial" service during its past license term and
(ii) has substantially complied with applicable FCC rules and policies and the
Communications Act. "Substantial" service is defined as service which is sound,
favorable and substantially above a level of mediocre service that might only
minimally warrant renewal. If the existing licensee does not receive a renewal
expectancy, competing applications for the license will be accepted by the FCC
and the license may be awarded to another entity.
In 1995, the Company filed for renewal of its Youngstown license which was
originally granted by the FCC in 1985. In its application for renewal, the
Company demonstrated not only its compliance with FCC regulations, but also its
service in the public interest. That license was renewed without challenge. The
Company is confident that it has met and will continue to meet all requirements
necessary to secure renewal of its cellular licenses, including those licenses
being acquired from the Horizon Companies. The first Horizon licenses subject to
renewal will be those for PA-6 and PA-7, which expire on October 1, 2000. The
licenses for PA-1 and NY-3 expire one year later.
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"
qualifications to be a licensee. In making the determination, the FCC considers
whether an applicant or licensee has been the subject of adverse findings in a
judicial or administrative proceeding involving felonies, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition, employment
discrimination, misrepresentations to the FCC or other government agencies, or
serious violations of the Communications Act or FCC regulations. The FCC also
requires licensees to comply with statutory restrictions regarding the direct or
indirect ownership or control of FCC licenses by non-U.S. persons or entities.
TELECOMMUNICATIONS ACT OF 1996
The 1996 Act, which makes significant changes to the Communications Act and
the antitrust consent decree applicable to the Regional Bell Operating Companies
("RBOCs"), affects the cellular industry. This legislation, among other things,
affects competition for local telecommunications services, interconnection
arrangements for carriers, universal service funding and the provision of
interexchange services by the RBOCs' wireless systems.
The 1996 Act requires state public utilities commissions and/or the FCC to
implement policies that mandate reciprocal compensation between local exchange
carriers, a category that may, for these purposes, include cellular carriers,
for interconnection services at rates more closely related to cost. On August 1,
1996, the FCC adopted rules implementing the interconnection policies imposed by
the 1996 Act. Various aspects of the order are being appealed in federal court.
While it is too soon to predict the actual effect of the FCC's order, the
Company believes that the new rules are likely to reduce the interconnection
expenses incurred by the Company.
The 1996 Act requires the FCC to adopt rules that require interstate
communications carriers, including cellular carriers, to "make an equitable and
non-discriminatory contribution" to a universal service fund that reimburses
communications carriers that provide basic communications services to users who
receive services at subsidized rates. The 1996 Act also eases the restrictions
on the provision of interexchange telephone services by wireless carriers
affiliated with RBOCs. RBOC-related wireless carriers have interpreted the
legislation to permit immediate provision of long distance call delivery for
their cellular customers.
The 1996 Act specifically exempts all cellular carriers from the obligation
to provide equal access to interstate long distance carriers. However, the 1996
Act gives the FCC the authority to impose rules to require unblocked access
through carrier identification codes or 800/888 numbers, so that cellular
subscribers are not
47
<PAGE> 50
denied access to the long distance carrier of their choosing, if the FCC
determines that the public interest so requires. The Company currently provides
"dial around" equal access to all of its customers.
The overall impact of the 1996 Act on the business of the Company is
unclear and will likely remain so for the foreseeable future. The Company may
benefit from reduced costs in acquiring required communications services and
facilities, such as LEC interconnection, resulting from the pro-competitive
policies of the 1996 Act. Similarly, the new limitations on local zoning
requirements may facilitate the construction of new cell sites and related
facilities. See "-- State, Local and Other Regulation." However, other
provisions of the new statute relating to interconnection, telephone number
portability, equal access and resale could subject the Company to additional
costs and increased competition.
STATE, LOCAL AND OTHER REGULATION
The Communications Act preempts state or local regulation of the entry of,
or the rates charged by, any commercial mobile service or any private mobile
service provider, which includes cellular telephone service providers. The FCC
has denied the petition of eight states to continue their rate regulation
authority, including authority over cellular operators. As a practical matter,
the Company is free to establish rates and offer new products and service with a
minimum of regulatory requirements. Two of the Company's three states of
operation, Ohio and New York, still maintain nominal oversight jurisdiction,
primarily focusing upon prior approval of acquisitions and transfers and
resolution of customer complaints.
The Public Utilities Commission of Ohio (the "PUCO") has decreased
significantly its regulatory oversight of cellular companies. In accordance with
the Communications Act, cellular prices no longer require state regulatory
approval, nor will the filing of prices for cellular services be required
(detariffing), leaving the Company free to respond to market forces. The PUCO
has waived various other regulatory approval requirements and most of the
remaining regulatory filing requirements typically can be accomplished either on
a same day notice basis, or automatically after thirty days, although some
procedures still require specific regulatory approval and are not subject to any
time limits for action.
The New York Public Service Commission requires advance approvals of
acquisition and transfers of cellular companies. The Company has filed for all
necessary approvals in connection with the acquisition of the Horizon Systems
and expects to have these approvals prior to closing.
The location and construction of cellular transmitter towers and antennas
are subject to Federal Aviation Administration ("FAA") regulations and are
subject to Federal, state and local environmental regulation, as well as state
or local zoning, land use and other regulation. Before a system can be put into
commercial operation, the grantee of a construction permit must obtain all
necessary zoning and building permit approvals for the cell sites and MTSO
locations and must secure state certification and tariff approvals, if required.
The time needed to obtain zoning approvals and requisite state permits varies
from market to market and state to state. Likewise, variations exist in local
zoning processes. There can be no assurance that any state or local regulatory
requirements currently applicable to the Company's systems will not be changed
in the future or that regulatory requirements will not be adopted in those
states and localities which currently have none.
Zoning and planning regulation may become more restrictive in the future as
many broadband PCS carriers are now seeking sites for network construction. The
1996 Act may provide some relief from state and local laws that arbitrarily
restrict the expansion of personal wireless services, which include cellular,
PCS and ESMR systems. For example, under the 1996 Act, localities are now
precluded from denying zoning approval for cell sites based upon electromagnetic
emission concerns, if the cellular operator's system complies with FCC emissions
standards. The FCC is required to adopt rules concerning emission standards by
early August 1996. In addition, localities are prohibited from adopting zoning
requirements that simply prohibit or have the effect of prohibiting personal
wireless services, or that discriminate between "functionally equivalent"
services. Notwithstanding these new requirements, the effectiveness of the new
law has not yet been tested and it is still unclear whether the costs of
expanding cellular systems by adding cell sites will increase and whether
significant delays will be experienced due to local zoning regulation.
48
<PAGE> 51
FUTURE REGULATION
From time to time, legislation that potentially could affect the Company,
either beneficially or adversely, is proposed by federal or state legislators.
There can be no assurance that legislation will not be enacted by the federal or
state governments, or that regulations will not be adopted or actions taken by
the FCC or state regulatory authorities that might adversely affect the business
of the Company. Changes such as the allocation by the FCC of radio spectrum for
services that compete with the Company's business could adversely affect the
Company's operating results.
RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain RF emissions from cellular
telephones may be linked to cancer. Litigation concerning this issue is pending
against several other cellular operators generally alleging that the death by
cancer of a cellular system subscriber was related to such emissions. The
Company is not aware of any credible evidence linking the usage of cellular
telephones with cancer. On August 1, 1996, the FCC released a report and order
that updates the guidelines and methods it uses for evaluation on RF emissions
of radio equipment, including cellular telephones. While the FCC's new rules
impose more restrictive standards for determining acceptable levels of RF
emissions from low power devices such as portable cellular telephones, the
Company believes that all cellular telephones currently provided by the Company
to its customers already comply with the new standards.
OTHER WIRELESS OPERATIONS
In addition to its cellular operations, the Company also operates two small
paging systems in the Youngstown area. The Company also resells paging in areas
where it does not provide such services directly. These paging operations
currently account for less 3% of the Company's revenues. However, like its
cellular operations, the Company also provides paging services pursuant to
licenses issued by the FCC. Commercial paging systems are also deemed to be CMRS
providers. Consequently, many of the regulations applicable to the cellular
systems are also applicable to the Company's paging operations, including the
requirement to renew system licenses on a periodic basis.
49
<PAGE> 52
MANAGEMENT
<TABLE>
<CAPTION>
NAME AGE OFFICE
<S> <C> <C>
Warren P. Williamson, III........... 66 Director and Chairman
Albert H. Pharis, Jr................ 46 Director, President and Chief Executive Officer
Craig T. Sheetz..................... 36 Vice President, Chief Financial Officer and
Treasurer
William Zlotnick.................... 41 Vice President and Chief Operating Officer
Gregory T. Pauley................... 34 Vice President and Chief Technical Officer
Joseph D. Williamson, II............ 51 Director
Lowry A. Stewart.................... 41 Director
Raymond S. Tittle, Jr............... 66 Director
Philip N. Winkelstern............... 66 Director
</TABLE>
WARREN P. WILLIAMSON, III is the founder of the Company and has served as
Chairman and Director since the Company's inception. Prior to founding the
Company, Mr. Williamson held the positions of President and Chief Executive
Officer for WKBN Broadcasting Corporation. He presently serves as Vice Chairman
of WKBN Broadcasting Corporation. In addition to his positions with the Company,
Mr. Williamson serves as Director and as Chairman of the Executive Committee of
the Mahoning National Bank. Mr. Williamson is also Director and Chairman of the
Board of the Youngstown State University Foundation. Finally, he serves as
Director of the Association of Maximum Service Television, Inc., a trade
association representing more than 300 U.S. television stations. Mr. Williamson
is the brother of Joseph D. Williamson, II and uncle of Lowry A. Stewart.
ALBERT H. PHARIS, JR. has served as President, Chief Executive Officer and
Director of the Company since the Company's inception in 1985. During that
period, Mr. Pharis has been involved in all aspects of the Company's
development. He has been active as a board member of CTIA since 1985 and as a
member of the CTIA Executive Committee since 1989. He has also been Chairman of
CTIA's Small Operators Caucus.
CRAIG T. SHEETZ has served since 1990 as Vice President, Chief Financial
Officer and Treasurer of the Company. Prior to 1990, Mr. Sheetz served as
Assistant Vice President at PNC Bank and Mellon Bank where he specialized in the
media and telecommunications industries and in middle market lending.
WILLIAM ZLOTNICK is expected to be named Vice President and Chief Operating
Officer of the Company immediately following consummation of the Horizon
Acquisition. Mr. Zlotnick currently serves as Regional General Manager for
Horizon Cellular Telephone Company in Western Pennsylvania, a position he has
held since 1991. From 1986 to 1991, Mr. Zlotnick was Regional General Manager
for McCaw Cellular Communications in Pittsburgh, Pennsylvania.
GREGORY T. PAULEY is Vice President and Chief Technical Officer. Mr. Pauley
joined the Company in 1987. He served as Technical Operations Manager for the
Company from May 1990 until his promotion to Vice President in January 1995.
JOSEPH D. WILLIAMSON, II has been a Director of the Company and its
predecessor company since its inception. In 1994, after serving as Executive
Vice President of WKBN Broadcasting Corporation, Mr. Williamson became President
of WKBN Broadcasting Corporation and has continued in that position. Mr.
Williamson is the brother of Warren P. Williamson, III and the uncle of Lowry A.
Stewart.
LOWRY A. STEWART has been a Director of the Company and its predecessor
company since its inception. Since 1993, Mr. Stewart has served as Treasurer and
Director of WKBN Broadcasting Corporation, where he also has been employed as
the Production Manager since 1991. Mr. Stewart is the nephew of Warren P.
Williamson, III and Joseph D. Williamson, II.
RAYMOND S. TITTLE, JR. has been a Director of the Company since 1991. Mr.
Tittle served as President of Northwest Indiana Markets until it was sold in
1993. Mr. Tittle is currently President of Joe Tittle, Inc. and Joe Tittle &
Sons, Inc. which administer real estate and investment assets formerly owned by
Northwest Indiana Markets.
PHILIP N. WINKELSTERN has been nominated to become a Director upon
consummation of the Offering and the Horizon Acquisition. Mr. Winkelstern served
as Senior Vice President and Chief Financial Officer of
50
<PAGE> 53
Commercial Intertech Corporation, a publicly held manufacturer ("CIC") prior to
his retirement in August 1995. Mr. Winkelstern also served as a Director of CIC
from July 1975 to August 1995 and is currently a Director of McDonald Steel
Corporation and Mahoning National Bank.
The Company expects to add two additional independent directors prior to or
shortly after consummation of the Offering.
COMMITTEES OF THE BOARD
The Board of Directors has established a Compensation Committee comprised
of Joseph D. Williamson, II, Lowry A. Stewart and, upon his appointment to the
Board of Directors, Philip N. Winkelstern. The Company will establish Audit and
Nomination Committees shortly after consummation of the Offering.
DIRECTOR COMPENSATION
Directors are currently not paid fees or other compensation for services
rendered as Directors of the Company. However, the Board is actively considering
plans to compensate its outside Directors and expects to institute a plan prior
to the consummation of the Offering.
EXECUTIVE COMPENSATION
The following table presents summary information concerning compensation
received by the Chief Executive Officer and each of the other executive officers
for the year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
<S> <C> <C> <C>
Warren P. Williamson, III................................ $223,587(1)
Chairman
Albert H. Pharis, Jr..................................... 171,990 $50,000 $2,400
President and Chief Executive Officer
Craig T. Sheetz.......................................... 85,885 25,000 4,800
Vice President, Chief Financial Officer and Treasurer
Greg T. Pauley........................................... 78,000 25,000 4,800
Vice President and Chief Technical Officer
</TABLE>
- -----------------------------
(1) Does not include salary and bonus paid by the Company for services rendered
to WKBN Broadcasting Corporation, which amount was reimbursed to the
Company by WKBN Broadcasting Corporation.
1996 STOCK OPTION PLAN
The Company has adopted a 1996 Stock Option Plan. Under the SOP, options to
purchase up to an aggregate of 1,000,000 shares of Class A Common Stock are
available for grants to employees of the Company. The SOP provides for issuance
of incentive stock options, intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended, and also nonqualified stock options.
The SOP will terminate by its terms in 2006 or earlier if so determined by the
Board of Directors.
The following tables present certain information concerning stock options
granted in 1996 to the executive officers of the Company.
51
<PAGE> 54
OPTIONS GRANTED
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% TOTAL OF VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO PER PRICE APPRECIATION FOR
EMPLOYEES SHARE OPTION TERM(4)
OPTIONS IN FISCAL EXERCISE EXPIRATION -----------------------
NAME GRANTED(1)(2) YEAR(3) PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Albert H. Pharis, Jr............. 225,000 44.64% $ 10.00 2006 $3,665,013 $5,835,921
Warren P. Williamson, III........ 100,000 19.84 10.00 2006 1,628,895 2,593,742
Craig T. Sheetz.................. 53,600 10.63 10.00 2006 873,088 1,390,246
Gregory T. Pauley................ 46,800 9.29 10.00 2006 762,323 1,213,871
All Others....................... 78,600 15.60 10.00 2006
Total Options............... 504,000 100.00%
</TABLE>
- -----------------------------
(1) Options granted by Sygnet Communications, Inc. in fiscal 1995 have been
terminated in conjunction with the Restructuring. All options granted prior
to the Restructuring are not reflected in this table. No options were
exercised in fiscal 1995.
(2) Ten-year options have been granted in conjunction with the Restructuring
pursuant to the Company's SOP. All the options become exercisable on
January 1, 1997 and remain exercisable in full so long as the holder
thereof remains an employee of the Company. The options further vest at the
rate of twenty percent (20%) on each anniversary thereafter, and unvested
options terminate if the holder's employment with the Company terminates.
(3) The Company has granted options representing Class A Common Stock to
employees in fiscal 1996.
(4) The amounts shown under these columns are the result of calculations at 5%
and 10% rates as required by the SEC are not intended to forecast future
appreciation of the stock price of the Class A Common Stock.
EMPLOYMENT AGREEMENTS
The Company will enter into employment agreements with Messrs. Pharis and
Williamson for an initial term of three years and with Messrs. Sheetz and Pauley
for an initial term of two years. All agreements will have automatic one-year
renewals after the initial terms expire. The executives will have initial annual
base salaries of $240,000, $240,000, $135,000 and $120,000, respectively. Each
agreement provides that if the executive officer is terminated without good
cause, as defined therein, or resigns with good cause, as defined therein, the
executive officer will be entitled to receive when due his or her base salary
and benefits for the remaining term of the agreement.
Each agreement will also provide that during the term of the agreement and
for one year thereafter, the executive officer will not, in any state in which
the Company does business or intends to do business, compete with the Company in
any way in the wireless communication business as employee, officer, director,
agent, representative, stockholder, partner, member, owner, or have any direct
or indirect financial interest in any enterprise engaged in the wireless
communications business. Provided, however, that ownership of less than 5% of
the outstanding stock of any corporation listed on a national securities
exchange and engaged in the wireless communications business is not deemed a
violation of the non-competition provision.
BONUS PLAN
The Board of Directors of the Company has instituted a cash bonus program
for executive officers for 1997 that will pay between 25% to 50% of base
salaries if certain targets are met. The percentages set may be higher if the
targets are exceeded. The criteria to be used and the specific targets to be met
by each officer will be set by the Board.
52
<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Class B Common Stock as of August 30, 1996 by (i)
each director of the Company, (ii) each named executive officer of the Company,
(iii) all officers and directors as a group and (iv) each person known to the
Company to beneficially own 5% or more of any class of the Company's securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES % SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS
J.D. Williamson, II....................................... 1,867,150 30.26
Warren P. Williamson, III(2).............................. 1,487,215 24.10
Lowry A. Stewart(3)....................................... 337,720 5.47
Raymond Tittle, Jr........................................ 329,835 5.35
Albert H. Pharis.......................................... 40,275 0.65
All directors and officers as a group (7 persons)(4)...... 4,062,195 65.83
Others.................................................... -- --
OTHER 5% OWNERS
Mahoning National Bank of Youngstown(5)................... 652,135 10.57
P.O. Box 479
Trust Department
Youngstown, OH 44501
Martha J. Stewart(6)...................................... 408,400 6.62
15 Mill Trace Road
Youngstown, Ohio 44511
</TABLE>
- -----------------------------
(1) As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. The Company's total issued and outstanding stock immediately
prior to the Offering is 6,170,630 shares of which all are Class B Common
Stock. Class B Common Stock is automatically converted to Class A Common
Stock upon transfer. Class A Common Stock is entitled to one vote per share
and Class B Common Stock is entitled to 10 votes per share. See
"Description of Capital Stock -- Common Stock."
(2) Includes 10,410 shares of Class B Common Stock with respect to which Warren
P. Williamson, III shares voting and investment power with his spouse,
Carol Williamson.
(3) Includes 5,845 shares of Class B Common Stock held by Lowry A. Stewart as
custodian for his daughter Kathryn A. Stewart.
(4) May include stock jointly or separately owned with or by a spouse.
(5) Represents Class B Common Stock beneficially owned by Mahoning National Bank
of Youngstown as trustee under certain Williamson family trusts.
(6) Includes 13,430 shares of Class B Common Stock held by Martha J. Stewart as
successor trustee for her niece Kathryn A. Stewart; 13,430 shares of Class
B Common Stock held by Martha J. Stewart as successor trustee for her niece
Cristina Marie Sparks-Stewart; and 12,850 shares of Class B Common Stock
held by Martha J. Stewart as successor trustee for her nephew David E.
Stewart. Ms. Stewart disclaims beneficial ownership of these shares.
53
<PAGE> 56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 5, 1995, the Company repurchased 48,197 shares of common stock
for $1.7 million in cash from W.P. Williamson, Jr. in a redemption transaction.
W.P. Williamson, Jr. was the father of Warren P. Williamson, III and Joseph D.
Williamson, II.
On December 29, 1994, the Company loaned $249,952 to Albert H. Pharis, Jr.,
the President, Chief Executive Officer and a Director of the Company to permit
Mr. Pharis to purchase stock of the Company from another shareholder. The
interest rate on the loan is 8.23% per year and the loan is to be repaid over
seven years.
The Company provided cellular telephone service during 1995 for $69,845 to
WKBN Broadcasting Corporation, a company owned by the Williamson family. Warren
P. Williamson, III, a Director and Chairman of the Company, provided consulting
services to WKBN Broadcasting Corporation and was paid $66,896 in 1995 for such
services. In 1995, Wilcom Cellular and Youngstown Cellular Telephone Company
purchased advertising services and facilities from WKBN Broadcasting Corporation
for $218,404. Warren P. Williamson, III is the Vice Chairman of WKBN
Broadcasting Corporation. Joseph D. Williamson, II, a Director of the Company,
is the President of WKBN Broadcasting Corporation. Lowry A. Stewart, a Director
of the Company, is the Treasurer and a Director of WKBN Broadcasting
Corporation.
54
<PAGE> 57
DESCRIPTION OF BANK CREDIT FACILITY
The Bank Credit Facility, which will be entered into concurrently with the
Horizon Acquisition, is a senior secured reducing revolver that provides the
Subsidiary the ability to borrow up to $300.0 million from time to time.
Interest under the Bank Credit Facility accrues at a variable rate using (at the
Subsidiary's election) either a prime rate or a rate based upon the London
Interbank Offered Rate ("LIBOR"), plus in each instance a margin. The margin
ranges from 0.25% to 1.75% for the prime rate and from 1.25% to 2.75% for the
LIBOR depending upon the ratio of consolidated total indebtedness of the Company
(including the Notes) to annualized operating cash flow of the Subsidiary (with
the ratios used ranging from 4-to-1 to 10-to-1, respectively).
Until June 30, 1999, the Subsidiary is only required to make quarterly
payments of interest; on and after that date, the Subsidiary must also make
quarterly payments of principal ranging from 2% up to 7% of the amount of the
initial outstanding balance under the Bank Credit Facility. In addition, on an
annual basis beginning March 31, 2000, the Subsidiary must also make payments of
principal equal to 50% of excess cash flow for the immediately preceding fiscal
year. Each such quarterly and annual payment of principal permanently reduces
the amount of credit available for borrowing under the Bank Credit Facility, and
the final maturity date of the facility is eight and one-half years from the
closing.
The Bank Credit Facility is secured by all of the assets of the Subsidiary,
as well as by a pledge of the stock of the Subsidiary.
Among the various covenants that must be satisfied by the Subsidiary are
the following five financial covenant ratios that must be satisfied as of the
end of each fiscal quarter:
(a) a ratio of senior indebtedness to annualized operating cash flow
that will range from a maximum of 8.5-to-1.0 through March 31, 1997
down to a maximum of 4.0-to-1.0 after December 31, 2000; and
(b) a ratio of consolidated total indebtedness for the Company
(including the Notes) to annualized operating cash flow for the
Subsidiary that will range from a maximum of 12.0-to-1.0 through
March 31, 1997 down to a maximum of 6.0-to-1.0 after June 30, 2000;
and
(c) a ratio of annualized operating cash flow (including credit
availability under the Bank Credit Facility) to fixed charges
(defined to include any amounts paid to the Company to pay interest
on the Notes) of at least 1.0-to-1.0; and
(d) a ratio of annualized operating cash flow to interest expense
through December 31, 1998 of at least 1.1-to-1.0 (and no such
covenant thereafter); and
(e) beginning as of the end of the fiscal quarter commencing on April 1,
1997, a ratio of annualized operating cash flow to pro forma debt
service of at least 1.0-to-1.0.
The Bank Credit Facility also contains certain restrictive covenants,
including, without limitation, restrictions on the ability of the Subsidiary (a)
to declare and pay dividends or distributions to the Company (for servicing the
Notes and otherwise), (b) to incur additional indebtedness, (c) to make loans
and advances, (d) to engage in transactions with the Company, (e) to transfer
and sell assets and (f) to acquire and purchase assets. The definitive credit
agreement also prohibits a Change of Control of the Company and/or the
Subsidiary, which for this purpose is defined as a change that results in the
current shareholders failing to own (directly or indirectly) shares of stock
that entitle them to at least 51% of the votes entitled to be cast in an
election of the board of directors. An Event of Default under and as defined in
the Indenture will also constitute one of the events of default under the Bank
Credit Facility.
The Bank Credit Facility permits the Subsidiary to declare and pay
dividends or distributions to the Company if such dividends are used to service
the semi-annual interest payments due on the Notes, and at the time of such
dividend or distribution no event of default or material default exists under
the Bank Credit Facility or would be caused by making such dividend. If there is
an event of default under the Bank Credit Facility other than a payment default,
the Lenders may suspend dividends and distributions for a period not to exceed
180 days in each year. If there is a payment default, the Lenders may suspend
dividends and distributions by the Subsidiary for as long as such default
exists. The stock pledge agreement by the Company
55
<PAGE> 58
in favor of the Lenders will permit the Company to continue making the
semi-annual interest payment, notwithstanding the occurrence of any default
under the Bank Credit Facility, if funds other than funds received from the
Subsidiary are used. The stock pledge agreement will permit the Company to make
principal payments, prepayments and redemptions on the Notes only if funds other
than funds from the Subsidiary are used and no event of default or material
default then exists under the Bank Credit Facility or would be caused thereby.
56
<PAGE> 59
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued under the Indenture by and between the Company and
Fleet National Bank, as trustee (the "Trustee"), which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. 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 of 1939 (the "Trust
Indenture Act"). The Notes are subject to all such terms, and holders of Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summaries of certain provisions of the Indenture are
summaries only, do not purport to be complete and are qualified in their
entirety by reference to all of the provisions of those documents. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Indenture. When used in this section, the term "Company" means
Sygnet Wireless, Inc. and not Sygnet Communications, Inc. or any other
subsidiary. See "-- Certain Definitions." Wherever particular provisions of the
Indenture are referred to in this summary, such provisions are incorporated by
reference as a part of the statements made and such statements are qualified in
their entirety by such reference.
RANKING
The Notes will be general unsecured obligations of the Company ranking pari
passu with all future Indebtedness of the Company, if any, that is not
subordinated to the Notes and senior to all future Indebtedness of the Company,
if any, that is subordinated to the Notes. The Notes will not be guaranteed by
the Subsidiary or any future Subsidiaries.
STRUCTURAL SUBORDINATION
The Company's operations are conducted entirely through the Subsidiary. The
Company has no assets other than the stock of the Subsidiary and has no direct
operations of any kind. As a holding company, the Company has no independent
operations and, therefore, is dependent on dividends and distributions from the
Subsidiary to meet its own obligations, including the obligations under the
Notes. Because the Subsidiary will not guarantee the payment of principal of or
interest on the Notes, holders of Notes will have no claim with respect to the
assets of the Subsidiary. As a result, the claims of holders of Notes will be
structurally subordinated to the claims of creditors of the Subsidiary,
including the lenders under the Bank Credit Facility. In addition, the Company
will pledge the stock of the Subsidiary to secure the borrowings under the Bank
Credit Facility and the Subsidiary and any other Subsidiaries will grant liens
on substantially all of their assets as security for the obligations under the
Bank Credit Facility. Because the Notes are not secured by any assets, in the
event of a dissolution, bankruptcy, liquidation or reorganization of the
Subsidiary, and holders of the Notes may receive less ratably than the secured
creditors under the Bank Credit Facility. As of June 30, 1996, after giving
effect to the Horizon Acquisition and the Related Transactions, the Subsidiary
would have had approximately $211.8 million in total outstanding liabilities
(including $204.4 million of Indebtedness under the Bank Credit Facility and
$7.4 million of trade payables and other obligations) that would be structurally
senior to the Notes. The Company is dependent upon the cash flows of the
Subsidiary to meet its obligations, including the payment of interest and
principal on the Notes. The Company's ability to receive distributions and
dividends from the Subsidiary will be limited by the provisions of the Bank
Credit Facility. See "Description of Bank Credit Facility."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be unsecured, general obligations of the Company, limited in
aggregate principal amount to $110,000,000. The Notes will be issued only in
fully registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes will mature on October 1, 2006. Interest on the Notes will accrue
at the rate of % per annum and will be payable semi-annually in arrears
on April 1 and October 1, commencing on April 1, 1997, to Holders of record on
the immediately preceding March 15 and September 15. 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 the date of original issuance.
57
<PAGE> 60
The Indenture does not contain provisions which would afford Holders of the
Notes protection in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transaction involving the
Company.
Principal of, premium, if any, and interest on the Notes will be payable,
and, subject to the following provisions, the Notes may be presented for
registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose, which office or agency shall be maintained in the
Borough of Manhattan of the City of New York. At the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
the addresses set forth in the register of the Holders. 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 tax or other governmental
charge payable in connection therewith. Until otherwise designated by the
Company, the Company's office or agency will be the corporate trust office of
the Trustee presently located at 777 Main Street, Hartford, Connecticut 06115.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to October
1, 2001. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on October
1 in the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2001...................................................................... %
2002...................................................................... %
2003...................................................................... %
2004...................................................................... %
2005 and thereafter....................................................... 100%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
the original issuance of Notes, the Company may redeem up to an aggregate of
$38.5 million in principal amount of Notes at a redemption price of % of
the principal amount thereof, in each case plus accrued and unpaid interest
thereon to the redemption date, with the net proceeds of an offering of
Qualified Capital Stock of the Company; provided that at least $71.5 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption shall
occur within 30 days of the date of the closing of such offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee 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 so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates 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. On and after the redemption date, interest
ceases to accrue on Notes or portions thereof called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
LIMITATION ON USE OF PROCEEDS; PROCEEDS PURCHASE OFFER
All proceeds (net of underwriting discounts and commissions and other
transaction expenses as set forth in the Prospectus under the caption "Use of
Proceeds") received by the Company from the sale of the Notes shall be applied
to the purchase of assets in the Horizon Acquisition or, as set forth below, to
repay
58
<PAGE> 61
indebtedness under the Subsidiary's existing bank credit facility pending such
acquisition; provided, however, that no such proceeds may be applied to the
purchase of assets in Horizon Acquisition until (i) the Company has received at
least $19.0 million in proceeds from the Preferred Stock Investment and (ii) the
Trustee has received the certificates and opinions set forth in Exhibit B to the
Indenture. Pending the consummation of the Horizon Acquisition, all such
proceeds shall be held by the Company in a separate bank account, except that up
to $71.5 million of the net proceeds from the sale of the Notes may be
contributed to the Subsidiary to repay indebtedness under the Subsidiary's
existing bank credit facility, but only to the extent that the banks thereunder
consent to allow the amounts repaid to be reborrowed and paid as a dividend or
other distribution to the Company for the sole purpose of funding a repurchase
of the Notes in the event that the Horizon Acquisition does not occur within 120
days following the closing of the sale of the Notes.
In the event that all of the net proceeds of the sale of the Notes have not
been so applied, directly or indirectly, to the purchase of assets in the
Horizon Acquisition within 120 days of the closing of the sale of the Notes, the
Company will make an offer (a "Proceeds Purchase Offer") to all holders of Notes
to purchase on a pro rata basis, at a price of 101% of the principal amount
thereof plus accrued interest to the purchase date, all Notes that may be
purchased at such price with such unapplied net proceeds.
If applicable, within five Business Days following the end of the 120-day
period referred to above, the Company will mail a notice to each Holder setting
forth the Proceeds Purchase Offer and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of 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 connection with the repurchase of the Notes in
the Proceeds Purchase Offer.
A Proceeds Purchase Offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Proceeds Purchase Offer Period"). No
later than five Business Days after the termination of the Proceeds Purchase
Offer Period (the "Proceeds Purchase Date"), the Company will purchase the
principal amount of Notes required to be purchased pursuant to this covenant
(the "Proceeds Purchase Offer Amount") or, if less than the Proceeds Purchase
Offer Amount has been tendered, all Notes tendered in response to the Proceeds
Purchase Offer. Payment for any Notes so purchased will be made in the same
manner as interest payments are made.
If the Proceeds Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Proceeds Purchase Offer.
On or before the Proceeds Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Proceeds Purchase Offer Amount of Notes or portions thereof tendered pursuant to
the Proceeds Purchase Offer, or if less than the Proceeds Purchase Offer Amount
has been tendered, all Notes tendered, and will deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this covenant. The
Company, the Depository or the Paying Agent, as the case may be, will promptly
(but in any case not later than five Business Days after the Proceeds Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company will promptly issue a new Note, and the Trustee, upon
written request from the Company will authenticate and mail or deliver such new
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted will be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Proceeds Purchase Offer on the Proceeds Purchase
Date.
CERTAIN COVENANTS
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control,
each Holder of Notes will have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple
59
<PAGE> 62
thereof) of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Company will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase Notes pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of 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 connection with the repurchase of the Notes as a
result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Change
of Control Offer Period (the "Change of Control Purchase Date"), the Company
will purchase all Notes tendered in response to the Change of Control Offer.
Payment for any Notes so purchased will be made in the same manner as interest
payments are made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Change of Control Offer.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (a) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or other restructuring.
The Bank Credit Facility provides that certain change of control events
with respect to the Company and the Subsidiary would constitute a default
thereunder. Any future credit agreements or other agreements relating to which
the Company or the Subsidiary becomes a party may contain similar restrictions
and provisions. In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes or the Subsidiary is prohibited from
making a distribution or paying a dividend to the Company to permit such
purchase, the Company could seek the consent of its lenders or the Subsidiary
could obtain the consent of its lenders to such purchase of Notes or to such
distribution or dividend, respectively, or either company could attempt to
refinance the borrowings that contain such prohibition. If the Company or the
Subsidiary do not obtain such consents or repay such borrowings, the Company
will not be able to purchase the Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS
The Indenture will provide that after the Issue Date the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, issue, create, incur, assume, guarantee or otherwise directly or
indirectly become liable for (including as a result of an acquisition), or
otherwise become responsible for, contingently or otherwise (individually or
collectively, to "Incur" or, as appropriate, an "Incurrence"), any Indebtedness.
60
<PAGE> 63
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may incur
Indebtedness if, after giving effect thereto, the Company's Annualized Operating
Cash Flow Ratio on a pro forma basis calculated on the assumption that such
Indebtedness had been incurred on the first day of the applicable Reference
Period, would have been less than the ratios set forth below for the calendar
year periods indicated:
<TABLE>
<CAPTION>
FOR THE PERIOD RATIO
<S> <C>
1996-1998..................................................................... 8.0x
1999 and after................................................................ 7.0x
</TABLE>
In addition, if there exists no Event of Default immediately prior and
subsequent thereto, the foregoing limitations will not apply to the Incurrence
of (i) prior to the date of the consummation of the Horizon Acquisition,
Indebtedness incurred under the Bank Credit Facility (including, without
limitation, Indebtedness under Interest Swap and Hedging Obligations required by
the Bank Credit Facility) in an aggregate amount not to exceed $75,000,000 in
aggregate principal amount; provided, however, that if such Indebtedness is
repaid with the net proceeds of the sale of the Notes pursuant to the covenant
entitled "-- Limitation on Use of Proceeds; Proceeds Purchase Offer," no
Indebtedness in excess of $3,500,000 may be incurred thereunder except for
Indebtedness whose proceeds are paid as a dividend or loan payment to the
Company for the sole purpose of funding a repurchase of the Notes under the
covenant entitled "-- Limitation on Use of Proceeds; Proceeds Purchase Offer,"
(ii) on and after the date of the consummation of the Horizon Acquisition,
Indebtedness incurred under the Bank Credit Facility (including, without
limitation, Indebtedness under Interest Swap and Hedging Obligations required by
the Bank Credit Facility) in an aggregate amount not to exceed $300,000,000 in
aggregate principal amount at any time, (iii) Indebtedness by the Company or any
of its Restricted Subsidiaries constituting Existing Indebtedness, reduced by
permanent repayments of and reductions thereof (and in commitments with respect
thereto) in satisfaction of the Net Cash Proceeds application requirement set
forth in the covenant described in "-- Limitation on Asset Sales and Sales of
Subsidiary Stock" and by repayments and permanent reductions in amounts
outstanding pursuant to scheduled amortizations and mandatory prepayments in
accordance with the terms thereof, (iv) Indebtedness by the Company evidenced by
the Notes, (v) Permitted Acquisition Indebtedness, (vi) Indebtedness between the
Company and any Restricted Subsidiary of the Company or between Restricted
Subsidiaries of the Company, provided that, in the case of Indebtedness incurred
by the Company, such obligations shall be unsecured and subordinated in all
respects to the Holders' rights pursuant to the Notes, (vii) Capitalized Lease
Obligations and Purchase Money Indebtedness in an aggregate amount or aggregate
principal amount, as the case may be, outstanding at any time not to exceed in
the aggregate $15.0 million, and (viii) Refinancing Indebtedness Incurred to
extend, renew, replace or refund Indebtedness permitted under clauses (iii) (as
so reduced in amount) and (iv) of this paragraph.
Indebtedness of any Person that is not a Restricted Subsidiary of the
Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company shall be deemed to
have been Incurred, as the case may be, at the time such Person becomes such a
Restricted Subsidiary of the Company, or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture will provide that after the Issue Date the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment, if, immediately prior or after giving
effect thereto on a pro forma basis, (a) a Default or an Event of Default would
occur or be continuing, (b) the Company's Annualized Operating Cash Flow Ratio
for the Reference Period would have exceeded 6 to 1, or (c) the aggregate amount
of all Restricted Payments made by the Company and its Restricted Subsidiaries,
including such proposed Restricted Payment (if not made in cash, then the fair
market value of any property used therefor) from and after the Issue Date and on
or prior to the date of such Restricted Payment, shall exceed the sum of (i) the
amount determined by subtracting (x) 2.0 times the aggregate Consolidated
Interest Expense of the Company for the period (taken as one accounting period)
from the Issue
61
<PAGE> 64
Date to the last day of the last full fiscal quarter prior to the date of the
proposed Restricted Payment (the "Computation Period") from (y) Operating Cash
Flow of the Company for the Computation Period, plus (ii) the aggregate Net
Proceeds received by the Company from the sale (other than to a Subsidiary of
the Company) of its Qualified Capital Stock after the Issue Date and on or prior
to the date of such Restricted Payment.
Notwithstanding the foregoing, the provisions set forth in clause (b) or
(c) of the immediately preceding paragraph will not prohibit (i) the use of an
aggregate of $10.0 million to be used solely for Investments in Unrestricted
Subsidiaries or Non-Recourse Restricted Subsidiaries, (ii) the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the foregoing
provisions, (iii) the redemption, defeasance, repurchase or other acquisition or
retirement of any Indebtedness or Capital Stock of the Company or its Restricted
Subsidiaries either in exchange for or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Qualified Capital Stock of the Company or (iv) the redemption, repurchase or
other acquisition or retirement of the Preferred Stock for an aggregate price
not to exceed $25.0 million if, after giving effect thereto on a pro forma
basis, the Company's Annualized Operating Cash Flow Ratio for the Reference
Period would have been less than 7.5 to 1.
LIMITATION ON RESTRICTED SUBSIDIARY DIVIDENDS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, assume or
suffer to exist any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to pay dividends or make other
distributions on the Capital Stock of any Restricted Subsidiary of the Company
or pay or satisfy any obligation to the Company or any of its Restricted
Subsidiaries or otherwise transfer assets or make or pay loans or advances to
the Company or any of its Restricted Subsidiaries, except encumbrances and
restrictions existing under (i) the Indenture and the Notes or Refinancing
Indebtedness incurred to refinance the Notes; provided, that such encumbrances
and restrictions are no more restrictive than those contained in the Indenture
as in effect on the Issue Date, (ii) the Bank Credit Facility as in effect on
and immediately after the date of the Horizon Acquisition, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Bank Credit
Facility as in effect on the Issue Date, (iii) any agreement of a Person
acquired by the Company or a Restricted Subsidiary of the Company, which
restrictions existed at the time of acquisition, were not put in place in
anticipation of such acquisition and are not applicable to any person or
property, other than the Person or any property of the Person so acquired.
Notwithstanding the foregoing, customary provisions restricting subletting or
assignment of any lease entered into the ordinary course of business, consistent
with past practices shall not in and of themselves be considered a restriction
on the ability of the applicable Restricted Subsidiary to transfer such
agreement or assets, as the case may be.
LIMITATION ON TRANSACTIONS WITH RELATED PERSONS
The Indenture will provide that, after the Issue Date, the Company will
not, and will not permit any of its Restricted Subsidiaries or Unrestricted
Subsidiaries to, enter into any contract, agreement, arrangement or transaction
with any Related Person (each a "Related Person Transaction"), or any series of
Related Person Transactions, except for transactions made in good faith, the
terms of which are (i) fair and reasonable to the Company or such Subsidiary, as
the case may be, and (ii) are at least as favorable as the terms which could be
obtained by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not Related
Persons.
Without limiting the foregoing, (a) any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of $1.0
million must first be approved by a majority of the Board of Directors of the
Company who are disinterested in the subject matter of the transaction pursuant
to a Board Resolution, and (b) with respect to any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of $5.0
million, the Company must first obtain a favorable
62
<PAGE> 65
written opinion from an independent financial advisor of national reputation as
to the fairness from a financial point of view of such transaction to the
Company or such Subsidiary, as the case may be.
Notwithstanding the foregoing, any contract, agreement, arrangement or
transaction solely between or among the Company and any of its Wholly Owned
Restricted Subsidiaries or between or among Wholly Owned Restricted Subsidiaries
of the Company is not a Related Person Transaction.
LIMITATION ON ASSET SALES AND SALES OF SUBSIDIARY STOCK
The Indenture will provide that after the Issue Date the Company will not,
and will not permit any of its Restricted Subsidiaries to, in one transaction or
a series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of its property, business or assets,
including any sale or other transfer or issuance of any Capital Stock of any
Restricted Subsidiary of the Company, whether owned on the Issue Date or
thereafter acquired (an "Asset Sale") unless (a) such Asset Sale is for fair
market value as determined by the Board of Directors of the Company acting
reasonably and in good faith, (b) at least 80% of the value of the consideration
for such Asset Sale consists of (i) cash, (ii) the assumption by the transferee
of pari passu Indebtedness or (iii) notes, obligations or other marketable
securities (collectively "Marketable Securities") that are immediately converted
into cash and (c) the Net Cash Proceeds therefrom are applied on or prior to 360
days after the date of such Asset Sale (i) to the permanent repayment of
Indebtedness under the Bank Credit Facility (which payment reduces the
commitment thereunder) or (ii) to the repurchase of the Notes pursuant to an
offer to purchase (an "Asset Sale Offer") described below or (iii) to an
investment in a Related Business.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) any Restricted Subsidiary of the Company may convey, sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or a Restricted Subsidiary of the
Company;
(ii) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, (A) convey, sell, lease, transfer, assign or otherwise
dispose of assets in the ordinary course of business and (B) exchange
assets for assets in Related Businesses;
(iii) the Company and its Restricted Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the covenant described in "-- Limitation on Mergers, Sales
or Consolidations";
(iv) the Company and its Restricted Subsidiaries may (a) sell damaged,
worn out or other obsolete property in the ordinary course of business or
other property no longer necessary for the proper conduct of the business
of the Company or any of its Restricted Subsidiaries, or (b) abandon such
property if it cannot, through reasonable efforts, be sold; and
(v) the Company may transfer the assets that it acquires in the
Horizon Acquisition to the Subsidiary after the Issue Date.
The Indenture will provide that an Asset Sale Offer may be deferred until
the accumulated Net Cash Proceeds not applied to the uses set forth in
subsections (c)(i) or (c)(iii) in the first paragraph exceeds $5.0 million. An
Asset Sale Offer will remain open for a period of 20 Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law (the "Asset Sale Offer Period"). No later than five
Business Days after the termination of the Asset Sale Offer Period (the "Asset
Sale Purchase Date"), the Company will purchase the principal amount of Notes
required to be purchased pursuant to this covenant (the "Asset Sale Offer
Amount") or, if less than the Asset Sale Offer Amount has been tendered, all
Notes tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased will be made in the same manner as interest payments are made.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
63
<PAGE> 66
On or before the Asset Sale Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this covenant. The Company, the
Depository or the Paying Agent, as the case may be, will promptly (but in any
case not later than five days after the Asset Sale Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company will promptly issue a new Note, and the Trustee, upon written request
from the Company will authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly announce the
results of the Asset Sale Offer on the Asset Sale Purchase Date.
LIMITATIONS ON LIENS
The Indenture will provide that the Company will not and will not permit
any Restricted Subsidiary, directly or indirectly, to incur or suffer to exist
any Lien (other than Permitted Liens) upon any of its property or assets,
whether now owned or hereafter acquired.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture will provide that the Company will not consolidate with or
merge with or into another Person, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, unless: (i) immediately after
giving effect to such transaction on a pro forma basis, the consolidated
resulting surviving or transferee entity would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Annualized Operating Cash Flow Ratio provision set forth in the second paragraph
of the covenant described in "-- Limitation on Incurrence of Additional
Indebtedness;" (ii) immediately thereafter, no Event of Default (and no event
which, after notice or lapse of time or both, would become an Event of Default)
shall have occurred and be continuing; (iii) either (a) the Company is the
surviving entity or (b) the resulting, surviving or transferee entity (if other
than the Company) is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in connection with
the Notes and the Indenture, including the punctual payment of the principal of,
and premium, if any, and interest on the Notes and the performance and
observance of every covenant of the Indenture on the part of the Company to be
performed; and (iv) the Company shall have delivered to the Trustee an Officers'
Certificate confirming compliance with the requirements of this covenant.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company.
REPORTS
The Indenture will provide that whether or not the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act of 1934,
as amended (the "Exchange Act"), the Company shall deliver to the Trustee and to
each Holder, within 15 days after it is or would have been required to file such
with the SEC, annual and quarterly financial statements substantially equivalent
to financial statements that would have been included in reports filed with the
SEC, if the Company were subject to the requirements of Section 13 or 15(d) of
the Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the SEC, and in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required.
64
<PAGE> 67
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due and payable of
interest on the Notes; (ii) default in payment when due and payable of the
principal of or premium, if any, on the Notes; (iii) failure by the Company to
comply with the provisions described under the captions "-- Change of Control,"
"-- Limitation on Asset Sales and Sales of Subsidiary Stock," "-- Limitation on
Restricted Payments," "-- Limitation on Incurrence of Additional Indebtedness,"
"-- Limitation on Liens," "Limitations on Merger, Sale or Consolidation" or
"Limitation on Use of Proceeds; Proceeds Purchase Offer"; (iv) failure by the
Company for 30 days after notice to comply with any of its other agreements in
the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); provided such Event of Default shall not occur
until 90 days after such Payment Default, or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare the unpaid principal of, premium, if any and all accrued interest on all
the Notes to be due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Subsidiary, the unpaid principal
of, premium, if any and all accrued interest on all outstanding Notes will
become due and payable without further action or notice. The holders of a
majority in principal amount of Notes may rescind any acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal and
interest that has become due solely because of the acceleration) have been cured
or waived. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in the interests of the
Holders of the Notes.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
October 1, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to October 1, 2001, then the
premium specified in the Indenture for optional redemptions shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
65
<PAGE> 68
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated date for payment thereof or on the applicable redemption date, as
the case may be, and the Company must specify whether the Notes are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
66
<PAGE> 69
AMENDMENTS AND SUPPLEMENTS
Except as provided in the next two succeeding paragraphs, 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 (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing Default or Event of
Default (other than a default in the payment of principal of, premium, if any,
or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the optional redemption of the Notes
(other than the provisions described under "-- Change of Control,"
"-- Limitation on Asset Sales or Sales of Subsidiary Stock" or "-- Limitations
on Use of Proceeds; Proceeds Purchase Offer"); (iii) reduce the rate of or
change the time for payment of interest on any Note; (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration); (v) make any Note
payable in money other than that stated in the Notes; (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes; (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the captions "-- Change of Control" or "-- Limitation on Asset Sales or
Sales of Subsidiary Stock" or "-- Limitations on Use of Proceeds; Proceeds
Purchase Offer"; or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture will provide that no direct or indirect stockholder,
employee, officer or director, as such, past, present or future of the Company
or any successor entity shall have any personal liability in respect of the
obligations of the Company under the Indenture or the Notes by reason of his or
its status as such stockholder, employee, officer or director. Each Holder by
accepting a Note waives and releases all such liability.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms to be contained in
the Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms and herein for which no definition is
provided.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
67
<PAGE> 70
"Annualized Operating Cash Flow" on any date, means with respect to any
Person the Operating Cash Flow for the Reference Period multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and it Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the Transaction
Date (after giving pro forma effect to the Incurrence of such Indebtedness)
divided by (ii) the aggregate amount of Annualized Operating Cash Flow of such
Person (determined on a pro forma basis after giving effect to all dispositions
of businesses made by such Person and its Subsidiaries from the beginning of the
Reference Period through the Transaction Date as if such disposition has
occurred at the beginning of such Reference Period); provided, that for purposes
of such computation, in calculating Annualized Operating Cash Flow and
consolidated Indebtedness: (a) the transaction giving rise to the need to
calculate the Annualized Operating Cash Flow Ratio will be assumed to have
occurred (on a pro forma basis) on the first day of the Reference Period; (b)
the incurrence of any Indebtedness during the Reference Period or subsequent
thereto and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to retire Indebtedness) will be assumed to
have occurred (on a pro forma basis) on the first day of such Reference Period;
(c) Consolidated Interest Expense attributable to any Indebtedness (whether
existing or being incurred) bearing a floating interest rate shall be computed
as if the rate in effect on the Transaction Date had been the applicable rate
for the entire period; and (d) all members of the consolidated group of such
Person on the Transaction Date that were acquired during the Reference Period
shall be deemed to be members of the consolidated group of such Person for the
entire Reference Period. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries.
"Bank Credit Facility" means, (a) until the consummation of the Horizon
Acquisition, the Credit Agreement, dated as of September 29, 1995, entered into
by and among Sygnet Communications, Inc. and certain of its affiliates, the
lenders which are parties thereto and PNC Bank, National Association, as the
agent for such lenders, as it may have been amended from time to time, and (b)
as of and after the consummation of the Horizon Acquisition, and so long as
there is Indebtedness under, or the borrower has the ability to borrow
thereunder, the Credit Agreement (in substantially the form filed as an exhibit
to Amendment No. 3 to the registration statement of which the Prospectus is a
part and consistent with the terms set forth in the commitment letter, dated as
of August 21, 1996), among Sygnet Communications, Inc., as the borrower, the
financial institutions which are parties thereto as lenders, PNC Bank, National
Association and Toronto Dominion (Texas), Inc. as managing agents and
syndication agents, Toronto Dominion (Texas), Inc. as the administrative agent,
and PNC Bank, National Association, as the documentation agent and the
collateral agent, or any other credit facility or loan agreement designated by
the Company to be the "Bank Credit Facility," as such Credit Agreement or other
credit facility or loan agreement may be amended, modified, restated, renewed,
increased, supplemented, refunded, replaced or refinanced from time to time.
There can be only one such credit facility or loan agreement designated to be
the "Bank Credit Facility" at any one time.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest of such Person if such Person is a partnership.
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
68
<PAGE> 71
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (iii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the assets
of the Company, on a consolidated basis, in one transaction or a series of
related transactions, if, immediately after giving effect to such transaction,
any "person" or "group" (as such terms are used for purposes of Sections 13(d)
and 14(d) of the Exchange Act, whether or not applicable), other than an
Excluded Person or Excluded Group, is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly
or indirectly, of more than 50% of the total voting power in the aggregate
normally entitled to vote in the election of directors, managers, or trustees,
as applicable, of the transferee, (ii) any "person" or "group" (as such terms
are used for purposes of Section 13(d) and 14(d) of the Exchange Act, whether or
not applicable), other than an Excluded Person or Excluded Group, is or becomes
the "beneficial owner" (as such term is used in Rule 13d-3 promulgated pursuant
to the Exchange Act), directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of the Company
then outstanding normally entitled to vote in elections of directors, or (iii)
during any period of 12 consecutive months after the Issue Date, individuals who
at the beginning of any such 12-month period constituted the Board of Directors
of the Company (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
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 Board of Directors of the Company then in office.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such Person and its
consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, and
(b) the amount of dividends accrued or payable by such Person or any of its
consolidated Subsidiaries in respect of Preferred Stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's Wholly
Owned Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such Person of an obligation of another Person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its consolidated Subsidiaries for such period,
determined (on a consolidated basis) in accordance with GAAP, adjusted to
exclude (only to the extent included in computing such net income (or loss), and
without duplication (i) all extraordinary gains and losses and gains and losses
that are nonrecurring (including as a result of Asset Sales outside the ordinary
course of business), (ii) the net income, if positive, of any Person, that is
not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together will all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period, (iii), except as provided in the
definition of "Annualized Operating Cash Flow Ratio," the net income (or loss)
of any Subsidiary acquired in a pooling of interests transaction for
69
<PAGE> 72
any period prior to the date of such acquisition and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or any agreement or instrument applicable
to such Subsidiary. When the foregoing definition is used in connection with the
Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an "Event of Default."
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of any event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Notes; provided that Capital Stock will not be deemed to be Disqualified
Capital Stock if it may only be redeemed or repurchased solely in consideration
of Qualified Capital Stock of the Company.
"Excluded Group" means a "group" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company "beneficially
owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act)
by such Excluded Persons (without attribution to such Excluded Persons of the
ownership by other members of the "group") represents a majority of the voting
power of the Capital Stock "beneficially owned" (as such term is used in Rule
13d-3 promulgated under the Exchange Act) by such group.
"Excluded Person" means the members of the Williamson family who owned
Capital Stock of the Company on the Issue Date and any wholly owned Affiliate of
any of the foregoing that is wholly owned by one of the foregoing.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"GAAP" means generally accepted accounting principles 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 ("FASB") or in such other statements by
such other entity as approved by a significant segment of the accounting
profession which are in effect in the United States; provided, however, that for
purposes of determining compliance with covenants in the Indenture, "GAAP" means
such generally accepted accounting principles as in effect as of the Issue Date.
"Holder" means a Person in whose name a Note is registered. The Holder of a
Note will be treated as the owner of such Note for all purposes.
"Horizon Acquisition" means the acquisition of assets made pursuant to the
Asset Acquisition Agreement, dated July 11, 1996, among the Company, Horizon
Cellular Telephone Company of Chautauqua, L.P., Horizon Cellular Telephone
Company of Crawford, L.P., and Horizon Cellular Telephone Company of Indiana,
L.P.
"Indebtedness" of any Person means, without duplication: (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or to financial institutions, which obligations are not being contested in good
faith and for which appropriate reserves have been established) those incurred
in the ordinary course of its business that would constitute ordinarily a trade
payable to trade creditors, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under Interest Swap and Hedging Obligations;
(c) all liabilities of others of the kind described in the
70
<PAGE> 73
preceding clauses (a) or (b) that such Person has guaranteed or that is
otherwise its legal liability or which are secured by any assets or property of
such Person and all obligations to purchase, redeem or acquire any Capital
Stock; (d) all Disqualified Capital Stock of such Person and all Preferred Stock
of such Person's Subsidiaries; and (e) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of, or
amendments, modifications or supplements to, any liability of the kind described
in any of the preceding clauses (a), (b), (c), or (d) or this clause (e),
whether or not between or among the same parties; provided that the outstanding
principal amount at any date of any Indebtedness issued with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such date.
"Interest Swap and Hedging Obligations" means any obligations of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For purposes of the
Indenture, the amount of such obligations shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such obligation had terminated at the
end of such fiscal quarter, and in making such determination, if any agreement
relating to such obligation provides for the netting of amounts payable by and
to such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person or in any event until the counterparty
thereunder defaults in its corresponding payment, then in each such case, the
amount of such obligations shall be the net amount so determined, plus any
premium due upon default by such Person.
"Investment" by any Person in any other Person means (without duplication):
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such Person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of such other Person or any agreement to make any
such acquisition; (b) the making by such Person of any deposit with, or advance,
loan or other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension; (c) the entering into by
such Person of any guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Company of any Person to be an
Unrestricted Subsidiary. For purposes of the covenant described in
"-- Limitation on Restricted Payments," (i) "Investment" shall include and be
valued at the fair market value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) the amount of any Investment shall
be the fair market value of such Investment plus the fair market value of all
additional Investments by the Company or any of its Restricted Subsidiaries at
the time any such Investment is made; provided that, for purposes of this
sentence, the fair market value of net assets in excess of $5,000,000 shall be
as determined by an independent appraiser of national reputation.
"Issue Date" means the time and date of the first issuance of the Notes
under the Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer or Asset Sale Offer).
71
<PAGE> 74
"Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents
received by the Company and its Restricted Subsidiaries in respect of an Asset
Sale (including upon the conversion to cash and Cash Equivalents of (a) any note
or installment receivable at any time, or (b) any other property as and when any
cash and Cash Equivalents are received in respect of any property received in an
Asset Sale but only to the extent such cash and Cash Equivalents are received
within one year after such Asset Sale), less the sum of (i) all reasonable
out-of-pocket fees, commissions and other expenses incurred in connection with
such Asset Sale, including the amount (estimated in good faith by the Board of
Directors of the Company) of income, franchise, sales and other applicable taxes
required to be paid by the Company or any Restricted Subsidiary of the Company
in connection with such Asset Sale and (ii) the aggregate amount of cash so
received which is used to retire any existing Indebtedness of its Restricted
Subsidiaries, as the case may be, which is required to be repaid in connection
with such Asset Sale or is secured by a Lien on the property or assets of the
Company or any of its Restricted Subsidiaries, as the case may be.
"Net Pops" of any Person with respect to any System means the Pops of the
MSA or RSA served by such System multiplied by the direct and/or indirect
percentage interest of such Person in the entity licensed or designated to
receive an authorization by the Federal Communications Commission to construct
or operate a system in that MSA or RSA.
"Net Proceeds" means the aggregate net proceeds (including the fair market
value of non-cash proceeds constituting equipment or other assets of a type
generally used in a Related Business in an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Obligations" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable pursuant
to the terms of the documentation governing any Indebtedness.
"Operating Cash Flow" for any Person for any period means (a) the
Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions for
income taxes for such period for such Person and its consolidated Subsidiaries,
(ii) depreciation, amortization and other non-cash charges of such Person and
its consolidated Subsidiaries and (iii) Consolidated Interest Expense of such
Person for such period, determined, in each case, on a consolidated basis for
such Person and its consolidated Subsidiaries in accordance with GAAP, less (c)
the sum, without duplication (and only to the extent such amounts are included
in such Consolidated Net Income) of (i) all extraordinary gains of such Person
and its consolidated Subsidiaries during such period and (ii) the amount of all
cash payments made during such period by such Person and its Subsidiaries to the
extent such payments relate to non-cash charges that were added back in
determining Operating Cash Flow for such period or for any prior period. When
the foregoing definition is used in connection with the Company and its
Restricted Subsidiaries, references to a Person and its Subsidiaries in the
foregoing definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
"Permitted Acquisition Indebtedness" means, with respect to any Person,
Indebtedness Incurred in connection with the acquisition of property, businesses
or assets which, or Capital Stock of a Person all or substantially all of whose
assets, are of a type generally used in a Related Business; provided that, in
the case of the Company or its Restricted Subsidiaries, as applicable, (x)(i)
the Company's Annualized Operating Cash Flow Ratio, after giving effect to such
acquisition and such Incurrence on a pro forma basis, is no greater than such
ratio prior to giving pro forma effect to such acquisition and such Incurrence,
(ii) the Company's consolidated Indebtedness under the Bank Credit Facility,
divided by the Net Pops of the Company and its Restricted Subsidiaries, in each
case giving pro forma effect to the acquisition and such Incurrence, does not
exceed $60, (iii) the Company's consolidated Indebtedness divided by the Net
Pops of the Company and its Restricted Subsidiaries does not increase as a
result of the acquisition and such Incurrence and (iv) after
72
<PAGE> 75
giving effect to such acquisition and such Incurrence the acquired property,
businesses or assets or such Capital Stock is owned directly by the Company or a
Wholly Owned Restricted Subsidiary of the Company or (y)(i) under the terms of
such Indebtedness and pursuant to applicable law, no recourse could be had for
the payment of principal, interest or premium with respect to such Indebtedness
or for any claim based thereon against the Company or any Person that
constituted a Restricted Subsidiary immediately prior to the consummation of
such acquisition or any of their property or assets, (ii) the obligor of such
Indebtedness shall have, immediately after giving effect to such acquisition and
such Incurrence on a pro forma basis, a ratio of Annualized Operating Cash Flow
as of the date of the acquisition to the product of Consolidated Interest
Expense for the Reference Period multiplied by four (but excluding from
Consolidated Interest Expense all amounts that are not required to be paid in
cash on a current basis) of at least 1 to 1 and (iii) immediately subsequent to
the Incurrence of such Indebtedness, the obligor thereof shall be a Restricted
Subsidiary and shall have been designated by the Company (as evidenced by an
Officers' Certificate delivered promptly to the Trustee) to be a "Non-Recourse
Restricted Subsidiary."
"Permitted Investment" means: (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary (other than a Non-Recourse
Restricted Subsidiary); (iii) Investments in a Person substantially all of whose
assets are of a type generally used in a Related Business (an "Acquired Person")
if, as a result of such Investments, (A) the Acquired Person immediately
thereupon becomes a Restricted Subsidiary (other than a Non-Recourse Restricted
Subsidiary) or (B) the Acquired Person immediately thereupon either (1) is
merged or consolidated with or into the Company or any of its Restricted
Subsidiaries (other than a Non-Recourse Restricted Subsidiary) or (2) transfers
or conveys all or substantially all of its assets to, or is liquidated into, the
Company or any of its Restricted Subsidiaries (other than a Non-Recourse
Restricted Subsidiary); (iv) Investments in accounts and notes receivable
acquired in the ordinary course of business; (v) any securities received in
connection with an Asset Sale (other than those of a Non-Recourse Restricted
Subsidiary) and any investment with the Net Cash Proceeds from any Asset Sale in
Capital Stock of a Person, all or substantially all of whose assets are of a
type used in a Related Business, that complies with the "Limitation on Asset
Sales and Sales of Subsidiary Stock" covenant; (vi) any Investment pursuant to
the terms of the agreements described in or referred to under the caption
"Certain Relationships and Related Transactions," as such agreements were in
effect on the Issue Date; (vii) advances and prepayments for asset purchases in
the ordinary course of business in a Related Business of the Company or a
Restricted Subsidiary; and (viii) customary loans or advances made in the
ordinary course of business to officers, directors or employees of the Company
or any of its Restricted Subsidiaries for travel, entertainment, and moving and
other relocation expenses.
"Permitted Liens" means: (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, and (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as such
property used by the Company or any of its Restricted Subsidiaries) or interfere
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (f) Liens arising by operation of law in connection
with judgments, only to the extent, for an amount and for a period not resulting
in an Event of Default with respect thereto; (g) pledges or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security legislation; (h) Liens
in favor of the Trustee arising under the Indenture; (i) Liens securing
Permitted Acquisition Indebtedness, which either (A) were not incurred or issued
in anticipation of such acquisition or (B) secure Permitted Acquisition
Indebtedness meeting the requirements set forth in clause (y) of the definition
thereof;
73
<PAGE> 76
(j) Liens securing Indebtedness under the Bank Credit Facility (including,
without limitation, Indebtedness under Interest Swap and Hedging Obligations
required by the Bank Credit Facility) that was incurred in accordance with
Section 4.08; (k) Liens securing Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or is merged with or into the
Company or a Restricted Subsidiary, provided that such Liens were in existence
prior to the date of such acquisition, merger or consolidation, were not
incurred in anticipation thereof, and do not extend to any other assets; (l)
Liens arising from Purchase Money Indebtedness permitted under the Indenture;
(m) Liens securing Refinancing Indebtedness Incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Notes than the terms of the Liens securing such refinanced
Indebtedness; (n) Liens in favor of the Company or a Wholly Owned Restricted
Subsidiary and (o) Liens arising out of judgments or awards against the Company
or a Subsidiary of the Company with respect to which enforcement has been stayed
and the Company at the time shall currently be prosecuting an appeal or
proceeding for review in good faith by appropriate proceedings diligently
conducted and with respect to which the Company has created adequate reserves or
has adequate insurance protection; provided, however, that at no time may the
aggregate amount of such judgment liens exceed $3.0 million.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Pops" means the estimate of the population of a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA") as derived from the most recent Rand
McNally Commercial Atlas and Marketing Guide or if such statistics are no longer
printed in the Rand McNally Commercial Atlas and Marketing Guide or the Rand
McNally Commercial Atlas and Marketing Guide is no longer published, such other
nationally recognized source of such information.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property or
assets for the business of the Company or its Restricted Subsidiaries, provided,
that the recourse of the lenders with respect to such Indebtedness is limited
solely to the property or assets so purchased without further recourse to either
the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Reference Period" with regard to any Person means the last full fiscal
quarter of such Person for which financial information (which the Company shall
use its best efforts to compile in a timely manner) in respect thereof is
available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference (or if such Indebtedness
or Disqualified Capital Stock does not require cash payments prior to maturity
or is otherwise issued at a discount, the original issue price of such
Indebtedness or Disqualified Capital Stock), not to exceed the sum of (x) the
lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing, (y) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such Indebtedness and (z) all other customary fees and expenses of the Company
or such Restricted Subsidiary reasonably incurred in connection with such
refinancing; provided, that (A) Refinancing Indebtedness issued by any
Restricted Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Restricted Subsidiary, (B)
Refinancing Indebtedness shall (x) not have a Weighted Average Life shorter than
the Indebtedness or Disqualified Capital Stock to be so refinanced at the time
of such Refinancing and (y) in all respects, be no
74
<PAGE> 77
less subordinated or junior, if applicable, to the rights of Holders of the
Notes than was the Indebtedness or Disqualified Capital Stock to be refinanced
and (C) such Refinancing Indebtedness shall have no installments or principal
(or redemption payment) scheduled to come due earlier than the scheduled
maturity of any installment of principal (or redemption payment) of the
Indebtedness or Disqualified Capital Stock to be so refinanced which was
scheduled to come due prior to the Stated Maturity of the Notes.
"Related Business" means any business directly related to the ownership,
development, operation, and acquisition of wireless cellular communications
systems.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any trust
in which any Person described in clause (i) above, has a beneficial interest.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of such Person or any Subsidiary
of such Person, (ii) any payment on account of the purchase, redemption or other
acquisition or retirement for value, or any payment in respect of any amendment
(in anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any shares of Capital Stock of such Person
or any Subsidiary of such Person held by Persons other than such Person or any
of its Restricted Subsidiaries, (iii) any defeasance, redemption, repurchase or
other acquisition or retirement for value, or any payment in respect of any
amendment (in anticipation of or in connection with any such retirement,
acquisition or defeasance) in whole or in part, of any Indebtedness of the
Company by such Person or a Subsidiary of such Person that is subordinate in
right of payment to, or ranks pari passu (other than the Notes) with, the Notes
and (iv) any Investment (other than a Permitted Investment); provided, however,
that the term "Restricted Payment" does not include (i) any dividend,
distribution or other payment on shares of Capital Stock of the Company or any
Restricted Subsidiary solely in shares of Qualified Capital Stock, (ii) any
dividend, distribution or other payment to the Company, or any dividend to any
of its Restricted Subsidiaries, by any of its Subsidiaries, or (iii) any
defeasance, redemption, repurchase or other acquisition or retirement for value,
in whole or in part, of Indebtedness of such person payable solely in shares of
Qualified Capital Stock of such Person.
"Restricted Subsidiary" means (i) Sygnet Communications, Inc. and (ii) any
Subsidiary of the Company which at the time of determination is not an
Unrestricted Subsidiary. The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if, immediately
before and after giving effect to such designation, there would exist no Default
or Event of Default and the Company could incur at least $1.00 of Indebtedness
pursuant to the Annualized Operating Cash Flow Ratio test under the covenant
described in "-- Limitation of Incurrence of Additional Indebtedness," on a pro
forma basis taking into account such designation.
"Stated Maturity" means the date fixed for the payment of any principal or
premium pursuant to the Indenture and the Notes, including the Maturity Date,
upon redemption, acceleration, Asset Sale Offer, Change of Control Offer or
otherwise.
"Subsidiary" with respect to any Person, means (i) a corporation at least
fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company that, at
the time of determination, shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below). The Board of
Directors of the Company may designate any Subsidiary of the Company other than
Sygnet Communications, Inc. (including any newly acquired or newly formed
Subsidiary at or prior to the time it is so formed or acquired) to be an
Unrestricted Subsidiary if (a) no Default or Event of Default is existing or
will occur as a consequence thereof, (b) such Subsidiary does not own any
Capital Stock of, or own or hold any Lien on any property or asset of, the
Company or any Restricted Subsidiary that is not a
75
<PAGE> 78
Subsidiary of the Subsidiary to be so designated, and (c) such Subsidiary and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee, or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any property or assets of the Company or any of its
Restricted Subsidiaries (except that such Subsidiary and its Subsidiaries may
guarantee the Notes); 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
covenant described in "-- Limitation on Restricted Payments." Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Voting Stock" means Capital Stock of the Company having generally the
right to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters of
the Company.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i) a
Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more other
Wholly Owned Subsidiaries of such Person, or (ii) any entity other than a
corporation in which such Person, directly or indirectly, owns not less than 99%
of the Capital Stock of such entity.
76
<PAGE> 79
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Ohio law and to the
provisions of the Company's Amended Articles of Incorporation (the "Articles of
Incorporation") a copy of which has been filed as an exhibit to the Registration
Statement on Form S-1 of which this Prospectus is a part. When used in this
section, the term "Company" means Sygnet Wireless, Inc. and not Sygnet
Communications, Inc. or any other subsidiary.
The authorized capital stock of the Company consists of 60,000,000 shares
of Class A Common Stock, $0.01 par value per share, 10,000,000 shares of Class B
Common Stock, $0.01 par value per share, 10,000,000 shares of voting preferred
stock, $0.01 par value per share and 5,000,000 shares of nonvoting preferred
stock, $0.01 par value per share (including the Preferred Stock).
PREFERRED STOCK
Concurrent with and conditioned upon the consummation of the Horizon
Acquisition, the Company will issue 200,000 shares of nonvoting Preferred Stock
for an aggregate purchase price of $20.0 million to Toronto Dominion
Investments, Inc. (or one or more of its affiliates), an affiliate of one of the
Agents and Lenders under the Bank Credit Facility. So long as any shares of the
Preferred Stock are outstanding, the Company may not authorize or issue (or
obligate itself to issue) any other equity securities senior to or on a parity
with the Preferred Stock.
RIGHTS TO DESIGNATE DIRECTORS
At any time after the first anniversary of the issuance of the Preferred
Stock, holders of the Preferred Stock will have the right to receive notice of
and to designate a representative to attend all meetings of the Board of
Directors of the Company. At any time after the third anniversary of such
issuance, the holders of Preferred Stock will have the right to designate
Directors constituting 15% of the total number of Directors.
LIQUIDATION PREFERENCE AND DIVIDEND RIGHTS
Each share of Preferred Stock has a liquidation preference of $100 (or an
aggregate liquidation preference of $20.0 million as of the date of the
Preferred Stock Investment).
Subject to the Default Rate (as defined), dividends on the Preferred Stock
will accrue quarterly in arrears and will be payable in additional shares of
Preferred Stock at the following rates (expressed as percentages of the
liquidation preference of Preferred Stock outstanding) during the respective
12-month periods ending on the anniversaries of the issuance of the Preferred
Stock in the following years:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1......................................................................... 15%
2......................................................................... 17%
3......................................................................... 19%
4 and thereafter.......................................................... 21%
</TABLE>
WARRANTS
Warrants to purchase shares of the Company's Class A Common Stock
representing 1% of the Common Stock outstanding, on a fully diluted basis, will
be issued to Toronto Dominion Investments, Inc. at the end of the nine-month
period following the issuance of the Preferred Stock if the Preferred Stock is
still outstanding at such time (subject to pro rata reduction in the event of a
partial redemption of the Preferred Stock during the first six months it is
outstanding). At the end of each quarter thereafter for so long as any of the
Preferred Stock continues to remain outstanding, warrants to purchase shares of
the Class A Common Stock representing 3/8% of the Common Stock then outstanding,
on a fully diluted basis, will be issued to Toronto Dominion Investments, Inc.
The exercise price of the warrants will be $0.01 per share of Class A Common
Stock.
77
<PAGE> 80
MANDATORY AND OPTIONAL REDEMPTION; PUT OPTION
The Company will be required to redeem the Preferred Stock at its
liquidation amount, plus all accrued and unpaid dividends to the date of
redemption, upon the earlier of (i) the tenth anniversary of the Preferred Stock
Investment, (ii) a Change of Control (defined below), (iii) the issuance of any
equity by the Company at the holding company level other than to employees or
directors as compensation or management incentives (to the extent of the
proceeds thereof) or (iv) the exercise of the Put Option (defined below) by
holders of 51% or more of the then-outstanding shares of Preferred Stock (each a
"Mandatory Redemption Event").
At any time after the fourth anniversary of the issuance of the Preferred
Stock, holders of the Preferred Stock have the right to require the Company to
redeem the Preferred Stock (the "Put Option") in whole or in part within 90 days
from the receipt of written notice of the exercise of the Put Option. In the
event the Preferred Stock is not redeemed within such 90-day period, the holders
of the Preferred Stock, upon written notice to the Company, will have the right
to require the Company to effect a sale or liquidation of the Company to be
completed within a period of twelve months following such notice.
The Preferred Stock will be subject to redemption at the option of the
Company at any time in minimum increments of $1.0 million in whole or in part
upon three business days' notice.
EVENTS OF DEFAULT; CERTAIN COVENANTS
Each of the following constitutes an event of default under the terms of
the Preferred Stock: (i) a Change of Control; (ii) default in the payment of or
the acceleration of any Indebtedness of the Company in excess of $5,000,000,
which default shall remain uncured for a period of more than 90 days; (iii)
failure to redeem the Preferred Stock after the occurrence of a Mandatory
Redemption Event; and (iv) the breach of any covenant in the Preferred Stock.
See "-- Liquidation Preference and Dividend Rights."
If any event of default under the terms of the Preferred Stock occurs and
is continuing or if the Company's Annualized Operating Cash Flow Ratio (using
substantially the same definition as that used in the Indenture) exceeds 12.0x,
the remedy will be an increase in the dividend rate to 5% in excess of the
otherwise applicable rate (the "Default Rate").
The terms of the Preferred Stock also prohibit the issuance of Indebtedness
by the Company or any Subsidiary other than substantially the same as that
permitted in the Bank Credit Facility.
CERTAIN DEFINITIONS
"Change of Control" has substantially the same meaning as the definition of
such term used in the Bank Credit Facility. See "Description of Bank Credit
Facility."
"Indebtedness" has substantially the same meaning as the definition of such
term used in the Indenture. See "Description of Notes -- Certain Terms."
COMMON STOCK
The rights of holders of Class A and Class B Common Stock are identical
except for voting and conversion rights. Holders of shares of Common Stock are
entitled to receive such dividends as may be declared by the Company's Board of
Directors out of funds legally available for such purpose. The Board of
Directors may not declare any cash dividends on shares of Class B Common Stock
unless it also declares at the same time (and payable on the same date as the
payment date for such dividends on Class B Common Stock) a cash dividend on
shares of Class A Common Stock in an amount per share that is at least equal to
the amount of dividends then being declared per share on the Class B Common
Stock. Each share of Class A Common Stock and each share of Class B Common Stock
shall be equal in respect of rights to dividends and distributions, when and as
declared in the form of stock or other property of the Company. The Company does
not anticipate paying cash dividends in the foreseeable future.
With respect to all matters upon which stockholders are entitled to vote or
to which stockholders are entitled to give consent, the holders of the
outstanding shares of Class A Common Stock and the holders of any outstanding
shares of Class B Common Stock shall vote (together with the holders of any
outstanding shares of preferred stock entitled to vote with the Class A Common
Stock and the Class B Common Stock)
78
<PAGE> 81
without regard to class and every holder of Class A Common Stock shall be
entitled to one vote for each share of Class A Common Stock held in his name and
every holder of Class B Common Stock shall be entitled to 10 votes for each
share of Class B Common Stock held in his name.
In addition to any other votes as may be required by law, the approval of
the holders of a majority of the Class A Common Stock voting separately as a
class, will be required to approve (i) the authorization of any new class of
capital stock which is entitled to more than one vote per share, (ii) any
increase in the votes per share of Class B Common Stock or the number of shares
of Class A Common Stock into which the shares of Class B Common Stock are
convertible, or (iii) any proposed amendment to the Articles of Incorporation
that would adversely affect the dividends or other distributions with respect to
shares of Class A Common Stock or the voting rights or other rights of the Class
A Common Stock. Holders of Class A Common Stock will have no cumulative voting
rights and no preemptive, subscription, sinking fund or conversion rights.
Holders of Class B Common Stock will have no cumulative voting rights and no
preemptive, subscription or sinking fund rights.
Each share of Class B Common Stock is convertible at any time, at the
option of its holder, into one share of Class A Common Stock. The Class B Common
Stock will convert automatically into Class A Common Stock and thereby lose its
special voting rights, if such Class B Common Stock is sold or otherwise
transferred to any person or entity other than certain current Holders of the
Class B Common Stock or their descendants or any trusts for their benefit.
79
<PAGE> 82
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters") have agreed, severally, to
purchase from the Company and the Company has agreed to sell to the
Underwriters, all of the Notes offered hereby. The respective principal amounts
of the Notes that each Underwriter has agreed to purchase is set forth opposite
its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................. $
Lehman Brothers Inc. ................................................
Toronto Dominion Securities (USA) Inc. ..............................
----------------
Total........................................................... $110,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent. The
Underwriting Agreement also provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities and
expenses, including liabilities under the Securities Act. The nature of the
Underwriters' obligations under the Underwriting Agreement is such that they are
required to purchase all of the Notes if the Underwriters purchase any of the
Notes.
The Underwriters propose to offer the Notes directly to the public at the
respective public offering prices set forth on the cover page of this Prospectus
and to certain dealers at such prices less a concession not in excess of
% of the principal amount of the Notes. The Underwriters may allow and
such dealers may reallow, a concession not in excess of % of the
principal amount of the Notes. After the initial public offering of the Notes,
the offering prices and other selling terms may be changed by the Underwriters.
The Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The Notes will not be listed on a national securities exchange or admitted
to trading in the National Association of Securities Dealers Automated Quotation
system. The Underwriters have advised the Company that they currently intend to
make a market in the Notes, but are not obligated to do so and may discontinue
any such market making at any time without notice. Accordingly, there can be no
assurance that an active trading market will develop for, or as to the liquidity
of, the Notes.
Toronto Dominion Securities (USA) Inc. is an affiliate of Toronto Dominion
Capital and Toronto-Dominion Bank. The Toronto-Dominion Bank is a lender under
the proposed Bank Credit Facility. The lenders under the Bank Credit Facility
will receive customary fees and other compensation.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held as capital assets by United States Holders
and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, life insurance companies,
persons holding Notes as part of a hedging or conversion transaction or a
straddle or United States Holders whose "functional currency" is not the U.S.
dollar. Furthermore, the discussion below is based on the provisions of the
Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial
decisions thereunder as of the date hereof and such authorities may be repealed,
revoked, or modified so as to result in federal income tax consequences
different from those discussed below. The discussion below is also based on
there not being original issue discount with respect to the original issuance of
the Notes. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
80
<PAGE> 83
PAYMENTS OF INTEREST
Interest on a Note will generally be taxable to a United States Holder as
ordinary income from domestic sources at the time it is paid or accrued in
accordance with the United States Holder's method of accounting for tax
purposes. As used herein, a "United States Holder" of a Note means a holder that
is a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source.
MARKET DISCOUNT
If a United States Holder purchases a Note for an amount that is less than
its principal amount (generally other than at its original issue), the amount of
the difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a United States Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such Note at the time of such payment or disposition. In
addition, the United States Holder may be required to defer, until the maturity
of the Note or its earlier disposition in a taxable transaction incurred or
continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue the market discount on a constant interest
method. A United States Holder of a Note may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest method)
in which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies and may not be revoked without
the consent of the Internal Revenue Service.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will, in general, be the
United States Holder's cost thereof, increased by market discount previously
included in income by the United States Holder and reduced by any amortized
premium and any cash payments on the Note other than qualified stated interest.
Upon the sale, exchange or retirement of a Note, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (less any accrued qualified stated interest,
which will be taxable as such) and the adjusted tax basis of the Note. Except
with respect to market discount, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if at the time of the sale, exchange
or retirement the Note has been held for more than one year. Under current law,
net capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. The deductibility of capital losses
is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to United States Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Bryan Cave
LLP, Washington, D.C. Certain legal matters related to the Offering will be
passed upon for the Underwriters by Latham & Watkins, Los Angeles, California.
81
<PAGE> 84
EXPERTS
The combined financial statements of SYGNET Communications, Inc. and Wilcom
Corporation as of December 31, 1994 and 1995, and for each of the three years in
the period ended December 31, 1995, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The combined financial statements of Selected Systems of Horizon Cellular
Telephone Company, L.P., representing certain majority-owned subsidiaries of
Horizon Cellular Telephone Company, L.P., as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statements of operations and changes in partners' capital and cash
flows of Erie Cellular Telephone Company for the period from January 1, 1995
through September 29, 1995, appearing in this Prospectus and Registration
Statement have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Erie Cellular Telephone Company as of December
31, 1994 and 1993 and for the years then ended, appearing in this Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The statements of operations, partners' capital (deficiency) and cash flows
of DICOMM Cellular Limited Partnership for the year ended December 31, 1993,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
82
<PAGE> 85
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SYGNET COMMUNICATIONS, INC.
WILCOM CORPORATION
Report of Independent Auditors....................................................... F-2
Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996........... F-3
Combined Statements of Income for the years ended December 31, 1993, 1994 and 1995
and
for the six months ended June 30, 1995 and 1996.................................... F-4
Combined Statements of Shareholders' Equity for the years ended December 31, 1993,
1994 and 1995 and the six months ended June 30, 1996............................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994, and
1995 and for the six months ended June 30, 1995 and 1996........................... F-6
Notes to Financial Statements........................................................ F-7
SELECTED SYSTEMS OF HORIZON CELLULAR TELEPHONE COMPANY, L.P.
Report of Independent Auditors....................................................... F-15
Combined Balance Sheets as of December 31, 1994 and 1995............................. F-16
Combined Statements of Operations for the years ended December 31, 1993, 1994 and
1995............................................................................... F-17
Combined Statements of Partners' Equity for the years ended December 31, 1993, 1994
and 1995........................................................................... F-18
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995............................................................................... F-19
Notes to Combined Financial Statements............................................... F-20
Combined Balance Sheet as of June 30, 1996........................................... F-25
Combined Statements of Operations for the six months ended June 30, 1995 and 1996.... F-26
Combined Statements of Cash Flows for the six months ended June 30, 1995 and 1996.... F-27
Notes to the Combined Financial Statements for the Six Months Ended June 30, 1996.... F-28
ERIE CELLULAR TELEPHONE COMPANY
Report of Independent Accountants.................................................... F-30
Statement of Operations and Changes in Partners' Capital for the period January 1,
1995 to September 29, 1995......................................................... F-31
Statement of Cash Flows for the period January 1, 1995 to September 29, 1995......... F-32
Notes to Financial Statements........................................................ F-33
ERIE CELLULAR TELEPHONE COMPANY
Report of Independent Public Accountants............................................. F-36
Balance Sheets as of December 31, 1993 and 1994...................................... F-37
Statements of Operations and Changes in Partners' Capital for the years ended
December 31, 1993 and 1994......................................................... F-38
Statements of Cash Flows for the years ended December 31, 1993 and 1994.............. F-39
Notes to Financial Statements........................................................ F-40
DICOMM CELLULAR LIMITED PARTNERSHIP
Report of Independent Auditors....................................................... F-44
Statement of Operations for the year ended December 31, 1993......................... F-45
Statement of Partners' Capital (Deficiency) for the year ended December 31, 1993..... F-46
Statement of Cash Flows for the year ended December 31, 1993......................... F-47
Notes to Financial Statements........................................................ F-48
</TABLE>
F-1
<PAGE> 86
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
SYGNET Communications, Inc.
Wilcom Corporation
We have audited the accompanying combined balance sheets of SYGNET
Communications, Inc. and Wilcom Corporation as of December 31, 1994 and 1995,
and the related combined statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Companies' 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of SYGNET
Communications, Inc. and Wilcom Corporation at December 31, 1994 and 1995 and
the combined results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Cleveland, Ohio
August 8, 1996, except as to Note 12, as to
which the date is September 16, 1996
F-2
<PAGE> 87
SYGNET COMMUNICATIONS, INC.
AND WILCOM CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 PRO FORMA
-------------------------- JUNE 30 JUNE 30
1994 1995 1996 1996
(UNAUDITED) (NOTE 12)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 436,790 $ 448,292 $ 1,661,363
Accounts receivable, less allowance for doubtful
accounts of $163,400 at December 31, 1994, $402,800 at
December 31, 1995, and $389,100 at June 30, 1996...... 2,076,231 5,654,208 4,755,063
Inventory............................................... 727,920 1,096,961 737,905
Prepaid expenses and deferred income taxes.............. 271,673 263,722 235,732 $ 549,732
----------- ----------- ----------- ----------
Total current assets................................ 3,512,614 7,463,183 7,390,063
Other assets:
Intangible assets -- net................................ 9,690,422 49,456,397 48,823,747
Deferred financing costs -- net......................... 130,737 1,649,997 1,536,842
----------- ----------- ----------- ----------
Total other assets.................................. 9,821,159 51,106,394 50,360,589
Property and equipment -- net............................... 14,084,371 21,048,896 22,429,951
----------- ----------- ----------- ----------
Total assets........................................ $27,418,144 $79,618,473 $80,180,603
=========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 1,618,507 $ 998,368 $ 912,948
Amount payable -- Erie Acquisition...................... -- 1,920,190 --
Deferred revenue........................................ 449,045 742,811 821,695
Utility property tax payable............................ 409,000 135,000 189,797
Accrued expenses and other liabilities.................. 921,132 1,786,965 1,981,834
Dividends payable....................................... 445,461 -- --
----------- ----------- ----------- ----------
Total current liabilities........................... 3,843,145 5,583,334 3,906,274
Long-term liabilities:
Deferred liability -- utility property tax.............. 542,450 248,876 289,212
Deferred income taxes................................... -- -- -- 557,000
Long-term debt.......................................... 18,263,812 69,500,000 70,500,000
----------- ----------- ----------- ----------
Total long-term liabilities......................... 18,806,262 69,748,876 70,789,212
Shareholders' equity:
Wilcom Corporation:
Common shares, no par, Type A, voting, stated value
$25; 1,000 shares authorized, 500 shares issued
and outstanding................................... 12,500 12,500 12,500 --
Common shares, no par, Type B, non-voting, stated
value $25; 5,000 shares authorized, 2,500 shares
issued and outstanding............................ 62,500 62,500 62,500 --
SYGNET Communications, Inc.:
Common shares, no par, Type A, voting, stated value
$1; 250,000 shares authorized, 209,362 shares
issued and outstanding............................ 209,362 209,362 209,362 --
Common shares, no par, Type B, non-voting, stated
value $1; 1,250,000 shares authorized, 1,046,801
shares issued and outstanding..................... 1,046,801 1,046,801 1,046,801 --
Sygnet Wireless, Inc.:
Common shares, $.01 par, Class B, voting; 10,000,000
shares authorized, 6,170,630 pro forma shares
issued and outstanding............................ 61,706
Additional paid-in capital.......................... 4,170,368 4,170,368 4,170,368 5,538,533
Retained earnings (deficit)......................... (482,842) 753,675 1,952,529 (108,170)
Note receivable from officer/shareholder............ (249,952) (249,952) (249,952) (249,952)
Treasury stock, at cost............................. -- (1,718,991) (1,718,991) --
----------- ----------- ----------- ----------
Total shareholders' equity.......................... 4,768,737 4,286,263 5,485,117 5,242,117
----------- ----------- ----------- ----------
Total liabilities and shareholders' equity.......... $27,418,144 $79,618,473 $80,180,603
=========== =========== =========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 88
SYGNET COMMUNICATIONS, INC.
AND WILCOM CORPORATION
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Subscriber revenue....... $ 8,877,744 $11,311,782 $17,191,291 $ 7,230,714 $12,968,212
Roamer revenue........... 3,107,035 4,144,532 4,175,809 1,904,409 2,759,586
Equipment sales.......... 1,098,271 1,172,126 1,529,284 744,081 742,779
Other revenue............ 1,391,205 1,419,501 1,680,544 839,632 756,088
----------- ----------- ----------- ----------- -----------
Total revenue................. 14,474,255 18,047,941 24,576,928 10,718,836 17,226,665
Costs and expenses:
Cost of services......... 2,514,411 3,452,103 3,365,954 1,504,883 2,330,531
Cost of equipment
sales.................. 930,430 1,623,996 4,163,890 1,675,674 2,003,169
General and
administrative......... 4,411,838 4,466,568 5,140,727 2,410,636 3,613,467
Selling and marketing.... 2,166,243 2,555,320 3,505,652 1,414,916 2,355,861
Depreciation and
amortization........... 1,951,209 2,638,577 3,486,554 1,387,061 2,482,516
----------- ----------- ----------- ----------- -----------
Total costs and expenses...... 11,974,131 14,736,564 19,662,777 8,393,170 12,785,544
----------- ----------- ----------- ----------- -----------
Income from operations........ 2,500,124 3,311,377 4,914,151 2,325,666 4,441,121
Other:
Interest expense, net.... 652,174 964,046 2,612,699 829,469 2,632,728
Other expense............ 188,070 552,762 286,016 86,749 228,916
----------- ----------- ----------- ----------- -----------
Income before income taxes.... 1,659,880 1,794,569 2,015,436 1,409,448 1,579,477
Income tax (benefit)
expense..................... -- (40,700) 65,400 24,115 119,000
----------- ----------- ----------- ----------- -----------
Income before minority partner
interest.................... 1,659,880 1,835,269 1,950,036 1,385,333 1,460,477
Minority interest............. 136,836 113,545 -- -- --
----------- ----------- ----------- ----------- -----------
Net income.................... $ 1,523,044 $ 1,721,724 $ 1,950,036 $ 1,385,333 $ 1,460,477
========== ========== ========== ========== ==========
Unaudited pro forma
information (Note 12):
Historical income before
income taxes........... $ 2,015,000 $ 1,579,000
Pro forma income taxes... 968,000 758,000
----------- -----------
Pro forma net income..... $ 1,047,000 $ 821,000
========== ==========
Pro forma net income per
share.................. $ .17 $ .13
========== ==========
Weighted average shares
outstanding............ 6,170,630 6,170,630
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 89
SYGNET COMMUNICATIONS, INC.
AND WILCOM CORPORATION
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
WILCOM CORPORATION COMMON STOCK SYGNET COMMUNICATIONS, INC. COMMON STOCK
----------------------------------- -------------------------------------------
TYPE A TYPE B TYPE A TYPE B ADDITIONAL
---------------- ---------------- ------------------ ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993.......... 500 $12,500 2,500 $62,500 209,362 $209,362 1,046,801 $1,046,801 $4,170,368
Net income......................
Dividends declared..............
--- ------- ----- ------- ------- -------- --------- ---------- ----------
Balance at December 31, 1993........ 500 12,500 2,500 62,500 209,362 209,362 1,046,801 1,046,801 4,170,368
Net income......................
Dividends declared..............
Officer/shareholder stock
purchase......................
--- ------- ----- ------- ------- -------- --------- ---------- ----------
Balance at December 31, 1994........ 500 12,500 2,500 62,500 209,362 209,362 1,046,801 1,046,801 4,170,368
Net income......................
Dividends declared..............
Type A common stock
repurchased...................
Type B common stock
repurchased...................
--- ------- ----- ------- ------- -------- --------- ---------- ----------
Balance at December 31, 1995........ 500 12,500 2,500 62,500 209,362 209,362 1,046,801 1,046,801 4,170,368
Net income (unaudited)..........
Dividends declared
(unaudited)...................
--- ------- ----- ------- ------- -------- --------- ---------- ----------
Balance at June 30, 1996
(unaudited)....................... 500 $12,500 2,500 $62,500 209,362 $209,362 1,046,801 $1,046,801 $4,170,368
=== ======= ===== ======= ======= ======== ========= ========== ==========
<CAPTION>
RETAINED RECEIVABLE TREASURY STOCK
EARNINGS FROM OFFICER/ --------------------
(DEFICIT) SHAREHOLDER SHARES AMOUNT
<S> <C> <C> <C> <C>
Balance at January 1, 1993.......... $ (602,990)
Net income...................... 1,523,044
Dividends declared.............. (996,305)
----------- --------- ------ -----------
Balance at December 31, 1993........ (76,251)
Net income...................... 1,721,724
Dividends declared.............. (2,128,315)
Officer/shareholder stock
purchase...................... $(249,952)
----------- --------- ------ -----------
Balance at December 31, 1994........ (482,842) (249,952)
Net income...................... 1,950,036
Dividends declared.............. (713,519)
Type A common stock
repurchased................... 8,024 $ (312,936)
Type B common stock
repurchased................... 40,173 (1,406,055)
----------- --------- ------ -----------
Balance at December 31, 1995........ 753,675 (249,952) 48,197 (1,718,991)
Net income (unaudited).......... 1,460,477
Dividends declared
(unaudited)................... (261,623)
----------- --------- ------ -----------
Balance at June 30, 1996
(unaudited)....................... $1,952,529 $(249,952) 48,197 $(1,718,991)
=========== ========= ====== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 90
SYGNET COMMUNICATIONS, INC.
AND WILCOM CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
------------------------------------------- --------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income............................ $ 1,523,044 $ 1,721,724 $ 1,950,036 $ 1,385,333 $ 1,460,477
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation...................... 1,762,831 2,365,848 2,765,816 1,234,402 1,732,635
Amortization...................... 188,378 272,729 720,738 152,659 749,881
Loss on disposal of equipment..... 37,870 461,333 161,222 23,270 153,151
Minority interest................. 136,836 113,545
Changes in operating assets and
liabilities:
Accounts receivable........... (404,067) (320,520) (2,838,833) (342,357) 899,145
Inventory..................... (31,002) (382,335) (184,951) 168,389 359,056
Prepaid and deferred
expenses.................... 34,744 (97,296) 7,951 (9,650) 27,990
Accounts payable and accrued
expenses.................... 604,188 1,161,191 (136,992) (744,463) 279,390
----------- ------------ ------------ ----------- -----------
Net cash provided by operating
activities...................... 3,852,822 5,296,219 2,444,987 1,867,583 5,661,725
Investing Activities
Acquisitions of Sharon and Erie (Note
3).................................. -- (4,500,000) (40,533,104) -- (1,920,190)
Issuance of note receivable........... -- (249,952) -- -- --
Purchases of property and equipment... (3,630,390) (5,793,053) (9,056,098) (3,621,030) (3,266,841)
Proceeds from sale of equipment....... 102,181 8,701 513,730 -- --
----------- ------------ ------------ ----------- -----------
Net cash used in investing
activities...................... (3,528,209) (10,534,304) (49,075,472) (3,621,030) (5,187,031)
Financing Activities
Dividends paid........................ (1,120,044) (1,856,089) (1,158,980) (980,600) (261,623)
Proceeds from long-term debt.......... -- 9,733,812 51,986,188 4,900,000 2,000,000
Principal payments on long-term
debt................................ (816,500) (3,534,000) (750,000) (750,000) (1,000,000)
Increase in financing costs........... (15,778) (127,546) (1,716,230) (45,522) --
Purchase of treasury stock............ -- -- (1,718,991) (1,718,991) --
----------- ------------ ------------ ----------- -----------
Net cash (used in) provided by
financing activities............ (1,952,322) 4,216,177 46,641,987 1,404,887 738,377
(Decrease) increase in cash and cash
equivalents............................. (1,627,709) (1,021,908) 11,502 (348,560) 1,213,071
Cash and cash equivalents at beginning of
period.................................. 3,086,407 1,458,698 436,790 436,790 448,292
----------- ------------ ------------ ----------- -----------
Cash and cash equivalents at end of
period.................................. $ 1,458,698 $ 436,790 $ 448,292 $ 88,230 $ 1,661,363
=========== ============ ============ =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 91
SYGNET COMMUNICATIONS, INC.
AND WILCOM CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND THE
UNAUDITED PERIODS ENDED JUNE 30, 1995 AND 1996
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The combined financial statements include the accounts of SYGNET
Communications, Inc. and its subsidiaries (SYGNET) combined with Wilcom
Corporation and its affiliates (Wilcom) (collectively, the Company). The Company
owns and operates cellular telephone systems in metropolitan statistical areas
(MSA) and rural service areas (RSA) located in northeastern Ohio and western
Pennsylvania representing a population of approximately one million, under three
partnerships, Wilcom Cellular, Youngstown Cellular Telephone Company ("YCTC")
and Erie Cellular Telephone Company (Erie). All significant intercompany
balances and transactions have been eliminated in the combined financial
statements.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventory
Inventory consisting of merchandise purchased for resale is stated at the
lower of cost or market determined by the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives calculated under the straight-line or double-declining
balance methods.
Intangible Assets
The FCC issues licenses that enable cellular carriers to provide cellular
service in specific geographic areas. The FCC grants licenses for a term of up
to 10 years, and generally grants renewals if the licensee has complied with its
obligations under the Communications Act of 1934, as amended. In 1993, the FCC
adopted specific standards to apply to cellular renewals, concluding it will
award a renewal to a cellular licensee that meets certain standards of past
performance. Historically, the FCC has granted license renewals routinely. The
Company believes that it has, and will continue to meet all requirements
necessary to secure renewal of its cellular licenses.
The Company has acquired cellular licenses through its acquisition of
interests in various cellular systems. The cost of licenses acquired was
$4,194,100 and $40,289,743 in 1994 and 1995, respectively. The Company uses a 40
year useful life to amortize its licenses under the straight-line method.
Purchased paging customer lists are being amortized over 5 years under the
straight-line method. The components of intangible assets at December 31 are
summarized below:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Cellular licenses.......................................... $10,256,527 $50,546,270
Paging license and customer lists.......................... 119,792 119,792
----------- -----------
10,376,319 50,666,062
Accumulated amortization................................... (685,897) (1,209,665)
----------- -----------
$ 9,690,422 $49,456,397
=========== ===========
</TABLE>
Amortization expense was $174,355, $211,921 and $523,768 in 1993, 1994 and
1995, respectively.
F-7
<PAGE> 92
The ongoing value and remaining useful life of intangible assets are
subject to periodic evaluation and the Company currently expects the carrying
amounts to be fully recoverable. When events and circumstances indicate that
intangible assets might be impaired, an undiscounted cash flow methodology would
be used to determine whether an impairment loss would be recognized.
Revenue Recognition
The Company earns revenue primarily by providing cellular services to its
customers (Subscriber Revenue) and from the usage of its system by the customers
of other cellular carriers (Roamer Revenue). Access revenue for Subscriber
Revenue is billed one month in advance. Revenue is recognized as service is
rendered. Subscriber acquisition costs (primarily commissions and loss on
equipment sales) are expensed when incurred.
Deferred Financing Costs
Deferred financing costs are being amortized over the term of the notes.
Accumulated amortization was $12,987 and $58,834 at December 31, 1994 and 1995,
respectively. Amortization expense was $14,023, $60,808 and $196,970 in 1993,
1994 and 1995, respectively.
Advertising Costs
Advertising costs are recorded as expense when incurred. Advertising
expense was $569,692, $625,255 and $933,498 in 1993, 1994 and 1995,
respectively.
Stock Compensation
The Company accounts for its stock-based employee compensation arrangements
based on the intrinsic value of the equity instruments granted, as set forth in
APB Opinion No. 25 Accounting For Stock Issued to Employees.
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 amounts reported in the financial statements. Actual
results may differ from those estimates.
Significant Concentrations
In connection with providing cellular services to customers of other
cellular carriers, the Company has contractual agreements with those carriers
which provide for agreed upon billing rates between the parties. Approximately
75%, 74% and 62% of the Company's Roamer Revenue was earned from two cellular
carriers in 1993, 1994 and 1995, respectively. In addition, approximately 30% of
Roamer Revenue in the markets to be acquired (see Note 11) is earned from a
single cellular carrier.
Financial Instruments
Derivative financial instruments are used by the Company in the management
of interest rate exposure and are accounted for on an accrual basis. Income and
expense are recorded in the same category as that arising from the related
liability being hedged (i.e., adjustments to interest expense).
The Company uses variable interest rate credit facilities to finance
acquisitions and operations of the Company. The Company may reduce its exposure
to fluctuations in interest rates by creating offsetting positions through the
use of derivative financial instruments. The Company does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives. The notional amount of interest rate swaps is
the underlying principal amount used in determining the interest payments
exchanged over the life of the swap. The notional amount is not a measure of the
Company's exposure through its use of derivatives. Premiums paid for interest
rate cap agreements are being amortized as adjustments to interest expense over
the term of the agreements.
The Company may be exposed to credit loss in the event of nonperformance by
the counterparty to its interest rate swap agreements and interest rate cap
agreements. The Company anticipates the counterparty
F-8
<PAGE> 93
will be able to fully satisfy its obligations under the agreements as the
counterparty is the primary lender under the financing agreement which the
interest rate swap and cap agreements hedge.
Fair Value of Financial Instruments
At December 31, 1994 and 1995, the carrying value of cash equivalents,
accounts receivable, the interest rate swap and cap and long-term debt
approximated the fair value.
Recently Issued Accounting Pronouncements
In March of 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, was issued. SFAS No. 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company adopted SFAS No. 121 effective January 1, 1996. The
impact resulting from the adoption of SFAS No. 121 did not have a material
effect on the Company's combined financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. Statement No. 123 defines a fair value based method of accounting
for stock-based employee compensation plans (including stock option plans).
Statement No. 123 allows an entity to continue to measure compensation costs for
its plans as prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. Management expects to account for stock options in accordance with
APB Opinion No. 25. The disclosure requirements of Statement No. 123, which are
required if an entity elects to continue to use the accounting method in APB
Opinion No. 25, will be adopted as required for financial statements beginning
in 1996 for the Stock Option Plan to be adopted in 1996 as described in Note 12.
Unaudited Interim Financial Information
The accompanying unaudited combined financial statements at June 30, 1996
and for the six months ended June 30, 1995 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with Article 10 of Regulation S-X. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the six-month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996.
3. ACQUISITIONS
On August 11, 1994, SYGNET purchased 75% and Wilcom purchased 25% of the
outstanding shares of common stock of Sharron Youngstown Cellular, Inc. (Sharon)
for $4.5 million. Sharon owns a 7.26% interest in Wilcom Cellular and Youngstown
Cellular Telephone Company.
On September 30, 1995, SYGNET, as a general partner, purchased 95.46% of
Erie for cash of $40.53 million. On November 30, 1995, Sharon purchased 4.54% of
Erie for $1.92 million, which was paid on February 12, 1996.
The above transactions were accounted for as purchases and, accordingly,
the results of operations of the companies acquired have been included in the
combined financial statements since the dates of acquisition.
The pro forma unaudited condensed combined results of operations for the
year ended December 31, 1994 and December 31, 1995 as if the purchases occurred
on January 1, 1994 are as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Revenue.................................................... $23,148,000 $30,374,000
=========== ===========
Net income................................................. $ 311,000 $ 1,860,000
=========== ===========
</TABLE>
F-9
<PAGE> 94
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIFE 1994 1995
<S> <C> <C> <C>
Land, building and improvements................ 10-19 years $ 2,392,162 $ 3,340,331
Cellular system and equipment.................. 5-19 years 11,043,087 19,556,464
Customer premise equipment..................... 3 years 2,548,036 1,695,605
Office furniture and equipment................. 3-10 years 1,954,899 2,498,057
Cell site construction in progress............. 950,700 379,813
----------- -----------
18,888,884 27,470,270
Accumulated depreciation....................... (4,804,513) (6,421,374)
----------- -----------
$14,084,371 $21,048,896
========== ==========
</TABLE>
At December 31, 1995, the Company had purchase commitments of approximately
$3.75 million for equipment.
5. CREDIT AGREEMENT
On September 29, 1995, the Company entered into a financing agreement with
a commercial bank group to borrow up to $75 million at any time through
September 30, 2003. The credit agreement provides for various borrowing rate
options based on either a fixed spread over the London Interbank Offered Rate
("LIBOR") or the prime rate.
Among other things, the credit agreement contains financial covenants
requiring the maintenance of debt service ratios, hedging of interest rate
exposure, limitations on distributions to shareholders and sales of assets. The
credit facility is secured by a pledge of the partnership interests in YCTC,
Wilcom Cellular and Erie. Interest rates at December 31, 1995 ranged from 7.48%
to 7.82%.
In connection with covenant requirements described above, the Company
entered into a three year interest rate swap and a two year interest rate cap
agreement on November 29, 1995 with a total underlying notional amount of $40
million. The swap agreement converted the interest rate on $20 million notional
amount of the credit facility from a variable rate based upon LIBOR (5.87% at
December 31, 1995) to a fixed rate of 5.79%. Amounts paid or received under this
agreement are recognized as adjustments to interest expense. The interest rate
cap agreement entitled the Company to receive from a counterparty on a quarterly
basis the amounts, if any, by which the Company's interest payments on its $20
million notional amount exceed 8.25%. The interest rate under the credit
facility did not exceed 8.25% during the period from November 29, 1995 to
December 31, 1995.
Minimum future payments based upon the borrowing levels at December 31,
1995 for the next five years are:
<TABLE>
<S> <C>
1996........................................................... $ --
1997........................................................... --
1998........................................................... 500,000
1999........................................................... 9,000,000
2000........................................................... 12,000,000
</TABLE>
Interest paid was $753,754, $810,303 and $2,202,345 in 1993, 1994 and 1995,
respectively.
6. LEASES
The Company has entered into various operating leases for land and office
facilities. Leases for tower sites provide for periodic extensions of lease
periods with future lease payments indexed to the consumer price index.
F-10
<PAGE> 95
Minimum future rental payments under operating leases having remaining
terms in excess of one year as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
<S> <C>
1996......................................................... $ 572,239
1997......................................................... 526,308
1998......................................................... 470,262
1999......................................................... 329,636
2000......................................................... 253,222
Thereafter................................................... 1,024,410
----------
Total........................................................ $3,176,077
==========
</TABLE>
Rent expense was approximately $230,000, $296,000 and $460,800 in 1993,
1994 and 1995, respectively.
7. RETIREMENT PLAN
The Company sponsors a 401(k) retirement and profit sharing plan which
covers substantially all its employees. Eligible employees can contribute from
1% to 15% of their compensation. The Company, at its discretion, may match a
portion of the employee's contribution. The Company may also, at its discretion,
make additional profit sharing contributions to the plan. Total pension expense
was $64,000, $113,000 and $114,000 in 1993, 1994 and 1995, respectively.
8. SHAREHOLDERS' EQUITY
Each share of SYGNET and Wilcom Type A common stock is entitled to one
vote. SYGNET and Wilcom Type B common stock have no voting rights. Both types of
common stock are identical in all other respects.
On January 5, 1995, SYGNET repurchased 8,024 Type A shares for $39.00 per
share and 40,173 Type B shares for $35.00 per share from a shareholder for
approximately $1,719,000. These shares are accounted for at cost and held as
treasury stock.
Under the most restrictive of the covenants discussed in Note 5, the
Company could not declare any additional dividends at December 31, 1995.
9. INCOME TAXES
SYGNET's shareholders have elected under Subchapter S of the Internal
Revenue Code to include SYGNET's taxable income and losses in the shareholders'
federal and Ohio returns.
Sharon is subject to federal and state taxes, and accordingly has provided
for deferred income taxes for the temporary differences between financial and
tax reporting. The principal differences relate to partnership income and
alternative minimum tax (AMT) credit carryforwards. Amounts for deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
DEFERRED TAX ASSETS: 1994 1995
------------------------------------------------------------------
<S> <C> <C>
AMT credit carryforward........................................... $48,200 $63,400
Investment in partnerships........................................ 33,900 --
Other............................................................. 7,600 8,200
------- -------
Total deferred tax assets......................................... 89,700 71,600
Deferred tax liability -- investment in partnerships.............. -- 26,600
------- -------
Net deferred tax assets........................................... $89,700 $45,000
======= =======
</TABLE>
Sharon had an AMT credit carryforward at December 31, 1995 of approximately
$63,000 which will be available to reduce future federal income tax over an
indefinite period. Deferred tax assets are included in
F-11
<PAGE> 96
prepaid expenses and deferred income taxes; deferred tax liabilities are
included in accrued expenses and other liabilities.
The components of the income tax provision (benefit), in the combined
statement of income for the years ended December 31, 1994 and 1995 are as
follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Current income tax expense....................................... $ 49,000 $20,700
Deferred income tax (benefit).................................... (89,700) 44,700
-------- --------
Total provision for income tax (benefit)......................... $(40,700) $65,400
======== ========
</TABLE>
Income taxes paid were $49,000 and $60,514 in 1994 and 1995, respectively.
10. RELATED PARTY TRANSACTIONS
Certain shareholders of SYGNET and Wilcom Corporation own a majority of the
outstanding shares of WKBN. SYGNET purchases advertising, production, tower
rental and other services from WKBN. WKBN purchases cellular telephone, paging
and other services from SYGNET. The following is a summary of material
transactions and balances with WKBN:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1993 1994 1995
<S> <C> <C> <C>
Services and facilities provided by WKBN.............. $233,385 $214,518 $218,404
Services provided to WKBN............................. 73,268 67,717 136,741
Property purchased from WKBN.......................... 700,000 -- --
Amounts payable to WKBN............................... 25,379 26,076 18,797
</TABLE>
On December 29, 1994, the Company received a promissory note from an
officer/shareholder for $249,952 for the purchase of Type A and Type B common
shares from a shareholder. The interest rate is 8.23% and the note is to be
repaid over 7 years.
11. PENDING ACQUISITION OF SELECTED CELLULAR SYSTEMS
On July 11, 1996, the Company signed an agreement to purchase various
cellular licenses, property and equipment and the net current assets of selected
systems of Horizon Cellular Telephone Company, L.P. The aggregate proposed
purchase price is $250 million plus the net current assets of the selected
systems. The Company intends to finance the acquisition through the issuance of
$110 million of senior notes, issuance of redeemed preferred stock and
additional bank credit facilities. Subsequent to the purchase, the Company
intends to extinguish its existing credit facility and expects to incur a loss
of approximately $1.5 million on the refinancing of its credit facility.
12. SUBSEQUENT EVENTS AND PRO FORMA INFORMATION (UNAUDITED)
Merger Between Sygnet Communications, Inc. and Wilcom Corporation
In connection with the transactions described in Note 11, the Company is in
the process of effecting a corporate restructuring as follows. First, the SYGNET
and Wilcom shareholders have terminated the Close Corporation Agreement and
Subchapter S corporation tax status. Wilcom merged into SYGNET whereby
shareholders of Wilcom received 8.72 shares of SYGNET common stock for each
share of Wilcom common stock held as of August 31, 1996. Effective with the
merger, the 500 shares of Wilcom Type A converted into 4,360 shares of SYGNET
Type A and the 2,500 shares of Wilcom Type B converted into 21,800 shares of
SYGNET Type B. The SYGNET common stock Type A 205,698 shares and Type B
1,028,428 shares will be converted into 6,170,630 shares of Sygnet Wireless,
Inc. (Wireless) Class B common stock. This merger is a business combination
between entities under common control whereby the assets and liabilities so
transferred will be accounted for at historical cost in a manner similar to that
in pooling-of-interest accounting. The corporate restructuring is contingent
upon FCC approval of the transfer of the FCC microwave licenses.
F-12
<PAGE> 97
As a result of the corporate restructuring described above, Wireless will
have a capital structure as follows:
Class A Common Stock -- Wireless will authorize 60 million shares of
$.01 par value Class A common stock. These shares will have one vote per
share.
Class B Common Stock -- Wireless will authorize 10 million shares of
$.01 par value Class B common stock. 6,170,360 shares will be issued and
outstanding as a result of the corporate restructuring described above.
These shares will have ten votes per share.
Preferred Stock -- Wireless will authorize 10 million shares of voting
$.01 par value preferred stock and 5 million shares of non-voting $.01 par
value preferred stock. The Board of Directors will have the authority to
determine the rights conferred to shareholders when the Board causes either
type of preferred stock to be issued. The Company expects to issue 200,000
shares of nonvoting redeemable cumulative preferred stock (Preferred Stock)
as a result of the transactions described in Note 11.
The net proceeds from the Preferred Stock are expected to total $19.0
million. Dividends will accrue quarterly in arrears and will be payable in
shares of Preferred Stock. The dividend rates will increase annually from 15% in
1997 to 19% in 1999 and are 21% in year 2000 and thereafter. Warrants to
purchase shares of the Company's Class A Common Stock representing 1% of the
Common Stock outstanding, on a fully diluted basis, will be issued to holders of
the Preferred Stock at the end of the nine-month period following the closing of
the issuance of the shares if the Preferred Stock is outstanding at such time.
At the end of each quarter thereafter for so long as any of the Preferred Stock
continues to remain outstanding, warrants to purchase shares of Class A Common
Stock representing 3/8%, on a fully diluted basis, will be issued to the
holders of the Preferred Stock. The exercise price of the warrants will be $0.01
per share of Class A Common Stock.
The Company will be required to redeem the Preferred Stock at its
liquidation amount thereof, plus all accrued and unpaid dividends to the date of
redemption, upon the earlier of (i) the tenth anniversary of the Preferred Stock
Investment, (ii) a Change of Control as defined, (iii) the issuance of any
equity by the Company at the holding Company level (to the extent of the
proceeds thereof) or (iv) the exercise of the Put Option (defined below).
At any time after the fourth anniversary, holders of the Preferred Stock
will have the right to require the Company to redeem the Preferred Stock (the
"Put Option") in whole or in part within 90 days from the receipt of written
notice of the exercise of the Put Option. In the event the Preferred Stock is
not redeemed within such 90-day period, the holders of the Preferred Stock, upon
written notice to the Company, will have the right to require the Company to
effect a sale or liquidation of the Company to be completed within a period of
12 months following such notice.
The Preferred Stock will be subject to redemption at the option of the
Company at any time in whole or in part upon three business days' notice.
Stock Option Plan
The Company has adopted a Stock Option Plan ("SOP"). The SOP will provide
for the grant of incentive and nonqualified stock options. Under the SOP,
options to purchase up to an aggregate of one million shares of Sygnet Wireless,
Inc. Class A Common Stock are available for grants to employees of the Company.
In August, 1996, the Board of Directors granted a total of 504,000 ten
year, non qualified stock options at the estimated fair value as determined by
the Board of Directors.
Tax Status
As a Subchapter S Corporation, SYGNET recorded no provision for income
taxes. SYGNET's taxable income and losses are included in its shareholders'
federal and state returns. As a result of the termination of the Subchapter S
Corporation status, application of the provisions of SFAS No. 109, Accounting
for Income Taxes requires deferred income taxes to be provided for differences
in the basis for tax purposes and for financial accounting purposes of recorded
assets and liabilities, principally, depreciable property and certain accrued
liabilities. A tax provision and a net deferred income tax liability of
approximately $243,000 (deferred
F-13
<PAGE> 98
income tax liability of $557,000 net of deferred income tax assets of $314,000)
would have been recorded at June 30, 1996 had the termination of the Subchapter
S Corporation occurred at that date.
Pro Forma Net Income Per Share Information
As described above, SYGNET and Wilcom will terminate their status as
Subchapter S Corporations. A pro forma adjustment has been made to the
historical financial statements for the year ended December 31, 1995 and for the
six months ended June 30, 1996 to reflect a provision for federal and certain
state income taxes at an effective rate of 48%. The effective rate is in excess
of the statutory rate primarily due to non-deductible amortization.
Pro forma net income per share is based on the weighted average number of
shares of common stock of 6,170,630 outstanding assuming the corporate
restructuring described above had occurred. Historical earnings per share data
is not presented because such data is not meaningful.
F-14
<PAGE> 99
REPORT OF INDEPENDENT AUDITORS
The Board of Horizon G.P., Inc.
We have audited the accompanying combined balance sheets of Selected
Systems of Horizon Cellular Telephone Company, L.P., representing certain
majority-owned subsidiaries of Horizon Cellular Telephone Company, L.P., as of
December 31, 1994 and 1995, and the related combined statements of operations,
partners' equity, and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of Horizon
Cellular Telephone Company, L.P.'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 combined financial position of Selected Systems of
Horizon Cellular Telephone Company, L.P. at December 31, 1994 and 1995, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
July 26, 1996
F-15
<PAGE> 100
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
<S> <C> <C>
ASSETS
Current assets:
Cash....................................................... $ 611,829 $ 629,874
Accounts receivable, net of allowance for doubtful accounts
of $173,671 and $218,218................................. 2,977,901 5,123,833
Inventory.................................................. 240,066 373,623
Prepaid expenses........................................... 100,068 147,206
----------- ------------
Total current assets.................................. 3,929,864 6,274,586
Property and equipment:
Cellular system............................................ 16,258,547 23,305,472
Other...................................................... 1,122,286 2,035,273
----------- ------------
17,380,833 25,340,745
Accumulated depreciation........................................ (2,714,488) (5,504,261)
----------- ------------
14,666,345 19,836,484
Licenses, net of accumulated amortization of $3,185,738
and $5,266,096................................................ 67,614,553 86,976,933
Other assets, net of accumulated amortization of $3,099,830
and $4,879,099................................................ 3,985,252 5,498,139
----------- ------------
Total assets.......................................... $90,196,014 $118,586,142
=========== ============
LIABILITIES AND COMBINED PARTNERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 867,180 $ 1,864,160
Accrued expenses........................................... 995,211 1,781,994
Deferred revenue........................................... 279,332 588,649
----------- ------------
Total current liabilities............................. 2,141,723 4,234,803
Advances from affiliates........................................ 34,914,840 33,087,671
Combined partners' equity:
Partners' contributions.................................... 61,376,007 89,215,915
Cumulative net loss........................................ (8,236,556) (7,952,247)
----------- ------------
Total combined partners' equity....................... 53,139,451 81,263,668
----------- ------------
Total liabilities and combined partners' equity....... $90,196,014 $118,586,142
=========== ============
</TABLE>
See accompanying notes.
F-16
<PAGE> 101
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Revenues and sales:
Subscriber revenues.............................. $ 2,701,900 $ 6,848,485 $12,069,274
Roaming revenues................................. 3,312,659 6,909,821 10,801,818
Equipment sales.................................. 569,919 1,149,996 1,602,339
----------- ----------- -----------
Total revenues and sales.............................. 6,584,478 14,908,302 24,473,431
Costs and expenses:
Cost of services................................. 1,567,551 2,807,611 3,572,445
Cost of equipment sales.......................... 717,081 1,689,616 2,544,039
General and administrative expenses.............. 848,459 2,096,844 3,576,817
Selling.......................................... 1,343,854 2,550,325 4,016,438
Depreciation and amortization.................... 2,293,908 4,483,784 6,649,659
----------- ----------- -----------
6,770,853 13,628,180 20,359,398
----------- ----------- -----------
(Loss) income from operations......................... (186,375) 1,280,122 4,114,033
Interest expense...................................... 2,731,076 3,662,815 3,829,724
----------- ----------- -----------
(Loss) income before extraordinary item............... (2,917,451) (2,382,693) 284,309
Extraordinary item -- gain on early extinguishment of
debt................................................ 873,638 -- --
----------- ----------- -----------
Net (loss) income..................................... $(2,043,813) $(2,382,693) $ 284,309
========== ========== ==========
</TABLE>
See accompanying notes.
F-17
<PAGE> 102
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
HORIZON
CELLULAR
TELEPHONE KCCGP,
COMPANY, L.P. L.P. TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Combined partners' equity at December 31, 1992......... $11,332,355 $ 29,543 $ 11,361,898
Partners' contributions........................... 1,243,160 1,244 1,244,404
Net loss.......................................... (2,032,392) (11,421) (2,043,813)
------------- ------------- -------------
Combined partners' equity at December 31, 1993......... 10,543,123 19,366 10,562,489
Partners' contributions........................... 44,510,058 449,597 44,959,655
Net loss.......................................... (2,361,001) (21,692) (2,382,693)
------------- ------------- -------------
Combined partners' equity at December 31, 1994......... 52,692,180 447,271 53,139,451
Partners' contributions........................... 27,000,000 839,908 27,839,908
Net income........................................ 281,465 2,844 284,309
------------- ------------- -------------
Combined partners' equity at December 31, 1995......... $79,973,645 $ 1,290,023 $ 81,263,668
=========== ========= ==========
</TABLE>
See accompanying notes.
F-18
<PAGE> 103
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Operating Activities
Net (loss) income............................. $ (2,043,813) $ (2,382,693) $ 284,309
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation and amortization............ 2,293,908 4,483,784 6,649,659
Provision for bad debts.................. 69,936 197,431 182,770
Accrued interest expense-affiliate....... 840,644 3,662,815 3,829,724
Gain on early extinguishment of debt..... (873,638) -- --
Changes in operating assets and
liabilities (net of effect of companies
acquired):
Accounts receivable................. (629,924) (1,296,819) (2,043,359)
Inventory........................... (6,238) (152,139) (83,995)
Prepaid expenses.................... (2,695) (56,996) (35,273)
Accounts payable and accrued
expenses.......................... 101,018 243,185 1,610,340
Deferred revenue.................... 67,849 122,379 262,900
------------ ------------ ------------
Net cash (used in) provided by operating
activities....................................... (182,953) 4,820,947 10,657,075
Investing Activities
Purchases of property and equipment, net of
$105,200 and $220,900 purchased on account
in 1994 and 1995, respectively.............. (2,089,923) (7,071,504) (5,244,548)
License and systems acquisitions.............. -- (41,951,228) (27,662,557)
Other......................................... (4,614) (109,101) 85,060
------------ ------------ ------------
Net cash used in investing activities.............. (2,094,537) (49,131,833) (32,822,045)
Financing Activities
Partners' contributions....................... 1,244,404 41,959,655 27,272,727
Advances from (to) affiliates, net of $567,181
noncash partner contributions in 1995....... 28,941,193 991,167 (5,089,712)
Repayment of subordinated notes payable and
other long-term debt........................ (26,723,726) -- --
------------ ------------ ------------
Net cash provided by financing activities.......... 3,461,871 42,950,822 22,183,015
------------ ------------ ------------
Net increase (decrease) in cash.................... 1,184,381 (1,360,064) 18,045
Cash at beginning of period........................ 787,512 1,971,893 611,829
------------ ------------ ------------
Cash at end of period.............................. $ 1,971,893 $ 611,829 $ 629,874
=========== =========== ===========
</TABLE>
See accompanying notes.
F-19
<PAGE> 104
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying combined financial statements reflect the combined
financial position, combined results of operations and combined cash flows of
Horizon Cellular Telephone Company of Lawrence, L.P. ("Lawrence"), Horizon
Cellular Telephone Company of Crawford, L.P. ("Crawford"), Horizon Cellular
Telephone Company of Chautauqua, L.P. ("Chautauqua"), and Horizon Cellular
Telephone Company of Indiana, L.P. ("Indiana") (collectively referred to as
"Selected Systems" or "the Company") as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995. The combined
financial statements include only the operating results since the Selected
Systems were acquired by Horizon Cellular Telephone Company L.P. Each of the
operating systems is a limited partnership in which KCCGP, L.P. ("KCCGP") is the
managing and sole general partner, and Horizon Cellular Telephone Company, L.P.
("HCTC") is the sole limited partner.
The Selected Systems own, design, develop, and operate cellular
communications systems. KCCGP performs certain administrative functions for the
Selected Systems and, accordingly, certain expenses of KCCGP (see Note 5) have
been allocated to the Selected Systems on a basis which, in the opinion of
management, is reasonable. However, such expenditures are not necessarily
indicative of, and it is not practicable for management to estimate, the nature
and level of expenses which might have been incurred had the systems been
operating as separate independent companies.
2. ACQUISITIONS
Crawford
In August 1991, HCTC acquired the Federal Communications Commission ("FCC")
PA-6 Construction Permit for $7 million in cash and a $16.6 million subordinated
note payable to the seller. In December 1992, HCTC contributed the Construction
Permit to Lawrence in exchange for a 99.9% interest in the Company and
Lawrence's assumption of the related debt. KCCGP contributed approximately
$13,000 to Lawrence for a 0.1% interest in the Company. Lawrence became
operational in September 1991.
In December 1992, HCTC acquired the FCC PA-1 Operating License and certain
operating assets and liabilities for $2.2 million in cash and $7.7 million of
notes payable. Also, in December 1992, HCTC contributed the Operating License to
Crawford in exchange for a 99.0% interest in the Company and Crawford's
assumption of the related debt. KCCGP contributed approximately $20,000 to
Crawford for a 1.0% interest in the Company. The PA-1 system became operational
in April 1992.
Effective January 1, 1995, the operations of Lawrence were merged into
Crawford. As part of the market consolidation, the general partner interests
were reorganized. KCCGP acquired an additional .9% (serving as general partner
with a 1% ownership), reducing HCTC's Limited Partnership interest to 99%.
Chautauqua
In March 1994, the Company acquired the FCC NY-3 Operating License and
certain operating assets and liabilities for $41.5 million in cash, and the
issuance of 30 HCTC limited partnership units with a stated value of $3 million.
Also in March 1994, HCTC contributed cash to fund the acquisition in exchange
for a 99.0% interest in the Company. KCCGP contributed approximately $450,000 to
Chautauqua for a 1.0% interest in the Company. The NY-3 system became
operational in October 1991.
Indiana
In June 1995, the Company acquired the FCC PA-7 Operating License
("Indiana") and certain operating assets and liabilities for $27 million in
cash. As part of the acquisition, the Company also acquired the right to operate
the FCC PA-2 system under an Interim Operating Authority, which permits the
Company
F-20
<PAGE> 105
to temporarily provide cellular service in an otherwise unserved area. Also in
June 1995, HCTC contributed cash to fund the acquisition in exchange for a 99.0%
interest in the Company. KCCGP contributed approximately $273,000 to Indiana for
a 1.0% interest in the Company. The PA-7 system became operational in July 1991.
Pursuant to the partnership agreements, the Selected Systems' net profits
and losses are allocated proportionately to the partners based upon their
respective ownership interests. The partnerships shall terminate on the
respective tenth anniversary dates of formation of the partnerships; however,
the partners may extend the term of the partnership at their discretion.
All of the Company's acquisitions were accounted for under the purchase
method of accounting; accordingly, assets acquired and liabilities assumed have
been recorded at HCTC's basis in such amounts which represents their estimated
fair values at the dates of acquisition by HCTC and their results of operations
are included in the accompanying combined statements of operations since the
date of acquisition. The excess of purchase price over the fair market value of
identifiable net tangible assets acquired has been allocated to customer lists
and licenses.
Pro Forma Results of Operations
The following unaudited pro forma information presents the revenues and
sales, and (loss) income before extraordinary item, as if the acquisitions of
Chautauqua and Indiana had occurred at the beginning of 1993 and 1994,
respectively. The pro forma information includes the revenues and sales, and
(loss) income before extraordinary item for the Selected Systems for the
indicated periods less increased amortization of license costs and other
intangible assets, and increased general and administrative expenses for
management fee allocations. Pro forma revenues and sales and (loss) income
before extraordinary item are not necessarily indicative of the revenues and
sales and (loss) income before extraordinary item that would have occurred had
the purchases been made at the beginning of the respective years or the results
which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
(UNAUDITED)
<S> <C> <C> <C>
Revenues and sales............................ $ 9,375,000 $19,040,000 $26,171,000
(Loss) income before extraordinary item....... (5,002,000) (3,488,000) 24,000
</TABLE>
3. ACCOUNTING POLICIES
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories are carried at the lower of cost (using the first-in, first-out
method) or market.
Property and Equipment
Property and equipment are stated at cost and are depreciated over their
estimated useful lives (three to twelve years) using the straight-line method.
Depreciation expense amounted to approximately $667,900 in 1993, $1,573,900
in 1994, and $2,790,100 in 1995.
Licenses
Licenses primarily represent the acquisition costs of the Operating
Licenses. Such costs are being amortized over a period of 40 years using the
straight-line method.
The Selected Systems periodically review the carrying value of their
licenses to determine whether such amounts are recoverable based on undiscounted
future cash flows and whether a reduction to fair value is necessary. There have
been no such reductions through December 31, 1995.
F-21
<PAGE> 106
Other Assets
Other assets primarily represent the acquisition cost of the customer lists
which is being amortized over a period of 5 years using the straight-line
method.
Advances from Affiliates
Advances from affiliates primarily represent cash advances from HCTC and
KCCGP which provided funds for investing and operating activities, and have no
specific repayment terms. Commencing in October 1993, upon the transaction
described below, interest expense is charged monthly at a rate of 11-3/8% of the
ending balances payable to HCTC.
In October 1993, HCTC advanced the Company a portion of the proceeds it
generated from the issuance of $235 million senior subordinated discount notes.
The Company utilized the funds advanced to repay all of its indebtedness,
resulting in an extraordinary gain of approximately $874,000, net of the
write-off of unamortized deferred financing fees of approximately $53,000.
Revenue and Expense Recognition
Cellular airtime revenue and access charges are recognized as service is
provided. Cellular airtime is billed in arrears and a majority of access charges
are billed in advance. Subscriber acquisition costs (mainly commissions and loss
on equipment sales) are expensed when incurred. Accounts receivable consist
mainly of amounts due from subscribers and other cellular companies whose
subscribers use the Selected Systems' cellular service.
Approximately 30% of the Company's 1995 roaming revenues were generated
from subscribers of a cellular company serving an adjacent market when such
subscribers place or receive calls on the Company's systems.
Advertising Expenses
Advertising expenses are charged to operations as incurred and amounted to
approximately $107,100 in 1993, $263,300 in 1994, and $336,400 in 1995.
Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
<S> <C> <C>
Property, sales and excise taxes.............................. $331,700 $ 617,600
Interconnection and other billing costs....................... 200,700 220,600
Salaries and bonuses.......................................... 180,400 364,700
Other......................................................... 282,400 579,100
-------- ----------
$995,200 $1,782,000
======== ==========
</TABLE>
Income Taxes
The Selected Systems are limited partnerships organized under the laws of
Delaware. Accordingly, federal and state income taxes are not paid at the
partnership level but by the ultimate partners of the Selected Systems. The tax
basis of the Selected Systems' assets amounted to approximately $74.7 million
and $93.7 million at December 31, 1994 and 1995, respectively.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Selected Systems will adopt SFAS
F-22
<PAGE> 107
121 in the first quarter of 1996 and, based upon current circumstances,
management does not believe the effect of the adoption will be material.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective for
fiscal years beginning after December 15, 1995. SFAS 123 provides companies with
a choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, Accounting
for Stock Issued to Employees. The Selected Systems expect to continue to follow
APB 25 with respect to the LPAR Plan (see Note 6) and will provide disclosures
as required by SFAS 123 in the December 31, 1996 notes to the financial
statements.
4. COMMITMENTS AND CONTINGENCIES
The Selected Systems lease office space, office equipment and cellular
sites and facilities under operating leases with initial terms ranging from 1 to
20 years. Most cellular sites contain renewal options ranging up to 25 years.
Future minimum payments under noncancelable operating leases with initial
terms of one year or more consisted of the following at December 31, 1995,
assuming cellular site leases are renewed through the year 2000:
<TABLE>
<CAPTION>
CELLULAR
SITES OTHER
-------- ----------
<S> <C> <C>
1996.................................................. $516,000 $ 326,000
1997.................................................. 526,000 287,000
1998.................................................. 533,000 279,000
1999.................................................. 537,000 279,000
2000.................................................. 529,000 266,000
Thereafter............................................ 508,000
----------
Total minimum lease payments.......................... $1,945,000
==========
</TABLE>
The minimum lease payments for cellular sites in the year 2000 are expected
to approximate the minimum payments thereafter, subject to contractual increases
and payments for additional sites.
Rental expense amounted to approximately $224,900 in 1993, $395,800 in
1994, and $669,600 in 1995.
The Selected Systems have guaranteed and pledged substantially all of its
assets as collateral for certain debt of HCTC.
5. RELATED PARTY TRANSACTIONS
KCCGP provides various administrative services to the Selected Systems,
including accounting, engineering, and marketing and advertising services, in
addition to funding working capital requirements and capital expenditures as
necessary. These expenses are charged, first on the basis of direct usage when
identifiable, with the remainder allocated equally among its operating systems.
Allocated expenses amounted to $80,000 in 1993, $120,000 in 1994, and $150,000
in 1995, respectively.
6. BENEFIT PLANS
HCTC has granted certain officers of the Selected Systems limited
partnership appreciation rights in HCTC pursuant to a Limited Partnership Unit
Appreciation Rights Plan ("LPAR Plan") that was adopted September 1, 1994, to be
effective January 1, 1993. Upon the occurrence of certain events as specified
therein ("Termination Events"), participants are entitled to share in the
amounts, if any, of distributions to HCTC's partners after all capital
contributions made by HCTC's partners have been repaid, together with a fixed
return on such contributions. Such rights vest over a period of five years,
however vesting is automatically accelerated upon the occurrence of a
Termination Event. Compensation expense will be recognized when distributions
become probable under the LPAR Plan.
Effective July 1, 1994, KCCGP established an employee savings plan (the
"Plan") that qualifies as a deferred salary arrangement under Section 401(k) of
the Internal Revenue Code. Under the Plan, which
F-23
<PAGE> 108
covers employees of the Selected Systems who have met certain eligibility
requirements, participating employees may defer up to 15% of their pretax
earnings, up to the Internal Revenue Service annual contribution limit ($9,240
for calendar year 1995). The Company matches up to 50% of the employee's
contributions, up to a maximum of 3% of the employee's earnings. Employees who
participate in the LPAR Plan are excluded from matching contributions. Matching
Plan contributions, which vest equally over five years, amounted to
approximately $16,000 in 1994, and $31,500 in 1995, respectively.
7. SUBSEQUENT EVENTS
On July 11, 1996, the Company entered into a definitive agreement to sell
the FCC Operating Licenses of Selected Systems, together with certain operating
assets and liabilities, to SYGNET Communications Inc. for approximately $250
million. The combined financial statements do not reflect either the estimated
gain, or any expenses incurred or expected to be incurred related to the sale of
the systems. The sale is expected to close during the third quarter of 1996, and
is subject to certain regulatory and other approvals.
F-24
<PAGE> 109
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
----------------------------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................ $ 629,874 $ 1,019,087
Accounts receivable, net of allowance for doubtful accounts
of $218,218 and $235,607.................................. 5,123,883 5,573,573
Inventory................................................... 373,623 396,990
Prepaid expenses............................................ 147,206 185,554
------------ ------------
Total current assets................................... 6,274,586 7,175,204
Property and equipment:
Cellular system............................................. 23,305,472 25,318,244
Other....................................................... 2,035,273 2,757,307
------------ ------------
25,340,745 28,075,551
Accumulated depreciation......................................... (5,504,261) (7,238,549)
------------ ------------
19,836,484 20,837,002
Licenses, net of accumulated amortization of $5,266,096 and
$6,422,861..................................................... 86,976,933 85,822,040
Other assets, net of accumulated amortization of $4,879,009 and
$5,906,099..................................................... 5,498,139 4,466,927
------------ ------------
Total assets........................................... $118,586,142 $118,301,173
=========== ===========
LIABILITIES AND COMBINED PARTNERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 1,864,160 $ 1,445,574
Accrued expenses............................................ 1,781,994 1,548,522
Deferred revenue............................................ 588,649 694,322
------------ ------------
Total current liabilities.............................. 4,234,803 3,688,418
Advances from affiliates......................................... 33,087,671 31,980,938
Combined partners' equity:
Partners' contributions..................................... 89,215,915 89,215,915
Cumulative net loss......................................... (7,952,247) (6,584,098)
------------ ------------
Total combined partners' equity........................ 81,263,668 82,631,817
------------ ------------
Total liabilities and combined partners' equity........ $118,586,142 $118,301,173
=========== ===========
</TABLE>
Note: The combined balance sheet at December 31, 1995 has been derived from the
audited combined financial statements at that date, but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
F-25
<PAGE> 110
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1995 1996
<S> <C> <C>
Revenues and sales:
Subscriber revenues............................................ $4,902,903 $ 7,858,344
Roaming revenues............................................... 4,233,107 6,357,961
Equipment sales................................................ 621,915 892,999
---------- -----------
Total revenues and sales.................................. 9,757,925 15,109,304
Costs and expenses:
Cost of services............................................... 1,569,118 2,121,106
Cost of equipment sales........................................ 918,238 1,442,640
General and administrative expenses............................ 1,475,669 2,278,009
Selling........................................................ 1,635,311 2,185,689
Depreciation and amortization.................................. 2,787,585 3,918,141
---------- -----------
8,385,921 11,945,585
---------- -----------
Income from operations.............................................. 1,372,004 3,163,719
Interest expense-affiliate.......................................... 1,925,084 1,795,570
---------- -----------
Net (loss) income......................................... $ (553,080) $ 1,368,149
========== ===========
</TABLE>
See accompanying notes.
F-26
<PAGE> 111
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1995 1996
<S> <C> <C>
Operating Activities
Net (loss) income............................................ $ (553,080) $ 1,368,149
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization........................... 2,787,585 3,918,141
Provision for bad debts................................. 68,534 140,069
Accrued interest expense-affiliate...................... 1,925,084 1,795,570
Changes in operating assets and liabilities (net of
effect of companies acquired):
Accounts receivable................................ (445,560) (589,759)
Inventory.......................................... (13,292) (23,367)
Prepaid expenses................................... (68,891) (38,348)
Accounts payable and accrued expenses.............. 365,927 (494,294)
Deferred revenue................................... 147,971 105,673
------------ -----------
Net cash provided by operating activities......................... 4,214,278 6,181,834
Investing Activities
Purchases of property and equipment, net of $166,200 and
$63,100 purchased on account in 1995 and 1996,
respectively................................................ (2,489,647) (2,894,440)
License and systems acquisitions............................. (27,662,557) --
Other........................................................ (22,675) 4,122
------------ -----------
Net cash used in investing activities............................. (30,174,879) (2,890,318)
Financing Activities
Partners' contributions...................................... 27,272,727 --
Advances to affiliates, net of $567,181 noncash partner
contributions in 1995....................................... (1,085,344) (2,902,303)
------------ -----------
Net cash provided by (used in) financing activities............... 26,187,383 (2,902,303)
------------ -----------
Net increase in cash.............................................. 226,782 389,213
Cash at beginning of period....................................... 611,829 629,874
------------ -----------
Cash at end of period............................................. $ 838,611 $ 1,019,087
============ ===========
</TABLE>
See accompanying notes.
F-27
<PAGE> 112
SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying unaudited combined financial statements reflect the
combined financial position, combined results of operations and combined cash
flows of Horizon Cellular Telephone Company of Lawrence, L.P. ("Lawrence"),
Horizon Cellular Telephone Company of Crawford, L.P. ("Crawford"), Horizon
Cellular Telephone Company of Chautauqua, L.P. ("Chautauqua"), and Horizon
Cellular Telephone Company of Indiana, L.P. ("Indiana") (collectively referred
to as "Selected Systems" or "the Company") for the periods presented. Each of
the operating systems is a limited partnership in which KCCGP, L.P. ("KCCGP") is
the managing and sole general partner, and Horizon Cellular Telephone Company,
L.P. ("HCTC") is the sole limited partner.
The Selected Systems own, design, develop, and operate cellular
communications systems. KCCGP performs certain administrative functions for the
Selected Systems and, accordingly, certain expenses of KCCGP (see Note 6) have
been allocated to the Selected Systems on a basis which, in the opinion of
management, is reasonable. However, such expenditures are not necessarily
indicative of, and it is not practicable for management to estimate, the nature
and level of expenses which might have been incurred had the systems been
operating as separate independent companies.
The accompanying unaudited combined financial statements of the Selected
Systems have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the six-month
period ended June 30, 1996, are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996.
2. ACQUISITIONS
In June 1995, the Company acquired the FCC PA-7 Operating License
("Indiana") and certain operating assets and liabilities for $27 million in
cash. As part of the acquisition, the Company also acquired the right to operate
the FCC PA-2 system under an Interim Operating Authority, which permits the
Company to temporarily provide cellular service in an otherwise unserved area.
Also in June 1995, HCTC contributed cash to fund the acquisition in exchange for
a 99.0% interest in the Company. KCCGP contributed approximately $273,000 to
Indiana for a 1.0% interest in the Company. The PA-7 system became operational
in July 1991.
The acquisition was accounted for under the purchase method of accounting;
accordingly, assets acquired and liabilities assumed have been recorded at
HCTC's basis in such amounts which represent their estimated fair values at the
date of acquisition by HCTC and the results of operations are included in the
accompanying combined statements of operations since the date of acquisition.
The excess of purchase price over the fair market value of identifiable net
tangible assets acquired has been allocated to customer list and license.
Pro Forma Results of Operations
The following unaudited pro forma information presents the revenues and
sales, and net loss, as if the acquisition had occurred at the beginning of
1995. The pro forma information includes the revenues and sales, and net loss
for the Selected Systems for the indicated period less increased amortization of
license costs and other intangible assets, and increased general and
administrative expenses for management fee allocations. Pro forma revenues and
sales and net loss are not necessarily indicative of the revenues and sales and
net loss that
F-28
<PAGE> 113
would have occurred had the acquisition been made at the beginning of the period
presented or the results which may occur in the future.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995
-------------
<S> <C>
Revenues and sales............................................. $ 11,456,000
Net loss....................................................... (839,000)
</TABLE>
3. 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
4. NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company adopted SFAS 121 in the first quarter of 1996 and the effect of the
adoption was not material.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective for
fiscal years beginning after December 15, 1995. SFAS 123 provides companies with
a choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, Accounting
for Stock Issued to Employees. The Company expects to continue to follow APB 25
with respect to the LPAR Plan and will provide disclosures as required by SFAS
123 in the December 31, 1996 notes to the financial statements.
5. ADVANCES FROM AFFILIATES
Advances from affiliates primarily represent cash advances from HCTC and
KCCGP which provided funds for investing and operating activities, and have no
specific repayment terms. Interest expense is charged monthly at a rate of
11 3/8% of the ending balance payable to HCTC.
6. RELATED PARTY TRANSACTIONS
KCCGP provides various administrative services to the Company, including
accounting, engineering, and marketing and advertising services, in addition to
funding working capital requirements and capital expenditures as necessary.
These expenses are charged, first on the basis of direct usage when
identifiable, with the remainder allocated equally among its operating systems.
Allocated expenses amounted to $50,000 and $75,000 for the six months ended June
30, 1995 and 1996, respectively.
7. RECENT DEVELOPMENTS
On July 11, 1996, the Company entered into a definitive agreement to sell
the FCC operating Licenses, together with certain operating assets and
liabilities, to SYGNET Communications Inc. for approximately $250 million. The
combined financial statements do not reflect either the estimated gain, or any
expenses incurred or expected to be incurred related to the sale of the systems.
The sale is expected to close during the third quarter of 1996, and is subject
to certain regulatory and other approvals.
F-29
<PAGE> 114
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Erie Cellular Telephone Company:
We have audited the statements of operations and changes in partners'
capital and cash flows of Erie Cellular Telephone Company (a Delaware general
partnership) for the period from January 1, 1995 to September 29, 1995. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit of the statements of operations and changes in
partners' capital and cash flows provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Erie
Cellular Telephone Company for the period from January 1, 1995 to September 29,
1995, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Seattle, Washington,
August 12, 1996
F-30
<PAGE> 115
ERIE CELLULAR TELEPHONE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
STATEMENT OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 1995 TO SEPTEMBER 29, 1995
<TABLE>
<S> <C>
Revenues:
Service.................................................................... $4,638,200
Equipment sales and installations.......................................... 915,600
----------
5,553,800
----------
Expenses:
Cost of service............................................................ 1,367,200
Cost of equipment sales and installations.................................. 887,000
General and administrative................................................. 1,272,600
Marketing.................................................................. 1,634,100
Depreciation and amortization.............................................. 362,000
----------
5,522,900
----------
Net Income...................................................................... 30,900
Partners' Capital, beginning of period.......................................... 9,106,000
Increase in cellular licensing costs from acquisitions made by majority
partner....................................................................... 182,300
----------
Partners' Capital, end of period................................................ $9,319,200
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 116
ERIE CELLULAR TELEPHONE COMPANY
A DELAWARE GENERAL PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 TO SEPTEMBER 29, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net Income.................................................................. $ 30,900
---------
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization.......................................... 362,000
Changes in current assets and liabilities:
Trade accounts receivable......................................... (80,000)
Cellular telephone inventory...................................... (106,100)
Other current assets.............................................. 13,800
Accounts payable.................................................. 12,300
Accrued expenses.................................................. 53,700
Customer deposits................................................. 20,800
---------
276,500
---------
Net cash provided by operating activities........................................ 307,400
---------
Cash flows from investing activities:
Purchase of property, equipment and other assets............................ (512,500)
---------
Net cash used in investing activities............................................ (512,500)
---------
Cash flows from financing activities:
Net advances from affiliates................................................ 202,300
---------
Net cash provided by financing activities........................................ 202,300
---------
Change in cash................................................................... (2,800)
Cash, beginning of period........................................................ 41,000
---------
Cash, end of period.............................................................. $ 38,200
=========
Supplemental disclosure of noncash investing activities:
Increase in cellular licensing costs from acquisitions made by majority
partner.................................................................... $ 182,300
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 117
ERIE CELLULAR TELEPHONE COMPANY
A DELAWARE GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND PARTNERS' INTEREST:
Organization
Erie Cellular Telephone Company (the Partnership), was organized in July
1987 by various applicants for the A Block cellular license in the metropolitan
statistical area (MSA) of Erie, Pennsylvania (the Market). The Partnership was
formed pursuant to an agreement between competing applicants in the lottery held
by the Federal Communications Commission to determine the recipient of the A
Block cellular license in the Market. Erie Cellular Systems, Inc. (Erie
Cellular), formerly McCaw Communications of Erie, Inc., a wholly owned
subsidiary of AT&T Wireless Services, Inc. (AWS) (formerly McCaw Cellular
Communications, Inc.), acquired controlling interest in the Partnership in June
1988. Effective September 29, 1995, Erie Cellular sold its interest in the
Partnership to SYGNET Communications, Inc. (SYGNET).
Allocation of Profits and Losses
Net income or loss is allocated to the partners in proportion to their
respective percentage interest during the period. The partners' percentage
interests at September 29, 1995, prior to the sale of Erie Cellular's interest
in the Partnership to SYGNET, were as follows:
<TABLE>
<S> <C>
Erie Cellular......................................................... 95.5%
Minority partners..................................................... 4.5
</TABLE>
In 1995, Erie Cellular purchased an additional 0.6% interest from a
minority partner for $182,300 in cash. The acquisition cost incurred by Erie
Cellular was capitalized as cellular licensing costs by the Partnership.
Subject to a majority vote of the partners, contributions to capital are
made to fund the Partnership's capital expenditures and operating losses. Should
a partner not make all or a portion of a required contribution, that partner's
interest is subject to dilution as determined by the partnership agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Cellular air time and cellular access charges are recorded as revenue as
earned. Sales of equipment and related services are recorded as revenue when the
goods and services are delivered.
The Partnership's cell sites are operated as part of a larger local calling
area managed by subsidiaries of AWS. Cellular air time revenue is recorded by
the Partnership based on the usage of its cell sites in relation to total usage
of all cell sites within the local calling area.
Depreciation and Amortization
Depreciation of property and equipment is computed using the straight-line
method over the estimated useful lives of the assets, which are generally twelve
years for cellular equipment and three to five years for other property and
equipment. Leasehold improvements are amortized using the straight-line method
over the term of the lease.
The costs of normal maintenance and repairs are charged to expense as
incurred and expenditures for major improvements are capitalized at cost. Gains
or losses on the disposition of assets are reflected in the determination of net
income or loss at the time of disposition.
Cellular licensing costs primarily represent amounts incurred by Erie
Cellular to acquire interests in the A Block cellular license in the Market.
Amortization of these costs is provided for using the straight-line method over
a period of 40 years.
F-33
<PAGE> 118
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH RELATED PARTIES:
Due to Affiliates
Certain expenditures are made out of a cash concentration account
maintained on behalf of the Partnership by a subsidiary of AWS to meet certain
capital expenditure and working capital requirements. Cash collections and the
above mentioned expenditures related to partnership operations are recorded in
this concentration account. Such activities are reflected as net advances from
affiliates in the accompanying statement of cash flows.
Technical, Administrative and Marketing Services
AWS has entered into an agreement with the Partnership by which the
Partnership shares technical, administrative and marketing services. Shared
service support is provided at three different levels: Corporate, Region and
District. The costs incurred by AWS and its subsidiaries, as agent, in
connection with these shared services, are recorded as follows: Technical
operating shared services are recorded based on the Partnership's cell sites in
relation to the total cell sites in markets served by AWS and its subsidiaries.
Administrative shared services are recorded based on the Partnership's
subscribers in relation to the total subscribers in markets served by AWS and
its subsidiaries. Marketing shared services are recorded based on the
Partnership's gross subscriber additions during the period in relation to the
total gross subscribers added in the markets served by AWS and its subsidiaries
during the period. The total number of cell sites, subscribers or gross
subscriber additions used in the calculation varies depending on the level at
which the shared service is provided. Prior to 1995, administrative and
marketing shared services were recorded based on the prior year's population in
the Partnership's market in relation to the total prior year's population in all
the markets served by AWS and its subsidiaries. Expenses for technical,
administrative and marketing shared services were approximately $724,400 for the
period January 1, 1995 to September 29, 1995.
Management Fees
The Partnership is charged a management fee by a subsidiary of AWS based
upon a specified percentage between 3% and 5% of gross monthly revenues not to
exceed $30,000 per month for its service in managing the system. Prior to 1995,
the management fee charged to the Partnership was 6% of gross revenues.
Management fee expense was approximately $209,000 for the period January 1, 1995
to September 29, 1995.
Switch Sharing
The Partnership shares the facilities and maintenance of an AWS
subsidiary's mobile switching center. The AWS subsidiary charges the Partnership
between $.015 and $.04 per minute of usage for the sharing of the switch. Prior
to 1995, the Partnership was charged $.04 per minute of usage for the sharing of
the switch. Expenses for switch sharing were approximately $287,000 for the
period January 1, 1995 to September 29, 1995.
Other Direct Expenses
Certain other direct expenses charged by AWS' subsidiaries to the
Partnership totalled approximately $8,700 for the period January 1, 1995 to
September 29, 1995. Such expenses included, among others, after-hours customer
care calls, security monitoring and roaming services.
Transactions with AT&T Corp.
The Partnership purchases certain cellular telephone inventory and long
distance services from AT&T Corp. (AT&T), parent of AWS. For the period January
1, 1995 to September 29, 1995, the Partnership expensed cellular telephone
inventory purchased from AT&T of approximately $33,000, and purchased long
distance services from AT&T reflected as cost of service of approximately
$110,800.
F-34
<PAGE> 119
4. INCOME TAXES:
Income taxes have not been recorded in the accompanying financial
statements because they are obligations of the partners. The tax returns, the
qualification of the Partnership as such for tax purposes and the amount of
distributable Partnership income or loss are subject to examination by taxing
authorities. If such examinations result in changes with respect to the
Partnership qualification or in changes with respect to the income or loss, the
tax liability of the partners would be changed accordingly.
The Partnership provides depreciation for financial reporting purposes
using the straight-line method whereas for income tax purposes accelerated
methods are used. In addition, the allowance method for bad debts is used for
financial reporting purposes, while the direct write-off method is used for
income tax purposes.
5. COMMITMENTS:
The Partnership is committed under operating leases and agreements,
principally for facilities, office space and cell sites, with remaining terms
ranging from one to five years. Certain cell site leases include options for
additional periods. Certain leases provide for payment by the lessee of taxes,
maintenance and insurance.
Future minimum payments, required under operating leases and agreements,
that have an initial or remaining noncancelable lease term in excess of one year
at September 29, 1995 are summarized below:
<TABLE>
<CAPTION>
PERIOD ENDING SEPTEMBER 29,
<S> <C>
1996.................................................... $124,800
1997.................................................... 121,200
1998.................................................... 119,600
1999.................................................... 104,200
2000.................................................... 44,600
--------
$514,400
========
</TABLE>
Total rent expense for the period January 1, 1995 to September 29, 1995 was
approximately $103,900.
F-35
<PAGE> 120
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Erie Cellular Telephone Company:
We have audited the accompanying balance sheets of Erie Cellular Telephone
Company (a Delaware general partnership) as of December 31, 1993 and 1994, and
the related statements of operations and changes in partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership'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 Erie Cellular Telephone
Company as of December 31, 1993 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Seattle, Washington,
January 27, 1995 (except with
respect to the matter discussed
in Note 9, as to which the date
is August 2, 1996)
F-36
<PAGE> 121
ERIE CELLULAR TELEPHONE COMPANY
BALANCE SHEETS -- DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
(RESTATED)
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................... $ 3,200 $ 41,000
Trade accounts receivable, net of allowance for doubtful
accounts (1993, $34,800; 1994, $50,000)....................... 458,000 730,500
Cellular telephone inventory................................... 49,400 93,100
Other.......................................................... 13,300 14,600
---------- -----------
Total current assets...................................... 523,900 879,200
Property and equipment, net of accumulated depreciation and
amortization (1993, $548,800; 1994, $752,600)..................... 1,491,500 1,900,900
Cellular licensing costs, net of accumulated amortization (1993,
$1,311,600; 1994, $1,534,300)..................................... 7,604,400 7,552,400
Other, net.......................................................... 5,800 --
---------- -----------
$9,625,600 $10,332,500
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable............................................... $ 33,500 $ 10,100
Accrued expenses............................................... 211,100 279,300
Due to affiliates.............................................. 7,600 936,500
Unearned revenues and customer deposits........................ 88,200 600
---------- -----------
Total current liabilities................................. 340,400 1,226,500
Commitments
Partners' capital................................................... 9,285,200 9,106,000
---------- -----------
$9,625,600 $10,332,500
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 122
ERIE CELLULAR TELEPHONE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
(RESTATED)
<S> <C> <C>
Revenues:
Service......................................................... $2,901,800 $4,303,400
Equipment sales and installations............................... 453,300 730,600
---------- ----------
3,355,100 5,034,000
---------- ----------
Expenses:
Cost of service................................................. 563,800 800,300
Cost of equipment sales and installations....................... 515,100 774,900
General and administrative...................................... 1,103,400 1,726,700
Marketing....................................................... 1,309,200 1,649,600
Depreciation and amortization................................... 350,200 432,400
---------- ----------
3,841,700 5,383,900
---------- ----------
Net loss............................................................. (486,600) (349,900)
Partners' capital, beginning of year................................. 8,507,400 9,285,200
Increase in cellular licensing costs from acquisitions made by
parent............................................................. 1,264,400 170,700
---------- ----------
Partners' capital, end of year....................................... $9,285,200 $9,106,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE> 123
ERIE CELLULAR TELEPHONE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
(RESTATED)
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................ $ (486,600) $(349,900)
---------- ---------
Adjustments to reconcile net loss to net cash used in operating
activities --
Depreciation and amortization.............................. 350,200 432,400
Changes in current assets and liabilities:
Trade accounts receivable, net........................ (201,600) (272,500)
Cellular telephone inventory.......................... (49,400) (43,700)
Other current assets.................................. 41,700 (1,300)
Accounts payable...................................... 21,700 (23,400)
Accrued expenses...................................... 119,100 68,200
Unearned revenues and customer deposits............... 42,300 (87,600)
---------- ---------
Total adjustments.......................................... 324,000 72,100
---------- ---------
Net cash used in operating activities................................ (162,600) (277,800)
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment.............................. (472,000) (613,300)
---------- ---------
Net cash used in investing activities................................ (472,000) (613,300)
---------- ---------
Cash flows from financing activities:
Net advances from affiliates.................................... 619,200 928,900
---------- ---------
Net cash provided by financing activities............................ 619,200 928,900
---------- ---------
Change in cash....................................................... (15,400) 37,800
---------- ---------
Cash, beginning of year.............................................. 18,600 3,200
---------- ---------
Cash, end of year.................................................... $ 3,200 $ 41,000
========== =========
Supplemental disclosure of noncash investing and financing
activities:
Increase in cellular licensing costs from acquisitions made by
parent......................................................... $1,264,400 $ 170,700
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 124
ERIE CELLULAR TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. ORGANIZATION AND PARTNERS' INTEREST:
Organization
Erie Cellular Telephone Company (the Partnership), a Delaware general
partnership, was originally organized in July 1987 by various applicants for the
A Block cellular license in the metropolitan statistical area (MSA) of Erie,
Pennsylvania (the Market). The Partnership was formed pursuant to an agreement
between competing applicants in the lottery held by the Federal Communications
Commission (FCC) to determine the recipient of the A Block cellular license in
the Market. McCaw Communications of Erie, Inc. (McCaw), a wholly owned
subsidiary of McCaw Cellular Communications, Inc. (MCCI), acquired controlling
interest in the Partnership in June 1988. On September 19, 1994, AT&T Corp.
(AT&T) merged with MCCI. During 1995, MCCI changed its name to AT&T Wireless
Services, Inc.
Allocation of Profits and Losses
Net loss is allocated to the partners in proportion to their respective
percentage interest during the period. The partners' percentage interests at
December 31, 1993 and 1994, were as follows:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
McCaw................................................................. 93.8% 94.9%
Minority partners..................................................... 6.2 5.1
</TABLE>
Subject to a majority vote of the partners, contributions to capital are
made to fund the Partnership's capital expenditures and operating losses. Should
a partner not make all or a portion of a required contribution, that partner's
interest is subject to dilution as determined by the partnership agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Cellular air time and cellular access charges are recorded as revenue as
earned. Sales of equipment and related services are recorded as revenue when the
goods and services are delivered. Prior to 1994, cellular access charges were
billed in advance.
Cellular Telephone Inventory
Cellular telephone inventory is stated at the lower of cost or market. Cost
is determined by using the specific identification method.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
are generally 12 years for cellular equipment and three to five years for other
property and equipment. Leasehold improvements are amortized using the
straight-line method over the term of the lease.
Cellular Licensing Costs
Cellular licensing costs primarily represent amounts incurred to secure the
A Block cellular license in the Market. Amortization of these costs is provided
for using the straight-line method over a period of 40 years.
F-40
<PAGE> 125
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1994
<S> <C> <C>
Cellular equipment........................................... $1,855,800 $2,452,900
Leasehold improvements....................................... 93,500 105,200
Other........................................................ 91,000 95,400
---------- ----------
2,040,300 2,653,500
========= =========
Less -- Accumulated depreciation and amortization............ 548,800 752,600
---------- ----------
$1,491,500 $1,900,900
========= =========
</TABLE>
4. ACCRUED EXPENSES:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
<S> <C> <C>
Wages, vacations and bonuses.................................... $ 70,400 $ 86,500
Sales, excise and other taxes................................... 25,300 47,100
Commissions..................................................... 47,900 85,300
Other........................................................... 67,500 60,400
-------- --------
$211,100 $279,300
======== ========
</TABLE>
5. TRANSACTIONS WITH RELATED PARTIES:
Due to Affiliates
Certain expenditures are made out of a cash concentration account,
maintained on behalf of the Partnership by an affiliate, to meet certain capital
expenditure and working capital requirements. Cash collections and the above
mentioned expenditures related to partnership operations are recorded in this
concentration account. The resulting cash balance for the Partnership related to
the above activities is reflected as due to affiliates in the accompanying
financial statements.
Technical, Administrative and Marketing Services
Costs incurred by MCCI and its subsidiaries, as agents, in association with
certain shared services, are recorded as follows: Technical operating shared
expenses are recorded based on the Partnership's cell sites in relation to the
total cell sites serviced by MCCI and its subsidiaries. Administrative and
marketing shared expenses are recorded based on the prior year's population in
the Partnership's MSA in relation to the total prior year's population in all
the MSAs serviced by MCCI or its subsidiaries.
In addition, a management fee of 6% of gross revenues is charged to the
Partnership from a subsidiary of MCCI for its service in managing the system.
Switch Sharing
The Partnership shares the facilities and maintenance of an affiliate's
mobile switching center. The affiliate charges the Partnership $.04 per billable
minute of usage for the sharing of the switch.
Expenses for technical, administrative and marketing services and switch
sharing were $1,281,400 and $1,903,900 for the years ended December 31, 1993 and
1994, respectively.
Certain other direct expenses allocated to the Partnership equaled $24,100
and $26,400 for the years ended December 31, 1993 and 1994, respectively. Such
expenses included, among others, after-hours customer care calls, security
monitoring, network services and roaming services.
A proposal has been made to the Partners by McCaw to modify management
fees, switch sharing and shared administrative and marketing expenses charged to
the Partnership effective January 1, 1995. The proposed changes are as follows:
The management fee charges will be the lesser of $30,000 per month or a
specified sliding scale percentage of gross revenue, switch sharing charges will
be on a sliding scale ranging
F-41
<PAGE> 126
from $.04 to $.015 per minute based on the market's monthly minutes of use, and
shared administrative and marketing expenses will be changing from
population-based to subscriber-based allocations.
Transactions with AT&T
The Partnership purchases certain cellular telephone inventory and long
distance services from AT&T. These goods and services were purchased under
contractual arrangements with AT&T which existed prior to the AT&T/MCCI merger
date. For the year ended December 31, 1994, approximately $113,000 of cellular
telephone inventory sold and reflected as cost of equipment sales and
approximately $122,000 of cellular long distance services reflected as cost of
service in the accompanying financial statements were purchased from AT&T.
6. INCOME TAXES:
Income taxes have not been recorded in the accompanying financial
statements because they are obligations of the partners. The tax returns, the
qualification of the Partnership as such for tax purposes and the amount of
distributable Partnership income or loss are subject to examination by taxing
authorities. If such examinations result in changes with respect to the
Partnership qualification or in changes with respect to the income or loss, the
tax liability of the partners would likely be changed accordingly.
The Partnership provides depreciation for financial reporting purposes
using the straight-line method whereas for income tax purposes accelerated
methods are used. In addition, the allowance method for bad debts is used for
financial reporting purposes, while the direct write-off method is used for
income tax purposes.
7. COMMITMENTS:
The Partnership is committed under operating leases and agreements,
principally for facilities, office space and cell sites, with remaining terms
ranging from one to five years. Certain cell site leases include options for
additional periods. Certain leases provide for payment by the lessee of taxes,
maintenance and insurance.
Future minimum payments, required under operating leases and agreements,
that have an initial or remaining noncancelable lease term in excess of one year
at December 31, 1994, are summarized below:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------------------------------------------------
<S> <C>
1995..................................................... $40,500
1996..................................................... 19,200
1997..................................................... 19,200
1998..................................................... 17,400
1999..................................................... 3,200
-------
$99,500
=======
</TABLE>
Total rent expense for the years ended December 31, 1993 and 1994, was
approximately $103,800 and $113,300, respectively.
8. MERGER OF MCCI AND AT&T:
In connection with the merger of MCCI and AT&T, both parties entered into a
Consent Decree with the Department of Justice. Under the Consent Decree, MCCI
and its affiliates are required to offer their customers equal access to long
distance carriers. The planned completion of this conversion for the Partnership
is August 1995. The Partnership has served and will continue to serve as the
provider for its customers' InterLATA and international calling services until
the conversion date. Subsequent to the conversion, all revenues and expenses
associated with providing InterLATA and international calling service will be
recorded by the long distance carrier providing the service. InterLATA and
international calling services reduced the net loss of the Partnership by
approximately $239,000 for the year ended December 31, 1994.
F-42
<PAGE> 127
9. SUBSEQUENT EVENT:
Effective September 29, 1995, McCaw sold all of its interests in the
Partnership to SYGNET Communications, Inc. (SYGNET). In connection with a
proposed offering of securities by SYGNET, adjustments have been made to the
previously issued financial statements of the Partnership to reflect the cost of
the cellular license originally purchased by McCaw. McCaw's basis in the
cellular license acquired and the related accumulated amortization have been
pushed down to the Partnership's financial statements for the years presented,
resulting in an increase to the provision for depreciation and amortization of
$180,700 and $222,700 for the years ended December 31, 1993 and 1994,
respectively, compared to the amounts previously reported.
F-43
<PAGE> 128
REPORT OF INDEPENDENT AUDITORS
General and Limited Partners
DICOMM Cellular Limited Partnership
We have audited the accompanying statements of operations, partners'
capital (deficiency), and cash flows of DICOMM Cellular Limited Partnership for
the year ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of DICOMM
Cellular Limited Partnership for the year ended December 31, 1993 in conformity
with generally accepted accounting principles.
Ernst & Young LLP
March 25, 1994
Boston, Massachusetts
F-44
<PAGE> 129
DICOMM CELLULAR LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Revenues
Subscriber revenue......................................................... $1,161,720
Roamer revenue............................................................. 1,628,654
----------
Total revenues........................................................ 2,790,374
Costs and Expenses
Costs of services.......................................................... 1,042,689
General and administrative................................................. 787,564
Selling and marketing...................................................... 566,505
Depreciation and amortization.............................................. 475,196
----------
2,871,954
Loss from operations............................................................ (81,580)
Interest expense................................................................ 530,239
----------
Net loss........................................................................ $ (611,819)
==========
</TABLE>
See accompanying notes.
F-45
<PAGE> 130
DICOMM CELLULAR LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL (DEFICIENCY)
<TABLE>
<CAPTION>
TOTAL
PARTNERS'
GENERAL LIMITED CAPITAL
PARTNER PARTNERS (DEFICIENCY)
<S> <C> <C> <C>
Balance at December 31, 1992............................. $(20,215) $(2,001,314) $ (2,021,529)
Partners' capital contributions.......................... 1,616 160,000 161,616
Net loss................................................. (6,118) (605,701) (611,819)
-------- ----------- ------------
Balance at December 31, 1993............................. $(24,717) $(2,447,015) $ (2,471,732)
======== ========== ==========
</TABLE>
See accompanying notes.
F-46
<PAGE> 131
DICOMM CELLULAR LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Operating Activities
Net loss.................................................................... $(611,819)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation........................................................... 460,090
Amortization........................................................... 15,106
Deferred rent.......................................................... (2,994)
Changes in operating assets and liabilities:
Accounts receivable............................................... (282,871)
Inventories....................................................... (19,495)
Prepaid expenses.................................................. (7,833)
Other assets...................................................... 1,898
Accounts payable.................................................. 77,178
Accrued expenses.................................................. 85,628
---------
Net cash used in operating activities............................................ (285,112)
Investing Activities
Purchases of property and equipment......................................... (483,509)
---------
Net cash used in investing activities............................................ (483,509)
Financing Activities
Proceeds from capital contributions......................................... 161,616
Proceeds from loans from supplier........................................... 23,389
Bank overdraft.............................................................. 51,616
Proceeds from notes payable to related parties.............................. 532,000
---------
Net cash provided by financing activities........................................ 768,621
---------
Net decrease in cash and cash equivalents........................................ --
Cash and cash equivalents at December 31, 1992................................... --
---------
Cash and cash equivalents at December 31, 1993................................... $ --
=========
</TABLE>
See accompanying notes.
F-47
<PAGE> 132
DICOMM CELLULAR LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
1. BASIS OF PRESENTATION
DICOMM Cellular Limited Partnership (the Company) was formed as a Delaware
limited partnership on February 7, 1991. The Company provides cellular portable
telephone service in the Genessee, Wyoming, Chautauqua, Cattaraugus, Alleghany
and Steuben Counties in New York State.
The General Partner is DICOMM Cellular Inc. The General Partner has a 1%
interest in the Company and has sole operating responsibility and control.
Limited Partners have no operating control or responsibility and
collectively hold a 99% share of the Company.
On March 8, 1994, the partners sold all of their general and limited
partnership interests in the Company, with the exception of certain liabilities,
primarily litigation relating to the period prior to March 8, 1994. See Note 6
for further discussion.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three
months or less at date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost, including expenses related to
engineering services. Depreciation is calculated on a straight-line basis over
the estimated useful lives of the assets, ranging from 5 to 40 years.
License Costs
License costs relate to organization and development costs, legal and
professional fees, salaries and related expenses associated with technical
development of the cellular system and obtaining related regulatory approvals.
The costs are being amortized on a straight-line basis over 40 years.
Other Assets
Other assets relate to organization costs, deferred financing costs and
capitalized lease costs which are being amortized on a straight-line basis over
terms of 5 to 10 years.
Income Taxes
The Company is a partnership and, as such, no provision is made for income
taxes as income or loss is included in the tax returns of the partners. Each
partner accounts for its related share of applicable tax credits.
3. NOTES PAYABLE TO SUPPLIER
The Company entered into a loan agreement on July 1, 1991 with its major
equipment supplier. The agreement related to the issuance of two promissory
notes, an equipment note and a working capital note aggregating $6,000,000.
Interest accrues on principal balances at the rate of the Morgan Guaranty Trust
Company of New York base rate plus 3%, adjusted periodically. Advances under the
notes are secured by substantially all of the Company's assets. The notes are
payable in 48 equal monthly principal payments of $125,000 beginning July 1,
1994.
The notes include restrictive financial covenants relating to working
capital, tangible net worth and other items. The Company was in violation of
certain of these covenants at December 31, 1993. However, the notes were paid in
full on March 8, 1994 in conjunction with the sale of the general and limited
partnership interests discussed in Note 6. Accordingly, the notes are classified
as current at December 31, 1993. Interest paid in 1993 was $497,251.
F-48
<PAGE> 133
4. LEASES
The Company has noncancellable operating lease commitments for office
space, land, tower space and vehicles. Terms of the leases range from one to ten
years and include various renewal options. Rent expense incurred during the year
ended December 31, 1993 amounted to $150,792. Minimum future rental commitments
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31:
<S> <C>
1994........................................................... $133,676
1995........................................................... 126,491
1996........................................................... 145,686
1997........................................................... 29,203
1998........................................................... 10,200
Thereafter..................................................... 37,994
--------
$483,250
========
</TABLE>
5. RELATED-PARTY TRANSACTIONS
The Company pays a monthly management fee to an affiliated company owned by
the limited partners for administrative and office services provided. The
Company incurred management fees of $119,874.
The notes payable to related parties on December 31, 1993 consist of
$542,000 unsecured demand promissory note from the general partner, of which
$462,000 is outstanding and $70,000 of unsecured demand notes payable to the
limited partners. The notes are noninterest bearing.
6. SUBSEQUENT EVENTS
On March 8, 1994, the General and Limited Partners sold their partnership
interests in the Company to Horizon Cellular Telephone Company, L.P. and Horizon
Cellular Telephone Company of Chautauqua L.P. (the Purchaser) for $43,750,000. A
portion of the purchase price was advanced to satisfy the Company's notes
payable to suppliers. Under the terms of the purchase and sale agreement,
certain liabilities of the Company remain with the general partner, including
notes payable and any litigation that may arise relating to the period prior to
March 8, 1994.
F-49
<PAGE> 134
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL TO, OR THE SOLICITATION OF ANY
OFFER TO BUY FROM ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CERTAIN TERMS............................... 2
ADDITIONAL INFORMATION...................... 2
PROSPECTUS SUMMARY.......................... 3
RISK FACTORS................................ 12
USE OF PROCEEDS............................. 16
CAPITALIZATION.............................. 17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA............................ 18
SELECTED FINANCIAL DATA..................... 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................ 28
BUSINESS.................................... 34
MANAGEMENT.................................. 50
PRINCIPAL STOCKHOLDERS...................... 53
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.............................. 54
DESCRIPTION OF BANK CREDIT FACILITY......... 55
DESCRIPTION OF NOTES........................ 57
DESCRIPTION OF CAPITAL STOCK................ 77
UNDERWRITING................................ 80
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.............................. 80
LEGAL MATTERS............................... 81
EXPERTS..................................... 82
INDEX TO FINANCIAL STATEMENTS............... F-1
</TABLE>
UNTIL DECEMBER , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT),
ALL DEALERS EFFECTING TRANSACTIONS IN THE SERIES 1996-3 CERTIFICATES WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$110,000,000
[SYGNET LOGO]
% SENIOR NOTES
DUE 2006
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
TORONTO DOMINION SECURITIES
------------------------------------------------------
------------------------------------------------------
<PAGE> 135
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting discounts and commissions) payable by the
Registrant in connection with the issuance and distribution of the securities
registered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 53,448.65
Printing and engraving*....................................... $ 200,000.00
Accountants' fees and expenses*............................... $ 565,000.00
Blue sky fees and expenses*................................... $ 30,000.00
Counsel fees and expenses*.................................... $ 300,000.00
Miscellaneous*................................................ $
-------------
Total............................................... $1,148,448.65
============
</TABLE>
- ---------------
* Estimate
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 1701.13(E) of the Ohio General Corporation Law (the "Ohio
Law"), a corporation may indemnify its directors, officers, employees and agents
and its former directors, officers, employees and agents and those who serve, at
the corporation's request, in such capacity with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Ohio Law
provides, however, that such person must have acted in good faith and in a
manner such person reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful. In
addition, the Ohio Law does not permit indemnification in an action or suit by
or in the right of the corporation, where (i) such person has been adjudged
liable to the corporation, unless and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication or, (ii) the
only liability asserted against a director is for unlawful loans, dividends or
distribution of assets. Indemnity is mandatory to the extent a claim, issue or
matter has been successfully defended.
The Company's Articles of Incorporation and Code of Regulations provide
that the Board of Directors may, by majority vote, authorize the Company to
indemnify directors, officers or employees of the Company on generally the same
terms as permitted by the Ohio Law.
The Underwriting Agreement provides for indemnification by the Underwriters
severally of the Company, its directors, its officers who sign the Registration
Statement and controlling persons of the Company against certain liabilities,
including liabilities under the Securities Act, under certain circumstances.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement for Notes Offering by and among Sygnet Wireless, Inc.
and Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers, and
Toronto Dominion Securities (USA) Inc. as Underwriters.
2.1 Certificate of Merger dated August 26, 1996, including the Amended and Restated
Agreement and Plan of Merger dated August 19, 1996.
</TABLE>
II-1
<PAGE> 136
<TABLE>
<C> <S>
2.2 Amended and Restated Agreement and Plan of Transfer of Assets dated August 28,
1996.*
2.3 Agreement and Plan of Recapitalization of Sygnet Wireless, Inc. dated August 28,
1996.*
3.1 Articles of Incorporation of Sygnet Wireless, Inc. (formerly named SYGNET
Communications, Inc.) dated August 20, 1991.
3.2 Code of Regulations of Sygnet Wireless, Inc. (formerly named SYGNET Communications,
Inc.).
3.3 Form of Amended and Restated Articles of Incorporation of Sygnet Wireless, Inc.
dated , 1996.
3.4 Form of Code of Regulations of Sygnet Wireless, Inc.
3.5 Form of Certificate of Amendment to the Amended and Restated Articles of
Incorporation of Sygnet Wireless, Inc. dated , 1996.
4.1 Form of Indenture (including form of Note) between Sygnet Wireless, Inc. and Fleet
National Bank, as Trustee, relating to the Senior Notes due 2006 of Sygnet Wireless,
Inc.
5.1 Opinion of Bryan Cave LLP, counsel to the Registrant, as to the legality of the
Notes being registered.
8.1 Opinion of Bryan Cave LLP, with respect to certain tax matters (included in the
legal opinion filed as Exhibit 5.1 hereto).
10.1 Employment Agreement dated August 26, 1996 between the Registrant and Albert H.
Pharis, Jr.*
10.2 Employment Agreement dated August 26, 1996 between the Registrant and Warren P.
Williamson, III.*
10.3 Employment Agreement dated August 26, 1996 between the Registrant and Craig T.
Sheetz.*
10.4 Employment Agreement dated August 26, 1996 between the Registrant and Gregory T.
Pauley.*
10.5 Sygnet Wireless, Inc. 1996 Stock Option Plan (including form of Stock Option
Agreement).*
10.6 Office Lease Agreement dated September 16, 1994 by and between K&T Realty and SYGNET
Communications Inc. for the premises located at 6550 Seville Drive, Canfield, Ohio.*
10.7 Site Lease Agreement dated March 29, 1990 between Milan John Vanco and Alice C.
Vanco and Erie Cellular Telephone Company.*
10.8 Lease Agreement dated June 1, 1990 between Bert D. and Margaret A. Schaefer and
Wilcom/Cellular One.*
10.9 Site Lease Agreement dated June 27, 1988 between John G. Virostek and MCI
Telecommunications Corporation with Assignment and Assumption of Lease dated
December 6, 1991 between MCI Telecommunications Corporation and Wilcom/Cellular
One.*
10.10 Lease Agreement with Real Estate Purchase Option Agreement dated July 21, 1987
between George A. Law and Agnes Law, George C. Law and Judith Law, August Thalman,
Jr. and Betty Thalman and Wilcom Corporation.*
10.11 Ground Lease Agreement dated December 15, 1987 between WKBN Broadcasting Corporation
and Youngstown Cellular Telephone Company.*
10.12 DMS-MTX Cellular Supply Agreement dated June 1, 1996 between Youngstown Cellular
Telephone Company and Northern Telecom, Inc.*
10.13 Intercarrier Services Agreement dated April 25, 1995 between Youngstown Cellular
Telephone Company and EDS Personal Communications Corporation.*
10.14 Software License Agreement dated April 20, 1995 between Youngstown Cellular
Telephone Company and International Telecommunication Data Systems, Inc.*
10.15 License Agreement between JSJ Software, Inc. and Youngstown Cellular Telephone
Company.*
10.16 Product Service Agreement dated February 1, 1995 between Glenayre Care and Wilcom
Cellular.*
10.17 Asset Acquisition Agreement dated July 11, 1996 between Horizon Cellular Telephone
Company of Chautauqua, L.P., Horizon Cellular Telephone Company of Crawford, L.P.,
Horizon Cellular Telephone Company of Indiana, L.P., and SYGNET Communications,
Inc.*
10.18 Agreement for Purchase of Partnership Interest dated September 15, 1995 between
SYGNET Communications, Inc. and Erie Cellular Systems, Inc.*
10.19 Stock Purchase Agreement between SYGNET Communications, Inc., Wilcom Corporation,
and Advent IV Capital Liquidating Trust, TA Associates IV, TA Venture Investors
Limited Partnership, Elden J. Heinz, Security Investment Management & Trust Company,
The Planned Giving Foundation, Inc., and Erma Heinz.*
</TABLE>
II-2
<PAGE> 137
<TABLE>
<C> <S>
10.20 Form of Credit Agreement dated , 1996 among the Registrant and
The Toronto- Dominion Bank and PNC Bank, National Association.
10.21 Commitment Letter dated August 21, 1996 executed and delivered by The
Toronto-Dominion Bank and PNC Bank, National Association in favor of the
Registrant.*
10.22 Promissory Note dated December 29, 1994 executed and delivered by Albert H. Pharis,
Jr. in favor of the Registrant.*
10.23 Cellular One License Agreement dated February 28, 1992 between Cellular One Group
and Erie Cellular Telephone Company.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiary of Sygnet Wireless, Inc.*
23.1 Consent of Ernst & Young LLP, Cleveland, Ohio.
23.2 Consent of Ernst & Young LLP, Boston, Massachusetts.
23.3 Consent of Ernst & Young LLP, Philadelphia, Pennsylvania.
23.4 Consent of Arthur Andersen LLP
23.5 Consent of Coopers & Lybrand L.L.P.
23.6 Consent of Bryan Cave, LLP (included in the legal opinion filed as Exhibit 5.1
hereto).
24.1 Powers of Attorney (included on the signature page to the Registration Statement).*
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.*
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules. All schedules have been omitted since
the required information is not present in amounts sufficient to require
submission of the schedules or because the information required is included in
the financial statements.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that,
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-3
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the District of
Columbia, on September 17, 1996.
SYGNET WIRELESS, INC.
By: /s/ WARREN P. WILLIAMSON, III*
------------------------------------
WARREN P. WILLIAMSON, III
DIRECTOR AND CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ WARREN P. WILLIAMSON, III* Director and Chairman September 17, 1996
- ---------------------------------------------
WARREN P. WILLIAMSON, III
/s/ ALBERT H. PHARIS, JR.* Director, President and September 17, 1996
- --------------------------------------------- Chief Executive Officer
ALBERT H. PHARIS, JR.
/s/ CRAIG T. SHEETZ* Vice President, Chief September 17, 1996
- --------------------------------------------- Financial Officer,
CRAIG T. SHEETZ Treasurer
/s/ GREGORY T. PAULEY* Vice President of September 17, 1996
- --------------------------------------------- Technical Operations
GREGORY T. PAULEY
/s/ JOSEPH D. WILLIAMSON, II* Director September 17, 1996
- ---------------------------------------------
JOSEPH D. WILLIAMSON, II
/s/ LOWRY A. STEWART* Director September 17, 1996
- ---------------------------------------------
LOWRY A. STEWART
/s/ RAYMOND S. TITTLE, JR.* Director September 17, 1996
- ---------------------------------------------
RAYMOND S. TITTLE, JR.
*By: /s/ THOMAS F. DOWD
- ---------------------------------------------
THOMAS F. DOWD
ATTORNEY-IN-FACT PURSUANT TO
POWERS OF ATTORNEY DATED AUGUST 14, 1996.
</TABLE>
II-4
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement for Notes Offering by and among Sygnet
Wireless, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation,
Lehman Brothers, and Toronto Dominion Securities (USA) Inc. as
Underwriters.............................................................
2.1 Certificate of Merger dated August 26, 1996, including the Amended and
Restated Agreement and Plan of Merger dated August 19, 1996..............
2.2 Amended and Restated Agreement and Plan of Transfer of Assets dated
August 28, 1996.*........................................................
2.3 Agreement and Plan of Recapitalization of Sygnet Wireless, Inc. dated
August 28, 1996.*........................................................
3.1 Articles of Incorporation of Sygnet Wireless, Inc. (formerly named SYGNET
Communications, Inc.) dated August 20, 1991..............................
3.2 Code of Regulations of Sygnet Wireless, Inc. (formerly named SYGNET
Communications, Inc.)....................................................
3.3 Form of Amended and Restated Articles of Incorporation of Sygnet
Wireless, Inc. dated , 1996..........................
3.4 Form of Code of Regulations of Sygnet Wireless, Inc. ....................
3.5 Form of Certificate of Amendment to the Amended and Restated Articles of
Incorporation of Sygnet Wireless, Inc. dated , 1996...............
4.1 Form of Indenture (including form of Note) between Sygnet Wireless, Inc.
and Fleet National Bank, as Trustee, relating to the Senior Notes due
2006 of Sygnet Wireless, Inc.............................................
5.1 Opinion of Bryan Cave LLP, counsel to the Registrant, as to the legality
of the Notes being registered............................................
8.1 Opinion of Bryan Cave LLP, with respect to certain tax matters (included
in the legal opinion filed as Exhibit 5.1 hereto). ......................
10.1 Employment Agreement dated August 26, 1996 between the Registrant and
Albert H. Pharis, Jr.*...................................................
10.2 Employment Agreement dated August 26, 1996 between the Registrant and
Warren P. Williamson, III.*..............................................
10.3 Employment Agreement dated August 26, 1996 between the Registrant and
Craig T. Sheetz.*........................................................
10.4 Employment Agreement dated August 26, 1996 between the Registrant and
Gregory T. Pauley.*......................................................
10.5 Sygnet Wireless, Inc. 1996 Stock Option Plan (including form of Stock
Option Agreement).*......................................................
10.6 Office Lease Agreement dated September 16, 1994 by and between K&T Realty
and SYGNET Communications Inc. for the premises located at 6550 Seville
Drive, Canfield, Ohio.*..................................................
10.7 Site Lease Agreement dated March 29, 1990 between Milan John Vanco and
Alice C. Vanco and Erie Cellular Telephone Company.*.....................
10.8 Lease Agreement dated June 1, 1990 between Bert D. and Margaret A.
Schaefer and Wilcom/Cellular One.*.......................................
10.9 Site Lease Agreement dated June 27, 1988 between John G. Virostek and MCI
Telecommunications Corporation with Assignment and Assumption of Lease
dated December 6, 1991 between MCI Telecommunications Corporation and
Wilcom/Cellular One.*....................................................
10.10 Lease Agreement with Real Estate Purchase Option Agreement dated July 21,
1987 between George A. Law and Agnes Law, George C. Law and Judith Law,
August Thalman, Jr. and Betty Thalman and Wilcom Corporation.*...........
10.11 Ground Lease Agreement dated December 15, 1987 between WKBN Broadcasting
Corporation and Youngstown Cellular Telephone Company.*..................
</TABLE>
<PAGE> 140
<TABLE>
<C> <S> <C>
10.12 DMS-MTX Cellular Supply Agreement dated June 1, 1996 between Youngstown
Cellular Telephone Company and Northern Telecom, Inc.*...................
10.13 Intercarrier Services Agreement dated April 25, 1995 between Youngstown
Cellular Telephone Company and EDS Personal Communications
Corporation.*............................................................
10.14 Software License Agreement dated April 20, 1995 between Youngstown
Cellular Telephone Company and International Telecommunication Data
Systems, Inc.*...........................................................
10.15 License Agreement between JSJ Software, Inc. and Youngstown Cellular
Telephone Company.*......................................................
10.16 Product Service Agreement dated February 1, 1995 between Glenayre Care
and Wilcom Cellular.*....................................................
10.17 Asset Acquisition Agreement dated July 11, 1996 between Horizon Cellular
Telephone Company of Chautauqua, L.P., Horizon Cellular Telephone Company
of Crawford, L.P., Horizon Cellular Telephone Company of Indiana, L.P.,
and SYGNET Communications, Inc.*.........................................
10.18 Agreement for Purchase of Partnership Interest dated September 15, 1995
between SYGNET Communications, Inc. and Erie Cellular Systems, Inc.*.....
10.19 Stock Purchase Agreement between SYGNET Communications, Inc., Wilcom
Corporation, and Advent IV Capital Liquidating Trust, TA Associates IV,
TA Venture Investors Limited Partnership, Elden J. Heinz, Security
Investment Management & Trust Company, The Planned Giving Foundation,
Inc., and Erma Heinz.*...................................................
10.20 Form of Credit Agreement dated , 1996 among the
Registrant and The Toronto-Dominion Bank and PNC Bank, National
Association..............................................................
10.21 Commitment Letter dated August 21, 1996 executed and delivered by The
Toronto-Dominion Bank and PNC Bank, National Association in favor of the
Registrant.*.............................................................
10.22 Promissory Note dated December 29, 1994 executed and delivered by Albert
H. Pharis, Jr. in favor of the Registrant.*..............................
10.23 Cellular One License Agreement dated February 28, 1992 between Cellular
One Group and Erie Cellular Telephone Company. ..........................
12.1 Statement regarding Computation of Ratio of Earnings to Fixed Charges....
21.1 Subsidiary of Sygnet Wireless, Inc.*.....................................
23.1 Consent of Ernst & Young LLP, Cleveland, Ohio. ..........................
23.2 Consent of Ernst & Young LLP, Boston, Massachusetts. ....................
23.3 Consent of Ernst & Young LLP, Philadelphia, Pennsylvania. ...............
23.4 Consent of Arthur Andersen LLP...........................................
23.5 Consent of Coopers & Lybrand L.L.P. .....................................
23.6 Consent of Bryan Cave, LLP (included in the legal opinion filed as
Exhibit 5.1 hereto). ....................................................
24.1 Powers of Attorney (included on the signature page to the Registration
Statement).*.............................................................
25.1 Statement of Eligibility of Trustee on Form T-1.*........................
27.1 Financial Data Schedule.*................................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
$110,000,000
SYGNET WIRELESS, INC.
__% SENIOR NOTES DUE 2006
UNDERWRITING AGREEMENT
September ___, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
TORONTO DOMINION SECURITIES (USA) INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Sygnet Wireless, Inc., an Ohio corporation (the "Company"), proposes to
issue and sell $110,000,000 principal amount of its __% Senior Notes due 2006
(the "Notes") to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Notes are to be issued pursuant to the provisions of an
Indenture to be dated as of September __, 1996 (the "Indenture") between the
Company and Fleet National Bank, as Trustee (the "Trustee"). A portion of the
proceeds of the sale of the Notes will be used to finance the acquisition of
certain assets pursuant to the Asset Acquisition Agreement, dated as of July
11, 1996 (the "Acquisition Agreement"), between the Company and Horizon
Cellular Telephone Company of Chautauqua, L.P., Horizon Cellular Telephone
Company of Crawford, L.P. and Horizon Cellular Telephone Company of Indiana,
L.P. (collectively, "Horizon").
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-1 including a prospectus relating to
the Notes, which may be amended. The registration statement
<PAGE> 2
as amended at the time when it becomes effective, including a registration
statement (if any) filed pursuant to Rule 462(b) under the Act increasing the
size of the offering registered under the Act and information (if any) deemed
to be part of the registration statement at the time of effectiveness pursuant
to Rule 430A or Rule 434 under the Act, is hereinafter referred to as the
Registration Statement; and the prospectus (including any prospectus subject to
completion taken together with any term sheet meeting the requirements of Rule
434(b)) in the form first used to confirm sales of Notes is hereinafter
referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms
and conditions, the Company agrees to issue and sell, and each Underwriter
agrees, severally and not jointly, to purchase from the Company the principal
amount of Notes set forth opposite the name of such Underwriter in Schedule I
hereto, at __% of the principal amount thereof (the "Purchase Price").
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Notes as soon after the effective date of the Registration Statement as
in your judgment is advisable and (ii) initially to offer the Notes upon the
terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment
for the Notes shall be made at 10:00 a.m., New York City time, on the
third or fourth business day following the date of the initial public offering
(the "Closing Date") pursuant to Rule 15c6-1 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") unless otherwise permitted by the
Commission or such Rule 15c6-1, at such place as you shall designate. The
Closing Date and the location of delivery of and the form of payment for the
Notes may be varied by agreement between you and the Company.
Certificates for the Notes shall be registered in such names and issued in
such denominations as you shall request in writing not later than two full
business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 a.m., New York City time,
on the business day next preceding the Closing Date. Certificates in
definitive form evidencing the Notes shall be delivered to you on the Closing
Date with any transfer taxes thereon duly paid by the Company, for the
respective accounts of the several Underwriters, against payment of the
Purchase Price therefor by wire transfer or certified bank checks payable in
Federal funds to the order of the Company.
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to become
effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment to it becomes effective,
(ii) of any request by the Commission
2
<PAGE> 3
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of
the Registration Statement or of the suspension of qualification of the
Notes for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(c) To furnish to you, without charge, three signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus (including the
issuance or filings of any term sheet within the meaning of Rule 434) of
which you shall not previously have been advised or to which you shall
reasonably object; and to prepare and file with the Commission, promptly
upon your reasonable request, any amendment to the Registration Statement
or supplement to the Prospectus (including the issuance or filings of any
term sheet within the meaning of Rule 434) which may be necessary or
advisable in connection with the distribution of the Notes by you, and to
use its best efforts to cause the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of
counsel for the Underwriters a prospectus is required by law to be
delivered in connection with sales by an Underwriter or a dealer, to
furnish to each Underwriter and dealer as many copies of the Prospectus
(and of any amendment or supplement to the Prospectus) as such Underwriter
or dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the
Underwriters it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if it
is necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or
3
<PAGE> 4
supplemented, will not in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law,
and to furnish to each Underwriter and to such dealers as you shall
specify, such number of copies thereof as such Underwriter or dealers may
reasonably request.
(g) Prior to any public offering of the Notes, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Notes for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such qualification in effect
so long as required for distribution of the Notes and to file such
consents to service of process or other documents as may be necessary in
order to effect such registration or qualification.
(h) To make generally available to its security holders as soon as
reasonably practicable an earnings statement covering a period of at least
twelve months after the effective date of the Registration Statement (but
in no event commencing later than 90 days after such date) which shall
satisfy the provisions of Section 11(a) of the Act, which may be
accomplished by complying with Rule 158 issued under the Act, and to
advise you in writing when such statement has been so made available.
(i) For so long as any of the Notes remain outstanding, (i) to mail as
soon as reasonably practicable after the end of each fiscal year to the
record holders of its Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of
all unconsolidated subsidiaries, if any), all such financial reports to
include a consolidated balance sheet, a consolidated statement of
operations, a consolidated statement of cash flows and a consolidated
statement of shareholders' equity as of the end of and for such fiscal
year, together with comparable information as of the end of and for the
preceding year, certified by independent certified public accountants, and
(ii) to mail and make generally available as soon as practicable after the
end of each quarterly period (except for the last quarterly period of each
fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and
similar financial reports of all unconsolidated subsidiaries, if any) as
of the end of and for such period, and for the period from the beginning
of such year to the close of such quarterly period, together with
comparable information for the corresponding periods of the preceding
year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the security holders of the Company
or filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including
4
<PAGE> 5
financial statements and exhibits), each preliminary prospectus and all
amendments and supplements to any of them prior to or during the period
specified in paragraph (e), (ii) the printing and delivery of the
Prospectus and all amendments or supplements to it during the period
specified in paragraph (e), (iii) the printing and delivery of this
Agreement, the Preliminary and Supplemental Blue Sky Memoranda and all
other agreements, memoranda, correspondence and other documents printed
and delivered in connection with the offering of the Notes (including in
each case any disbursements of counsel for the Underwriters relating to
such printing and delivery), (iv) the registration or qualification of the
Notes for offer and sale under the securities or Blue Sky laws of the
several states (including in each case the fees and disbursements of
counsel for the Underwriters relating to such registration or
qualification and memoranda relating thereto), (v) filings and clearance
with the National Association of Securities Dealers, Inc. in connection
with the offering, (vi) the listing of the Notes on the Nasdaq National
Market and (vii) furnishing such copies of the Registration Statement, the
Prospectus and all amendments and supplements thereto as may be requested
for use in connection with the offering or sale of the Notes by the
Underwriters or by dealers to whom Notes may be sold.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the Notes
(other than (i) the Notes and (ii) commercial paper issued in the ordinary
course of business), without your prior written consent.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Notes.
(6) Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each part of the Registration Statement, when such part became
effective, did not contain and each such part, as amended or supplemented,
if applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) the Registration
Statement and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act and (iii)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were
5
<PAGE> 6
made, not misleading, except that the representations and warranties set
forth in this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, and each Registration Statement
filed pursuant to Rule 462(b) under the Act, if any, complied when so
filed in all material respects with the Act; and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the corporate
power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable,
and are owned by the Company, free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature.
(f) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be entitled to the benefits of the Indenture, and will be
valid and binding obligations of the Company, enforceable in accordance
with their terms except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms (except as rights to indemnity
and contribution hereunder may be limited by applicable law and except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability).
6
<PAGE> 7
(h) The Indenture has been duly qualified under the Trust Indenture Act
of 1939, as amended, and has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(i) The Notes conform as to legal matters to the description thereof
contained in the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any other agreement, indenture
or instrument material to the conduct of the business of the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property is bound.
(k) The Acquisition Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms (except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability).
(l) The execution, delivery and performance of this Agreement, the
Indenture and the Notes and compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under
the securities or Blue Sky laws of the various states) and will not
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any of its
subsidiaries or any agreement, indenture or other instrument to which it
or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or violate or conflict
with any laws, administrative regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective
property.
(m) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated. No contract or document
of a character required to be described in the Registration Statement
7
<PAGE> 8
or the Prospectus or to be filed as an exhibit to the Registration
Statement is not so described or filed as required.
(n) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in
each case might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and
its subsidiaries, taken as a whole.
(o) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate
its respective properties and to conduct its business; the Company and
each of its subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such permit; and, except as described in the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries.
(p) Except as otherwise set forth in the Prospectus or such as are not
material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the
Company and each of its subsidiaries has good and marketable title, free
and clear of all liens, claims, encumbrances and restrictions except liens
for taxes not yet due and payable, to all property and assets described in
the Registration Statement as being owned by it. All leases to which the
Company or any of its subsidiaries is a party are valid and binding and no
default has occurred or is continuing thereunder, which might result in
any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries
taken as a whole, and the Company and its subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such subsidiary.
(q) The Company and each of its subsidiaries maintains reasonably
adequate insurance.
(r) Ernst & Young LLP and Coopers & Lybrand L.L.P., each are
independent public accountants with respect to the Company as required by
the Act.
8
<PAGE> 9
(s) The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated in the
Registration Statement at the respective dates or for the respective
periods to which they apply; such statements and related schedules and
notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and
data set forth in the Registration Statement and the Prospectus (and any
amendment or supplement thereto) is, in all material respects, accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of the Company.
(t) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(u) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company.
(v) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(w) In the case of Rule 434(b) term sheets, such term sheet and
prospectus subject to completion provided by the Company to the
Underwriters for use in connection with the offering and sale of the Notes
pursuant to Rule 434 under the Act together are not materially different
from the prospectus included in the Registration Statement at the time of
effectiveness or an effective post-effective amendment thereto and such
term sheet sets forth all information material to investors with respect
the offering that is not disclosed in the prospectus subject to completion
or confirmation.
(x) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens related to or
entitling any person to purchase or otherwise to acquire from the Company
or any subsidiary any shares of the capital stock of, or other ownership
interest in, the Company or any subsidiary thereof except as otherwise
disclosed in the Registration Statement.
(y) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(z) There is (i) no significant unfair labor practice complaint pending
against the Company or any of its subsidiaries or, to the best knowledge
of the Company, threatened against any of them, before the National Labor
Relations Board or any state
9
<PAGE> 10
or local labor relations board, and no significant grievance or more
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of its
subsidiaries or, to the best knowledge of the Company, threatened against
any of them, and (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Company or any of its subsidiaries or, to the
best knowledge of the Company, threatened against it or any of its
subsidiaries except for such actions specified in clause (i) or (ii)
above, which, singly or in the aggregate could not reasonably be expected
to have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(aa) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations, (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (3)
access to assets is permitted only in accordance with management's general
or specific authorization, and (4) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(ab) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due pursuant to such returns or pursuant to any assessment
received by the Company or any of its subsidiaries have been paid, other
than those being contested in good faith and for which adequate reserves
have been provided.
(ac) The Company and each of its subsidiaries has received the
consents of the Federal Communications Commission (the "FCC") to the
Horizon Acquisition. Those consents constitute all consents, approvals
and actions necessary for the assignment of the nonwireline cellular
telephone licenses for the PA-1 RSA, the PA-6 RSA, the PA-7 RSA, the NY-3
RSA and the PA-2 IOA, as identified in the Prospectus (the "Horizon FCC
Licenses"). All applicable administrative and judicial appeal, review and
reconsideration periods of such FCC consents have expired, without the
timely filing of any such appeal or request for review or reconsideration
and without the FCC having instituted review of the grant of such consent
on its own motion.
(ad) The Company and each of its subsidiaries validly holds all FCC
licenses necessary for the operation of the Existing Systems and,
following the Horizon Acquisition will validly hold all FCC licenses
necessary for the operation of the Horizon Systems, as identified in the
Prospectus (the "FCC Licenses"). The FCC Licenses are in full force and
effect and are not subject to any conditions other than those conditions
listed thereon and those conditions generally applicable to entities
holding similar licenses issued by the FCC. The FCC Licenses constitute
all of the licenses, permits, consents
10
<PAGE> 11
or authorizations required by the FCC to permit operation of a nonwireline
cellular telephone system in the Youngstown, OH MSA, the Sharon, PA MSA,
the OH-11 RSA, the Erie, PA MSA, the NY-3 RSA, the PA-1 RSA, the PA-6 RSA,
and the PA-7 RSA (collectively, the "Cellular Systems"), and to permit
interim operations in the PA-2 IOA. The FCC Licenses expire on the
following dates: [insert dates]. The five-year build-out periods for the
Cellular Systems expire[d] on [insert dates].
(ae) Neither the execution and delivery of the Underwriting Agreement
nor the sale of the Notes contemplated hereby (1) contravene any provision
of the Communications Act of 1934, as amended (the "Communications Act"),
or the published rules and regulations of the FCC ("FCC Rules"), (2)
conflict with or result in the violation of any judgment, order or decree
of the FCC or (3) require any consent of the FCC not already obtained.
(af) There are no judgments, decrees or orders issued by the FCC that
could result in a suspension, revocation, material impairment, termination
prior to its expiration date, non-renewal or adverse modification of the
FCC Licenses, or that could have a material adverse effect upon, or cause
material disruption to, the cellular operations pursuant to the FCC
Licenses. To the best of the Company's knowledge, there is no FCC
complaint, investigation, action or proceeding pending or threatened
relative to the FCC Licenses relating to its cellular operations,
including, without limitation, any Notice of Violation, Notice of Apparent
Liability or Order to Show Cause, other than proceedings that affect the
cellular telephone industry generally, that could result in a suspension,
revocation, material impairment, termination prior to its expiration date,
non-renewal or adverse modification of the FCC Licenses or which could
have a material adverse effect upon, or cause material disruption to, the
cellular operations in the Youngstown, OH MSA, the Sharon, PA MSA, the
OH-11 RSA, the Erie, PA MSA, the NY-3 RSA, the PA-1 RSA, the PA-6 RSA, or
the PA-7 RSA, or the interim operations in the PA-2 IOA. Each of the
Cellular Systems is operating in compliance in all material respects with
the Communications Act and the FCC Rules.
(ag) The Company and each of its subsidiaries has, or has timely
filed applications for, all permits, licenses, franchises and other
authorizations ("permits") of governmental or regulatory authorities
(including, as appropriate, the state public utilities commissions of
Ohio, Pennsylvania and New York) necessary to engage in the business
currently conducted in the Cellular Systems, except where the failure to
hold such permits would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole; and there is no reason to believe
that any governmental body or agency is considering limiting, suspending
or revoking any such permit. All such permits are valid and in full force
and effect.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter
11
<PAGE> 12
and each person, if any, who controls any Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, 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, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriters furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages and liabilities and
judgments purchased Notes, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required
by law so to have been delivered, at or prior to the written confirmation
of the sale of the Notes to such person, and if the Prospectus (as so
amended and supplemented) would have cured the defect giving rise to such
loss, claim, damage, liability or judgment.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
or supplement thereto and with respect to which indemnity may be sought
against the Company, such Underwriter shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party
and payment of all fees and expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the employment of such counsel shall
have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all such Underwriters and
12
<PAGE> 13
controlling persons, which firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation and that all such fees
and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without its
written consent but if settled with the written consent of the Company,
the Company agrees to indemnify and hold harmless any Underwriter and any
such controlling person from and against any loss or liability by reason
of such settlement. Notwithstanding the immediately preceding sentence, if
in any case where the fees and expenses of counsel are at the expense of
the indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its
written consent if (i) such settlement is entered into more than ten
business days after the receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement 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
any 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.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and any person controlling the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to
each Underwriter but only with reference to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the
Prospectus or any preliminary prospectus. In case any action shall be
brought against the Company, any of its directors, any such officer or any
person controlling the Company based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter, the Underwriter shall have the
rights and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such
officers and any person controlling the Company shall have the rights and
duties given to the Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified
13
<PAGE> 14
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on
the other hand from the offering of the Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to
be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company, and the total
underwriting discounts and commissions received by the Underwriters, bear
to the total price to the public of the Notes, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault of
the Company and the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter 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 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective number of Notes purchased by each of the Underwriters hereunder and
not joint.
8. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Notes under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect
14
<PAGE> 15
as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 p.m. (and in the case of a Registration Statement filed under
Rule 462(b) of the Act, not later than 10:00 p.m.), New York City time, on
the date of this Agreement or at such later date and time as you may
approve in writing, and at the Closing Date no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading,
nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not indicate
the direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical rating
organization", as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act.
(d) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock or
in the long-term debt of the Company from that set forth in the
Registration Statement and Prospectus, (iii) the Company and its
subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole,
other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by Albert H. Pharis and Craig
T. Sheetz, in their capacities as the President and Chief Executive
Officer, and Vice President, Chief Financial Officer and Treasurer,
respectively, of the Company, confirming the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the
Closing Date, of Harrington & Mitchell, Ltd., counsel for the Company, to
the effect that:
(i) the Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its business as
it is currently being conducted and to own, lease and operate its
properties;
15
<PAGE> 16
(ii) the Company and each of its subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(iii) all of the outstanding shares of capital stock of, or
other ownership interests in, each of the Company's
subsidiaries have been duly and validly authorized and issued and
are fully paid and non-assessable, and are owned by the Company,
free and clear of any security interest, claim, lien, encumbrance or
adverse interest of any nature;
(iv) the Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company
enforceable in accordance with their terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(v) this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of
the Company enforceable in accordance with its terms (except as
rights to indemnity and contribution hereunder may be limited by
applicable law and except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability);
(vi) The Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(vii) the statements under the captions "Management" and
"Certain Relationships and Related Transactions" in the Prospectus,
as amended or supplemented, and Items 14 and 15 of Part II of the
Registration Statement insofar as such statements constitute a
summary of legal matters, documents or
16
<PAGE> 17
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings;
(viii) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge, neither the Company nor any of its
subsidiaries is in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture
or instrument material to the conduct of the business of the Company
and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound; and
(ix) to the best of such counsel's knowledge, all leases to
which the Company or any of its subsidiaries is a party (or to which
it or any of them will become a party following consummation of the
transactions under the Acquisition Agreement) are valid and binding
and no default has occurred or is continuing thereunder, which might
result in any material adverse change in the business, prospects,
financial condition or results of operation of the Company and its
subsidiaries taken as a whole, with such exceptions as do not
materially interfere with the use made by the Company or such
subsidiary.
The opinion of Harrington & Mitchell, Ltd. described in paragraph (e)
above shall be rendered to you at the request of the Company and shall so state
therein.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the
Closing Date, of Bryan Cave, LLP, counsel for the Company, to the effect
that:
(i) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended;
(ii) the Acquisition Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms
(except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability);
(iii) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been
issued and no proceedings for that purpose are, to the knowledge of
such counsel, pending before or contemplated by the Commission;
17
<PAGE> 18
(iv) the statements under the captions "Risk Factors--Holding
Company Structure; Structural Subordination," "Risk
Factors--Reliance on Use of Third-Party Service Mark," "Risk
Factors--Fraudulence Conveyance Statutes," "Risk Factors--Potential
for Adverse Regulatory Change and the Need for Regulatory
Approvals," "Business--The Horizon Acquisition," "Business--Service
Marks," "Business--Regulatory Overview," "Certain Relationships and
Related Transactions," "Description of Bank Credit Facility,"
"Description of Notes," "Description of Capital Stock" and
"Underwriting" in the Prospectus, as amended or supplemented, and
Items 14 and 15 of Part II of the Registration Statement insofar as
such statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings;
(v) Based on the Internal Revenue Code of 1986, as amended,
regulations promulgated thereunder and interpretations thereof by
the Internal Revenue Service and the courts having jurisdiction over
such matters, all of which are subject to change either
prospectively or retroactively, and in reliance on the facts set
forth in the Registration Statement, the material federal income tax
consequences are accurately set forth under the caption "Certain
United States Federal Income Tax Consequences";
(vi) the execution, delivery and performance of this Agreement,
the Indenture and the Notes and compliance by the Company with
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not require any
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except as such may be required under the securities or Blue Sky
laws of the various states) and to the best of such counsel's
knowledge, will not conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any agreement,
indenture or other instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective properties is bound, or violate or
conflict with in any material respects with any laws, administrative
regulations or rulings or court decrees applicable to the Company or
any of its subsidiaries or their respective properties;
(vii) such counsel does not know of any legal or governmental
proceeding pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of their respective property
is subject which is required to be described in the Registration
Statement or the Prospectus and is not so described, or of any
contract or other document which is required to be described in the
Registration Statement or the Prospectus or is required to be filed
as an exhibit to the Registration Statement which is not described
or filed as required;
18
<PAGE> 19
(viii) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(ix) to the best of such counsel's knowledge, no holder of any
security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company;
(x) the Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus
and any supplement or amendment thereto (except for financial
statements as to which no opinion need be expressed) comply as to
form in all material respects with the Act;
(xi) the Company and each of its subsidiaries has received the
consents of the FCC to the Horizon Acquisition. Those consents
constitute all consents, approvals and actions necessary for the
assignment of the Horizon FCC Licenses. All applicable
administrative and judicial appeal, review and reconsideration
periods of such FCC consents have expired, without the timely filing
of any such appeal or request for review or reconsideration and
without the FCC having instituted review of the grant of such
consent on its own motion;
(xii) the Company and each of its subsidiaries validly holds
all the FCC Licenses. The FCC Licenses are in full force and effect
and are not subject to any conditions other than those conditions
listed thereon and those conditions generally applicable to entities
holding similar licenses issued by the FCC. The FCC Licenses
constitute all of the licenses, permits, consents or authorizations
required by the FCC to permit operation of the Cellular Systems, and
to permit interim operations in the PA-2 IOA. The FCC Licenses
expire on the following dates: [insert dates]. The five-year
build-out periods for the Cellular Systems expire[d] on [insert
dates];
(xiii) neither the execution and delivery of the Underwriting
Agreement nor the sale of the Notes contemplated hereby will (A)
contravene any provision of the Act or the FCC Rules, (B) conflict
with or result in the violation of any judgment, order or decree of
the FCC or (C) require any consent of the FCC not already obtained;
(xiv) there are no judgments, decrees or orders issued by the
FCC that could result in a suspension, revocation, material
impairment, termination prior to its expiration date, non-renewal or
adverse modification of the FCC Licenses, or that could have a
material adverse effect upon, or cause material disruption to, the
cellular operations pursuant to the FCC Licenses. To the best of
our knowledge, there is no FCC complaint, investigation, action or
19
<PAGE> 20
proceeding pending or threatened relative to the FCC Licenses
relating to its cellular operations, including, without limitation,
any Notice of Violation, Notice of Apparent Liability or Order to
Show Cause, other than proceedings that affect the cellular
telephone industry generally, that could result in a suspension,
revocation, material impairment, termination prior to its expiration
date, non-renewal or adverse modification of the FCC Licenses or
which could have a material adverse effect upon, or cause material
disruption to, the cellular operations in the Youngstown, OH MSA,
the Sharon, PA MSA, the OH-11 RSA, the Erie, PA MSA, the NY-3 RSA,
the PA-1 RSA, the PA-6 RSA, or the PA-7 RSA, or the interim
operations in the PA-2 IOA; and
(xv) the statements in the Prospectus under the captions "Risk
Factors--Potential for Adverse Regulatory Change and the Need for
Regulatory Approvals," and "Business of the Company--Regulatory
Overview," insofar as such statements constitute a summary of
Communications Act and the FCC Rules, fairly and accurately
summarize in all material respects the matters therein described.
Such counsel's opinion shall further state that during the course of
preparation by the Company of the Registration Statement and the Prospectus
such counsel has participated in conferences with officers and representatives
of the Company, at which conferences the contents of the Registration Statement
and the Prospectus were discussed, reviewed and revised, and on the basis of
the information that was developed during the course thereof, such counsel has
reason to believe the following:
(xvi) to the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries has violated any Environmental
Laws, nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or
state wages and hours laws, nor any provisions of the Employee
Retirement Income Security Act or the rules and regulations
promulgated thereunder, which in each case might result in any
material adverse change in the business, prospects, financial
condition or results of operation of the Company and its
subsidiaries, taken as a whole;
(xvii) to the best of such counsel's knowledge, the Company
and each of its subsidiaries has such permits, licenses, franchises
and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate its
respective properties (including the properties to be owned, leased
and operated following consummation of the transactions under the
Acquisition Agreement) and to conduct its business in the manner
described in the Prospectus; to the best of such counsel's
knowledge, the Company and each of its subsidiaries has fulfilled
and performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after notice
20
<PAGE> 21
or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder
of any such permit, subject in each case to such qualification as
may be set forth in the Prospectus; and, except as described in the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries;
(xviii) such counsel believes that (except for financial
statements, as aforesaid and except for that part of the
Registration Statement that constitutes the Form T-1) the
Registration Statement and the prospectus included therein at the
time the Registration Statement became effective did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that the Prospectus, as amended or
supplemented, if applicable (except for financial statements, as
aforesaid) does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and
(xviv) the Company and each of its subsidiaries has, or has
timely filed applications for, all permits of governmental or
regulatory authorities (including, as appropriate, the state public
utilities commissions of Ohio, Pennsylvania and New York) necessary
to engage in the business currently conducted in the Cellular
Systems, except where the failure to hold such permits would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole; and there is no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such permit. All such permits are valid and in full
force and effect.
The opinion of Bryan Cave, LLP described in paragraph (f) above
shall be rendered to you at the request of the Company and shall so state
therein.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Latham & Watkins, counsel for the Underwriters, as to the
matters referred to in clauses (iv), (v), and (vi) of the foregoing
paragraph (e) and clause (xviv) in the foregoing paragraph (f) (but only
with respect to the statements under the captions "Description of Notes"
and "Underwriting" in such clause). In giving such opinion with respect
to the matters covered by clause (xviv) of paragraph (f) such counsel may
state that their opinion and belief are based upon their participation in
the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except
as specified.
(h) You shall have received letters on and as of the Closing Date, in
form and substance satisfactory to you, from Ernst & Young LLP and Coopers
& Lybrand L.L.P.,
21
<PAGE> 22
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by such accountants on the date of this Agreement.
(i) The Company shall not have failed at or prior to the Closing
Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company at or prior
to the Closing Date.
9. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this
Agreement and (ii) when notification of the effectiveness of the Registration
Statement has been released by the Commission.
This Agreement may be terminated at any time prior to the Closing
Date by you by written notice to the Company if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change
or development involving a prospective material adverse change in the
condition, financial or otherwise, of the Company and its subsidiaries or the
earnings, affairs, or business prospects of the Company or any of its
subsidiaries taken as a whole, whether or not arising in the ordinary course of
business, which would, in your judgment, make it impracticable to market the
Notes on the terms and in the manner contemplated in the Prospectus; (ii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in your judgment, is material and
adverse and would, in your judgment, make it impracticable to market the Notes
on the terms and in the manner contemplated in the Prospectus; (iii) the
suspension or material limitation of trading in securities on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market or
limitation on prices for securities on any such exchange or Nasdaq National
Market; (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business or operations of the
Company or any Subsidiary; (v) the declaration of a banking moratorium by
either federal or New York State authorities; or (vi) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date any one or more of the Underwriters shall
fail or refuse to purchase the Notes which it or they have agreed to
purchase hereunder on such date and the aggregate number of Notes which such
defaulting Underwriter or Underwriters, as the case may be, agreed but failed
or refused to purchase is not more than one-tenth of the total number of Notes
to be purchased on such date by all Underwriters, each non-defaulting
Underwriter shall be obligated severally, in the proportion which the number of
Notes set forth opposite its name in Schedule I bears to the total number of
Notes which all the non-defaulting Underwriters, as the case may be, have
agreed to purchase, or in such other proportion as you may specify, to
22
<PAGE> 23
purchase the Notes which such defaulting Underwriter or Underwriters, as the
case may be, agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Notes which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9
by an amount in excess of one-ninth of such number of Notes without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Notes and the aggregate number of
Notes with respect to which such default occurs is more than one-tenth of the
aggregate number of Notes to be purchased on such date by all Underwriters and
arrangements satisfactory to you and the Company for purchase of such Notes are
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
10. Post-Closing Obligations. At the time of the closing of the Horizon
Acquisition (the "Horizon Closing Date") the following shall occur:
(a) The Company shall deliver an officer's certificate to each
Underwriter stating, representing and warranting that:
(i) The Company has received net proceeds from the sale of its
preferred stock of not less than $19.0 million;
(ii) The Acquisition Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms
(except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability);
(iii) The execution, delivery and performance of the
Acquisition Agreement and compliance by the Company with all the
provisions thereof and the consummation of the transactions
contemplated thereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body and will not
conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any agreement, indenture or
other instrument to which it or any of its subsidiaries is a party
or by which it or any of its subsidiaries or their respective
property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court
23
<PAGE> 24
decrees applicable to the Company, any of its subsidiaries or their
respective property;
(iv) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or
regulatory authorities ("permits"), including, without limitation,
under any applicable Environmental Laws, as are necessary to own,
lease and operate the Horizon Systems and to conduct the business of
the Horizon Systems; the Company and each of its subsidiaries has
fulfilled and performed all of its material obligations with respect
to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of
the holder of any such permit; and, except as described in the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries;
(v) The Company and each of its subsidiaries has received the
consents of the FCC to the Horizon Acquisition. Those consents
constitute all consents, approvals and actions necessary for the
assignment of the Horizon FCC. All applicable administrative and
judicial appeal, review and reconsideration periods of such FCC
consents have expired, without the timely filing of any such appeal
or request for review or reconsideration and without the FCC having
instituted review of the grant of such consent on its own motion;
(vi) The Company and each of its subsidiaries validly holds all
FCC licenses necessary for the operation of the Horizon Systems.
The Horizon FCC Licenses are in full force and effect and are not
subject to any conditions other than those conditions listed thereon
and those conditions generally applicable to entities holding
similar licenses issued by the FCC. The FCC Licenses constitute all
of the licenses, permits, consents or authorizations required by the
FCC to permit operation of a nonwireline cellular telephone system
in the Cellular Systems, and to permit interim operations in the
PA-2 IOA. The FCC Licenses expire on the following dates: [insert
dates]. The five-year build-out periods for the Cellular Systems
expire[d] on [insert dates]; and
(vii) There are no judgments, decrees or orders issued by the
FCC that could result in a suspension, revocation, material
impairment, termination prior to its expiration date, non-renewal or
adverse modification of the FCC Licenses, or that could have a
material adverse effect upon, or cause material disruption to, the
cellular operations pursuant to the FCC Licenses. To the best of
the Company's knowledge, there is no FCC complaint, investigation,
action or proceeding pending or threatened relative to the FCC
Licenses relating to its cellular operations, including, without
limitation, any Notice of Violation, Notice of Apparent Liability or
Order to Show Cause, other than proceedings that affect the cellular
telephone industry generally, that could result in a suspension,
24
<PAGE> 25
revocation, material impairment, termination prior to its expiration
date, non-renewal or adverse modification of the FCC Licenses or
which could have a material adverse effect upon, or cause material
disruption to, the cellular operations in the Youngstown, OH MSA,
the Sharon, PA MSA, the OH-11 RSA, the Erie, PA MSA, the NY-3 RSA,
the PA-1 RSA, the PA-6 RSA, or the PA-7 RSA, or the interim
operations in the PA-2 IOA. Each of the Cellular Systems is
operating in compliance in all material respects with the
Communications Act and the FCC Rules.
(b) The Company shall deliver to the Underwriters an opinion
(satisfactory to you and counsel for the Underwriters) of Bryan Cave LLP,
dated the Horizon Closing Date, to the effect that:
(i) the Acquisition Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement of
the Company enforceable in accordance with its terms (except as (a)
the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (b) rights
of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability);
(ii) the execution, delivery and performance of the Acquisition
Agreement and compliance by the Company with all the provisions
thereof and the consummation of the transactions contemplated
thereby will not require any consent, approval, authorization or
other order of any court, regulatory body, administrative agency or
other governmental body and to the best of such counsel's knowledge,
will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any material agreement,
indenture or other instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective properties is bound, or violate or
conflict with any laws, administrative regulations or rulings or
court decrees applicable to the Company or any of its subsidiaries
or their respective properties;
(iii) to the best of such counsel's knowledge, the Company and
each of its subsidiaries has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities, including,
without limitation, under any applicable Environmental Laws, as are
necessary to own, lease and operate the properties to be owned,
leased and operated following consummation of the transactions under
the Acquisition Agreement and to conduct its business in the manner
described in the Prospectus; to the best of such counsel's
knowledge, the Company and each of its subsidiaries has fulfilled
and performed all of its material obligations with respect to such
permits and no event has occurred which
25
<PAGE> 26
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of
the rights of the holder of any such permit, subject in each case to
such qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company or any of
its subsidiaries;
(iv) to the best of such counsel's knowledge, all leases to
which the Company or any of its subsidiaries will become a party
following consummation of the transactions under the Acquisition
Agreement are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse
change in the business, prospects, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, with
such exceptions as do not materially interfere with the use made by
the Company or such subsidiary;
(v) the Company and each of its subsidiaries has received the
consents of the FCC to the Horizon Acquisition. Those consents
constitute all consents, approvals and actions necessary for the
assignment of the Horizon FCC Licenses. All applicable
administrative and judicial appeal, review and reconsideration
periods of such FCC consents have expired, without the timely filing
of any such appeal or request for review or reconsideration and
without the FCC having instituted review of the grant of such
consent on its own motion;
(vi) the Company and each of its subsidiaries validly holds all
the FCC Licenses. The FCC Licenses are in full force and effect and
are not subject to any conditions other than those conditions listed
thereon and those conditions generally applicable to entities
holding similar licenses issued by the FCC. The FCC Licenses
constitute all of the licenses, permits, consents or authorizations
required by the FCC to permit operation of the Cellular Systems, and
to permit interim operations in the PA-2 IOA. The FCC Licenses
expire on the following dates: [insert dates]. The five-year
build-out periods for the Cellular Systems expire[d] on [insert
dates];
(vii) there are no judgments, decrees or orders issued by the
FCC that could result in a suspension, revocation, material
impairment, termination prior to its expiration date, non-renewal or
adverse modification of the FCC Licenses, or that could have a
material adverse effect upon, or cause material disruption to, the
cellular operations pursuant to the FCC Licenses. To the best of
our knowledge, there is no FCC complaint, investigation, action or
proceeding pending or threatened relative to the FCC Licenses
relating to its cellular operations, including, without limitation,
any Notice of Violation, Notice of Apparent Liability or Order to
Show Cause, other than proceedings that affect the cellular
telephone industry generally, that could result in a suspension,
26
<PAGE> 27
revocation, material impairment, termination prior to its expiration
date, non-renewal or adverse modification of the FCC Licenses or
which could have a material adverse effect upon, or cause material
disruption to, the cellular operations in the Youngstown, OH MSA,
the Sharon, PA MSA, the OH-11 RSA, the Erie, PA MSA, the NY-3 RSA,
the PA-1 RSA, the PA-6 RSA, or the PA-7 RSA, or the interim
operations in the PA-2 IOA; and
(viii) the Company and each of its subsidiaries has, or has
timely filed applications for, all permits of governmental or
regulatory authorities (including, as appropriate, the state public
utilities commissions of Ohio, Pennsylvania and New York) necessary
to engage in the business currently conducted in the Cellular
Systems, except where the failure to hold such permits would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole; and there is no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such permit. All such permits are valid and in full
force and effect.
The opinion of Bryan Cave, LLP described in paragraph (b) above
shall be rendered to you at the request of the Company and shall so state
therein.
(c) The transactions under the Acquisition Agreement shall have been
consummated in accordance with the terms of the Acquisition Agreement.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to
Sygnet Wireless, Inc., 6550-B Seville Drive, Canfield, Ohio 44406, and (b) if
to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Notes, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter or by or on
behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Notes and payment for
them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, the Company agrees
to reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) reasonably incurred by them.
27
<PAGE> 28
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, any
controlling persons referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include a purchaser of any of the
Notes from any of the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
28
<PAGE> 29
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
SYGNET WIRELESS, INC.
By
-------------------------------------
Albert H. Pharis
President and Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
Acting on behalf of
itself and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
--------------------------
Steven D. Smith
Vice President
29
<PAGE> 30
SCHEDULE I
Principal Amount of
Underwriters Notes to be Purchased
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers Inc.
Toronto Dominion Securities (USA) Inc. ----------------------
TOTAL $110,000,000
30
<PAGE> 1
EXHIBIT 2.1
[SEAL] Approved _____________
Prescribed by Date _________________
Bob Taft, Secretary of State Fee __________________
30 East Broad Street, 14th Floor
Columbus, Ohio 43266-0418
Form MER (July 1994)
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio law, the
undersigned corporations, limited liability companies and/or limited
partnerships, desiring to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
SYGNET Communications, Inc.
-------------------------------------------------------------
-------------------------------------------------------------
B. Name change: As a result of this merger, the name of
the surviving entity has been changed to the
following: Sygnet Wireless, Inc.
-----------------------------------------
----------------------------------------------------
(complete only if the name of surviving entity is
changing through the merger)
C. The surviving entity is a: (Please check the
appropriate box and fill in the appropriate blanks)
/X/ Domestic (Ohio) corporation
/ / Foreign (Non-Ohio) corporation incorporated under the
laws of the state/country of_______________, and
licensed to transact business in the state of Ohio.
/ / Foreign (Non-Ohio) corporation incorporated under
the laws of the state/country of ______________,
and NOT licensed to transact business in the state of
Ohio.
/ / Domestic (Ohio) limited liability company
/ / Foreign (Non-Ohio) limited liability company
organized under the laws of the state/country of
_____________, and registered to do business in
the state of Ohio.
/ / Foreign (Non-Ohio) limited liability company
organized under the laws of the state/country of
_______________, and NOT registered to do business
in the state of Ohio.
/ / Domestic (Ohio) limited partnership, registration
number __________________________________________
<PAGE> 2
/ / Foreign (Non-Ohio) limited partnership organized
under the laws of the state/country of__________,
and registered to do business in the state of Ohio,
under registration number ________________.
/ / Foreign (Non-Ohio) limited partnership organized
under the laws of the state/country of ___________,
and NOT registered to do business in the state of
Ohio.
II. Merging Entities
The name, type of entity, and state/country of incorporation
or organization, respectively, or each entity, other than the survivor, which
is a party to the merger are as follows: (if insufficient space to cover this
item, please attach a separate sheet listing the merging entities; Ohio
registered or foreign qualified limited partnerships must include registration
number)
<TABLE>
<S> <C> <C>
Name State/Country of Organization Type of Entity
Wilcom Corporation Ohio Corporation
- ----------------------------- ---------------------------- --------------------------
- ----------------------------- ---------------------------- --------------------------
- ----------------------------- ---------------------------- --------------------------
- ----------------------------- ---------------------------- --------------------------
- ----------------------------- ---------------------------- --------------------------
</TABLE>
III. Merger Agreement on File
The name and mailing address of the person or entity from
whom/which eligible persons may obtain a copy of the agreement of merger upon
written request:
<TABLE>
<CAPTION>
Name Address
<S> <C>
Albert H. Pharis, Jr. 3910 South Avenue
- ---------------------------- ----------------------------------------------
(street and number)
Youngstown, Ohio 44512-1399
----------------------------------------------
(city, village or township (state) (zip code)
</TABLE>
IV. Effective Date of Merger
This merger is to be effective:
On August 31, 1996 (if a date is specified, the date must be
a date on or after the date of filing; the effective date of the merger cannot
be earlier than the date of filing; if no date is specified, the date of
filing will be the effective date of the merger).
<PAGE> 3
V. Merger Authorized
The laws of the state or country under which each constituent
entity exists, permits this merger.
This merger was adopted, approved and authorized by each of
the constituent entities in compliance with the laws of the state under which
it is organized, and the persons signing this certificate on behalf of each of
the constituent entities are duly authorized to do so.
VI. Statutory Agent
The name and address of the surviving entity's statutory
agent upon whom any process, notice or demand may be served is:
<TABLE>
<CAPTION>
Name Address
<S> <C>
Albert H. Pharis, Jr. 3910 South Avenue
- -------------------------------- --------------------------------------------
(complete street address)
Youngstown, Ohio 44512-1399
--------------------------------------------
(city, village or township) (zip code)
</TABLE>
(This item MUST be completed if the surviving entity is a foreign entity which
is not licensed, registered or otherwise authorized to conduct or transact
business in the State of Ohio)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the
above referenced surviving entity, hereby acknowledges and accepts the
appointment of statutory agent for said entity.
/s/ ALBERT H. PHARIS, JR.
-----------------------------
Signature of Agent
(The acceptance of agent must be completed by domestic surviving entities if
through this merger the statutory agent for the surviving entity has changed,
or the named agent differs in any way from the name reflected on the Secretary
of State's records).
VII. Statement of Merger
Upon filing, or upon such later date as specified herein,
the merging entity/entities listed herein shall merge into the listed surviving
entity.
VIII. Amendments
The articles of incorporation, articles of organization or
certificate of limited partnership (strike the inapplicable terms) of the
surviving domestic entity herein, are amended as set forth in the attached
"Exhibit A."
(Please note that any amendments to articles of
incorporation, articles or organization or to a certificate of limited
partnership MUST be attached if the surviving entity is a DOMESTIC
corporation, limited liability company, or limited partnership.)
<PAGE> 4
IX. Qualification or Licensure of Foreign Surviving Entity
A. The listed surviving foreign corporation, limited
liability company, or limited partnership desires to transact business in
Ohio as a foreign corporation, foreign limited liability company, or foreign
limited partnership, and hereby appoints the following as its statutory agent
upon whom process, notice or demand against the entity may be served in the
State of Ohio. The name and complete address of the statutory agent is:
- --------------------------------- ---------------------------------
(name) (street and number)
, Ohio
- -------------------------------------- --------------------------
(city, village or township) (zip code)
The subject surviving foreign corporation, limited liability
company or limited partnership irrevocably consents to service of process on
the statutory agent listed above as long as the authority of the agent
continues, and to service of process upon the Secretary of State if the
agent cannot be found, if the corporation, limited liability company or limited
partnership fails to designate another agent when required to do so, or if the
corporation's, limited liability company's, or limited partnership's license
or registration to do business in Ohio expires or is cancelled.
B. The qualifying entity also states as follows: (complete
only if applicable)
1. Foreign Qualifying Limited Liability Company
(If the qualifying entity is a foreign
limited liability company, the following
information must be completed)
a. The name of the limited liability
company in its state of
organization/registration is
-----------------------------------
-----------------------------------
b. The name under which the limited
liability company desires to transact
business in Ohio is
-----------------------------------
c. The limited liability company was
organized or registered on
-----------------------------------
month day year
under the laws of the state/country of
------------------------------------
d. The address to which interested persons
may direct request for copies of the
articles of organization, operating
agreement, bylaws, or other charter
documents of the company is:
-------------------------------------
-------------------------------------
<PAGE> 5
2. Foreign Qualifying Limited Partnership (If the
qualifying entity is a foreign limited
partnership, the following information must be
completed)
a. The name of limited partnership is____
__________________________________________
b. The limited partnership was formed on
_______________________________________
month day year
under the laws of the state/country of____
__________________________
c. The address of the office of the limited
partnership in its state/country of
organization is________________________
d. The limited partnership's principal office
address is ___________________________
e. The names and business or residence
addresses of the GENERAL partners of the
partnership are as follows:
Name Address
__________________________________________
__________________________________________
__________________________________________
(If insufficient space to cover this item,
please attached a separate sheet listing
the general partners and their respective
addresses)
f. The address of the office where a list
of the names and business or residence
addresses of the limited partners and
their respective capital contributions
is to be maintained is:
________________________________________
________________________________________
The limited partnership hereby certifies
that it shall maintain said records until
the registration of the limited
partnership in Ohio is cancelled or
withdrawn.
<PAGE> 6
The undersigned constituent entities have caused this
certificate of merger to be signed by its duly authorized officers, partners
and representatives on the date(s) stated below.
<TABLE>
<S> <C>
SYGNET Communications, Inc.
- --------------------------------------- -----------------------------------------
exact name of entity exact name of entity
By: /s/ ALBERT H. PHARIS, JR By:
------------------------------------ --------------------------------------
Its: President Its:
----------------------------------- -------------------------------------
Date: 8/26/96 Date:
------------------------- -----------------------
Wilcom Corporation
- --------------------------------------- -----------------------------------------
exact name of entity exact name of entity
By: /s/ WARREN P. WILLIAMSON III By:
------------------------------------ --------------------------------------
Its: Chairman Its:
----------------------------------- -------------------------------------
Date: 8/26/96 Date:
------------------------ -----------------------
- --------------------------------------- -----------------------------------------
exact name of entity exact name of entity
By: By:
------------------------------------ --------------------------------------
Its: Its:
----------------------------------- -------------------------------------
Date: Date:
------------------------ -----------------------
- --------------------------------------- -----------------------------------------
exact name of entity exact name of entity
By: By:
------------------------------------ --------------------------------------
Its: Its:
----------------------------------- -------------------------------------
Date: Date:
------------------------ -----------------------
- --------------------------------------- -----------------------------------------
exact name of entity exact name of entity
By: By:
------------------------------------ --------------------------------------
Its: Its:
----------------------------------- -------------------------------------
Date: Date:
------------------------ -----------------------
</TABLE>
(Please note that the chairman of the board, the president, vice president,
secretary or an assistant secretary must sign on behalf of each constituent
corporation, and at least one general partner must sign on behalf of each
constituent limited partnership; if insufficient space for signature, a
separate sheet should be attached containing such signatures)
<PAGE> 7
[SEAL] Prescribed by
Bob Taft, Secretary of State
30 East Broad Street, 14th Floor
Columbus, Ohio 43266-0418
CONSENT FOR USE OF SIMILAR NAME
(Where consenting entity is a corporation)
<TABLE>
<S> <C>
SIGNET Communications, Inc.
- -----------------------------------------------------------------------------------
(Name of Corporation giving consent)
(Charter/License Number) 797311
--------------------
gives its consent to Sharron Youngstown Cellular, Inc.
---------------------------------------------------------------
(Name of individual or proposed corporation receiving consent)
to use the name Sygnet Communications, Inc.
-----------------------------------------------------------------
This document is signed by any
authorized corporate officer.
Date 8-26-96 Signed /s/ ALBERT H. PHARIS, JR.
------------------ -----------------------------
Title PRESIDENT
-----------------------------
</TABLE>
<PAGE> 8
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER OF
WILCOM CORPORATION
WITH AND INTO SYGNET COMMUNICATIONS, INC.
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is made and
entered into on August 19, 1996, by and between Wilcom Corporation ("Wilcom"),
a corporation organized and existing under the laws of the State of Ohio,
(Wilcom being hereinafter sometimes referred to as the "Merging Corporation")
and SYGNET Communications, Inc. ("Sygnet"), a corporation organized and
existing under the laws of the State of Ohio (Sygnet being hereinafter
sometimes referred to as the "Surviving Corporation"), said two corporations
being hereinafter sometimes referred to collectively as the "Constituent
Corporations"; and
WHEREAS, this Amended and Restated Agreement and Plan of Merger
restates the Agreement and Plan of Merger between the parties dated July 17,
1996; and
WHEREAS, the Board of Directors and Shareholders of each of the
Constituent Corporations believe that a simplified corporate structure will be
required to facilitate future expansion; reduce management, tax, audit, and
legal expenses; and allow for more efficient management of the Constituent
Corporations and their affiliated entities; and
WHEREAS, the Board of Directors and Shareholders of each of the
Constituent Corporations deem it advisable and in the best interests of the
Constituent Corporations that Wilcom be merged with and into Sygnet, with
Sygnet being the Surviving Corporation, under and pursuant to the laws of the
State of Ohio and on the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
MERGER
1.1 Wilcom shall be merged with and into Sygnet in accordance with
the laws of the State of Ohio. The separate corporate existence of Wilcom
shall thereby cease, and Sygnet shall be the Surviving Corporation.
1.2 The name that the Surviving Corporation is to have after the
merger shall be "Sygnet Wireless, Inc."
1.3 At the Effective Time (as defined in Section 2.1 below), the
separate existence of the Merging Corporation shall cease. Except as herein
otherwise specifically set forth, from and after the Effective Time the
Surviving Corporation shall possess all of the rights, privileges, immunities
and franchises, to the extent consistent with its Articles of Incorporation, of
the Constituent Corporations. All the rights, privileges, powers and
franchises of the Merging Corporation, of a public as well as of a private
nature, and all property, real, personal and mixed of the Merging Corporation,
and all debts due on whatever account to them, including all choses in action
and all and every other interest of or belonging to them, shall be taken by and
deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; and all such property, rights, privileges,
1
<PAGE> 9
immunities and franchises, of a public as well as of a private nature, and all
and every other interest of the Merging Corporation shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
Merging Corporation.
1.4 From and after the Effective Time, the Surviving Corporation
shall be subject to all the duties and liabilities of a corporation organized
under the General Corporation Law of the State of Ohio and shall be liable and
responsible for all the liabilities and obligations of the Constituent
Corporations. The rights of the creditors of the Constituent Corporations, or
of any person dealing with such corporations, or any liens upon the property of
such corporations, shall not be impaired by this merger, and any claim existing
or action or proceeding pending by or against either of such corporations may
be prosecuted to judgment as if this merger had not taken place, or the
Surviving Corporation may be proceeded against or substituted in place of the
Merging Corporation. Except as otherwise specifically provided to the contrary
herein, the identity, existence, purposes, powers, franchises, rights
immunities and liabilities of the Surviving Corporation shall continue
unaffected and unimpaired by the merger.
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
The terms and conditions of the merger shall be as follows:
2.1 The merger shall become effective, pursuant to Section 1701.78
of the General Corporation Law of the State of Ohio, at the close of business
August 31, 1996 or when the Agreement and any other necessary documents are
filed with the Ohio Secretary of State, whichever is later. The time and date
of such effectiveness is referred to in this Agreement as the "Effective Time."
2.2 Prior to the Effective Time, the Constituent Corporations
shall take all such action as shall be necessary or appropriate in order to
effect the merger. If at any time after the Effective Time, the Surviving
Corporation shall determine that any further conveyance, assignment or other
documents or any further action is necessary or desirable in order to vest in,
or confirm to, the Surviving Corporation full title to all of the property,
assets, rights, privileges and franchises of the Constituent Corporations, or
any of them, the officers and directors of the Constituent Corporations shall
execute and deliver all such instruments and take all such further actions as
the Surviving Corporation may determine to be necessary or desirable in order
to vest in and confirm to the Surviving Corporation title to and possession of
all such property, assets, rights, privileges, immunities and franchises, and
otherwise to carry out the purposes of this Agreement and Plan.
ARTICLE III
CHARTER AND BYLAWS; DIRECTORS AND OFFICERS
3.1 Except as provided otherwise in Section 1.2, the Articles of
Incorporation of Sygnet, as in effect immediately prior to the Effective Time,
shall, after the merger, continue to be the Articles of Incorporation of the
Surviving Corporation, and are not amended by this Agreement.
3.2 The Code of Regulations of Sygnet, as in effect immediately
prior to the Effective Time, shall, after the merger, continue to be the Code
of Regulations of the Surviving Corporation. The Code of Regulations of Sygnet
is not amended by this Agreement.
3.3 The persons who are the Directors and officers of Sygnet
immediately prior to the Effective Time shall, after the merger, continue as
the Directors and officers of the Surviving Corporation without change, to
serve, subject to the provisions of the Code of Regulations of the Surviving
Corporation, until their successors have been duly elected and qualified in
accordance with the laws of the State of Ohio and the Articles of Incorporation
and Code of Regulations of the Surviving Corporation.
2
<PAGE> 10
ARTICLE IV
CONVERSION OF SHARES
4.1 The Surviving Corporation presently has issued and outstanding
187,782 shares of no par value Type A common stock ("Sygnet Type A Common"),
987,857 shares of no par value Type B common stock ("Sygnet Type B Common"),
and 62,556 shares of no par value Type C common stock ("Sygnet Type C Common");
which shares of Sygnet Type A Common, Sygnet Type B Common, and Sygnet Type C
Common are the only outstanding shares of the Surviving Corporation.
4.2 Wilcom presently has issued and outstanding 500 shares of no
par value Type A common stock ("Wilcom Type A Common") and 2,500 shares of no
par value Type B common stock ("Wilcom Type B Common").
4.3 At the Effective Time, each issued and outstanding share of
Wilcom Type A Common shall be converted into approximately 8.72 shares of
Sygnet Type A Common and each such issued and outstanding share of Wilcom Type
B Common shall be converted into approximately 8.72 shares of Sygnet Type B
Common. After the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Wilcom Type A Common or Wilcom
Type B Common may, but shall not be required to, surrender the same to the
Surviving Corporation for cancellation or transfer, and each such holder or
transferee will be entitled to receive, respectively, certificates representing
approximately 8.72 shares of Sygnet Type A Common or approximately 8.72 shares
of Sygnet Type B Common for every one (1) share of Wilcom Type A Common or
Wilcom Type B Common previously represented by the stock certificates
surrendered. Until so surrendered or presented for transfer, each outstanding
certificate which prior to the Effective Time represented Wilcom Type A Common
or Wilcom Type B Common, respectively, shall be deemed and treated for all
corporate purposes to represent the ownership of approximately 8.72 shares of
Sygnet Type A Common or approximately 8.72 shares of Sygnet Type B Common.
The exact results of this conversion are set forth in the chart below.
<TABLE>
<CAPTION>
=======================================================================================================
WILCOM SHAREHOLDERS CURRENT WILCOM SHARES ISSUED SYGNET SHARES
-------------------------------------------------------------
A B A B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lowry Stewart 10 0 87 0
- -------------------------------------------------------------------------------------------------------
Albert H. Pharis, Jr. 20 100 175 872
- -------------------------------------------------------------------------------------------------------
J.D. Williamson, II 235 0 2,049 0
- -------------------------------------------------------------------------------------------------------
W.P. Williamson, III 235 1,175 2,049 10,246
- -------------------------------------------------------------------------------------------------------
David Stewart 0 50 0 436
- -------------------------------------------------------------------------------------------------------
John Boydston 0 1,175 0 10,246
- -------------------------------------------------------------------------------------------------------
TOTAL 500 2,500 4,360 21,800
=======================================================================================================
</TABLE>
ARTICLE V
MISCELLANEOUS
5.1 Notwithstanding anything herein to the contrary, the Board of
Directors of any of the Constituent Corporations may, in their sole discretion
and at any time prior to the filing with the Secretary of State of Ohio of the
necessary Articles of Merger giving effect to the merger, by resolution duly
adopted, abandon the merger if it shall deem such action necessary, desirable
and in the best interests of the respective Constituent
3
<PAGE> 11
Corporation. In the event of such determination and abandonment of this
Agreement and Plan pursuant to the provisions of this Paragraph 5.1, the same
shall become null and void and shall have no further effect. Such termination
shall not give rise to any liability on the part of any of the Constituent
Corporations or its Directors, officers or shareholders in respect of this
Agreement and Plan.
5.2 The Shareholders of Wilcom and Sygnet dissenting to the
Agreement and Plan shall be entitled, pursuant to Sections 1701.84 and 1701.85
of the General Corporation Law of the State of Ohio, to be paid the fair value
of their shares upon compliance with such statutory sections.
5.3 This Agreement and Plan embodies the entire agreement between
the parties hereto and there are no agreements, understandings, restrictions or
warranties between the parties hereto other than those set forth herein or
herein provided for.
IN WITNESS WHEREOF, this Amended and Restated Agreement and Plan of
Merger has been signed by the duly authorized officers of the Constituent
Corporations pursuant to the authorization by the Board of Directors and
Shareholders of the Constituent Corporations, all as of the day and year first
above written.
WILCOM CORPORATION
By: /s/ W.P. WILLIAMSON, III
------------------------------------------
ATTEST: Title: Chairman
------------------------------------------
/s/ LYNN WILLIAMSON
- --------------------
Secretary
SYGNET COMMUNICATIONS, INC.
By: /s/ ALBERT H. PHARIS, JR.
------------------------------------------
ATTEST: Title: President
------------------------------------------
/s/ LYNN WILLIAMSON
- --------------------
Secretary
4
<PAGE> 1
EXHIBIT 3.1
AMENDED ARTICLES OF INCORPORATION
OF SYGNET COMMUNICATIONS, INC.
The undersigned, a citizen of the United States, under Chapter 1701 of
the Ohio Revised Code does hereby certify:
FIRST: NAME. The name of said corporation is:
SYGNET Communications, Inc.
SECOND: LOCATION. The place in Ohio where its principal
office is located is 3930 Sunset Boulevard, Youngstown, Mahoning County, Ohio.
THIRD: PURPOSE. The purposes for which the Corporation is
formed are: to engage in any kind of business, trade, or other activity for
which a corporation, for profit, may be lawfully organized under the
corporation laws of the State of Ohio.
FOURTH: SHARES.
4.01 AUTHORIZED. The aggregate number of shares
which the corporation is authorized to have outstanding is one million seven
hundred fifty thousand (1,750,000), all of which shall be classified as Common
Stock without par value, but divided into three types of Common Stock:
<PAGE> 2
TYPE A: Except for the election of the Type C Director, Type
A Voting Shares shall have voting powers in all
matters. Each share of Type A Voting Stock shall
have one vote.
The Corporation is authorized to issue 250,000 shares of Type
A Voting Stock.
TYPE B: Type B Non-Voting Shares shall have no voting powers
whatsoever except as provided for herein and except
as mandated by law.
The Corporation is authorized to issue 1,250,000 shares of
Type B Non Voting Stock.
TYPE C: Type C Voting Shares shall have voting powers in all
matters. However, each share of Type C Voting Stock
shall have one-sixth (1/6) vote as compared to one
(1) share of Type A Stock which has one (1) vote.
Type C Voting shares shall be exclusively entitled to
elect one (1) member of the Corporation's Board of
Directors as indicated in the Corporate Code of
Regulations, who shall be known as the Type C
Director.
The Corporation is authorized to issue 250,000 shares
of Type C Voting Stock.
<PAGE> 3
4.02. In all other respects, including the right to
share in dividends or distributions which may be declared upon the
common stock of the Corporation, the rights of Types A, B and C Stock
are identical.
4.03. FUTURE ISSUANCE NOT RESTRICTED. Up to two
hundred fifty thousand shares of Type C Voting Shares may be issued
prior to January 1, 1992 for such amounts of consideration as
determined by the Board of Directors without any shareholder approval.
Moreover, shares of any type without par value now or hereafter
authorized may be issued or agreed to be issued from time to time for
such amount or amounts of consideration as may be fixed from time to
time by the Board of Directors, and approved by an affirmative vote of
the majority of the total votes of the Type A and Type C Voting Shares
combined which are issued, outstanding and entitled to vote; each Type
A share being entitled to one (1) vote per share and each Type C share
being entitled to one-sixth (1/6) vote per share. Different amounts
and/or kinds of consideration may be fixed for the issuance of shares
of any type without par value, whether issued at the same or different
times, and the proportion of the amount or amounts of consideration
received by the corporation which is treated as stated capital may
vary. Any and all shares of any type without par value so issued, the
consideration for which has been paid or delivered, shall be fully
paid and non-assessable.
FIFTH: CAPITAL. The minimum amount of capital with which
the Corporation will begin business is Five Hundred Dollars ($500.00).
<PAGE> 4
SIXTH: NO PREEMPTIVE RIGHTS. No holder of shares of any
type of common stock of the Corporation shall have any preemptive
right to subscribe for or to purchase any shares of the Corporation of
any type, whether those shares of that type be now or later
authorized.
SEVENTH: WORKING CAPITAL AND TREASURY STOCK. The
Board of Directors is hereby authorized to fix and determine and to
vary the amount of working capital of the Corporation, to determine
whether any and, if any, what part of its surplus, however created or
arising, shall be used or disposed of or declared in dividends or paid
to shareholders, and, without action by the shareholders, to use and
apply such surplus, or any part thereof, at any time or from time to
time in the purchase or acquisition of shares of any type or class,
voting trust certificates for shares, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness of the
Corporation or other securities of the Corporation, to such extent or
amount and in such manner and upon such terms as the Board of
Directors shall deem expedient.
EIGHTH: AMENDMENT AND TERMINATION. These Articles may be
amended by affirmative vote of a majority of the total votes of Type A
and Type C Voting Shares combined; each Type A share being entitled to
one (1) vote per share and each Type C share being entitled to a
one-sixth (1/6) vote per share.
NINTH: EXTRAORDINARY TRANSACTIONS. By the affirmative
vote of a majority of the total votes of Type A and Type C Voting
Shares combined; each Type A share being entitled to one (1) vote per
share and each Type
<PAGE> 5
C share being entitled to a one-sixth (1/6) vote per share; the
Corporation may:
- Lease, sell, transfer or otherwise dispose of all or
substantially all of its assets according to Ohio
Revised Code '1701.76; and/or
- Merge and/or consolidate into a domestic, into a
foreign corporation, or into a subsidiary corporation
according to Ohio Revised Code '1701.78, 1701.79, and
1701.801; and/or
- Combine or effect a majority share acquisition
according to Ohio Revised Code '1701.83, if a
shareholder vote is required according to that
section.
TENTH: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Board of Directors may, by majority vote,
authorize the Corporation to pay to or reimburse any present or former
Director, Officer or Employee of the Corporation for any judgments,
fines, penalties, costs or expenses actually and necessarily incurred
by him or her in any action suit or proceeding to which he or she is
made a party by reason of holding his or her position. Payment or
reimbursement is conditioned on the Director, Officer or Employee
having acted in good faith and in a manner he or she reasonably
believed to be in, and not opposed to, the best interests of the
Corporation. However, the Director, Officer or Employee shall not
receive indemnification if he or she is finally adjudicated to be
liable for negligence or misconduct in the performance of his or her
duties to the Corporation. (Unless a court of competent jurisdiction
determines indemnification should
<PAGE> 6
apply notwithstanding such adjudication, and except for liability
based solely upon O.R.C. '1701.95; Unlawful Loans, Dividends, or
Distribution of Assets.) Provided, however, that in the event of a
settlement of such action, suit or proceeding, such director or
officer shall be indemnified by the Corporation against such expenses
incurred by such director or officer only to such extent, if any, as
may be determined in, or in connection with such settlement, and then
only if such determination shall have been approved by a court of
competent jurisdiction or by a resolution duly adopted by a majority
of the whole Board of Directors and no director included in such
majority shall have, or shall at any time have, any financial interest
adverse to the Corporation in the suit, action or proceeding. The
foregoing right of indemnification shall not be exclusive of other
rights to which any director or officer may be entitled as a matter of
law.
These Articles of Incorporation are hereby amended and
restated at Youngstown, Ohio on August 20, 1991.
/S/ RALPH A. BEARD
--------------------------------
Ralph A. Beard
Sole Incorporator
<PAGE> 1
EXHIBIT 3.2
CODE OF REGULATIONS
OF
SYGNET COMMUNICATIONS, INC.
ARTICLE 1
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation
shall be at such place in Ohio as may be designated from time to time by the
Board of Directors. The initial principal office of the Corporation shall be
3930 Sunset Boulevard, Boardman Township, Ohio.
SECTION 2. OTHER OFFICES. The corporation may also have offices at such
other places without, as well as within, the State of Ohio as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders of
this corporation for the purpose of fixing or changing the number of directors
of the corporation, electing directors and transacting such other business as
may come before the meeting, shall be held on the second Wednesday in March of
each year, if not a legal holiday, but if a legal holiday, then on the next
business day following.
<PAGE> 2
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by:
(i) the Chairman of the Board of the Corporation; or
(ii) the President of the Corporation; or
(iii) a majority of the Board of Directors acting with or without a
meeting; or
(iv) an affirmative vote of the holders of one-half of all Type A
Voting shares outstanding and entitled to vote at such
special meeting; or
(v) an affirmative vote of the holders of one-half of all Type C
Voting shares outstanding and entitled to vote at such
special meeting.
SECTION 3. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the principal office of the corporation unless the Board of Directors decides
that a meeting shall be held at some other place within or without the State of
Ohio and causes the notice thereof to so state.
SECTION 4. NOTICE OF MEETINGS. Unless waived, a written, printed or
typewritten notice of each annual or special meeting, stating the day, hour,
place and the purpose or purposes thereof, shall be served upon or mailed to
each shareholder of record entitled to vote or entitled to notice, not more than
thirty (30) days nor less than seven (7) days before any such meeting. If
mailed, it shall
2
<PAGE> 3
be directed to a shareholder at his or her address as the same appears upon the
records of the corporation.
SECTION 5. WAIVER OF NOTICE. Any shareholder, either before or after any
meeting, may waive any notice required to be given by law or under these
Regulations; and whenever all of the shareholders shall meet in person or by
proxy and consent to holding a meeting, it shall be valid for all purposes
without call or notice, and at such meeting any shareholder action may be taken.
SECTION 6. QUORUM. At any meeting of the shareholders, the holders of
Type A and Type C Voting shares entitling them to exercise a majority of the
voting power of the corporation, present in person or represented by proxy,
shall constitute a quorum.
At any meeting at which a quorum is present, all questions and business
which shall come before the meeting shall be determined by the vote of the
holders of a majority of voting shares as are represented in person or by proxy,
except when a greater proportion is required by law or the Articles of
Incorporation.
At any meeting, whether a quorum is present or not, the holders of a
majority of the voting shares represented by shareholders present or by proxy
may adjourn from time to time and from place to place without notice other than
by announcement at the meeting. At any such adjourned meeting at which quorum is
present, any business may be transacted which might be transacted at the meeting
as originally notified or held.
3
<PAGE> 4
SECTION 7. PROXIES. Any shareholder of record who is entitled to attend a
shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meeting or to vote thereat
or to assent or give consents in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing signed by such
shareholder, which need not be sealed, witnessed or acknowledged.
SECTION 8. VOTING.
8.01 TYPE A. At any meeting of shareholders, each Type A shareholder
of the corporation shall, except as otherwise provided by law or by the
Articles of Incorporation or by these Regulations, be entitled to one (1)
vote in person or by proxy for each Type A Voting Share of the corporation
registered in his name on the books of the corporation (1) on the date
fixed pursuant to subparagraph (f) of Section 2 of Article IV of these
Regulations as the record date for the determination of shareholders
entitled to vote at such meeting, notwithstanding the prior or subsequent
sale, or other disposal of such share or shares or transfer of the same on
the books of the corporation on or after the date so fixed, or (2) if no
such record date shall have been fixed, then at the time of such meeting.
8.02 TYPE C. At any meeting of shareholders, each Type C shareholder
of the corporation shall, except as otherwise provided by law or by the
Articles of Incorporation or by these Regulations, be entitled
4
<PAGE> 5
to one-sixth (1/6) vote in person or by proxy for each Type C
Voting Share of the corporation registered in his name on the books of the
corporation (1) on the date fixed pursuant to subparagraph (f) of Section
2 of Article IV of these Regulations as the record date for the
determination of shareholders entitled to vote at such meeting,
notwithstanding the prior or subsequent sale, or other disposal of such
share or shares or transfer of the same on the books of the corporation on
or after the date so fixed, or (2) if no such record date shall have been
fixed, then at the time of such meeting.
SECTION 9. FINANCIAL REPORTS. At the annual meeting, there shall be laid
before the shareholders a statement of profit and loss and a balance sheet
containing a summary of the assets and liabilities, as at the end of the
preceding fiscal year, together with a statement of dividends paid, and other
changes in the surplus account of the corporation during such year.
A certificate signed by the President or a Vice President and the Treasurer
or an Assistant Treasurer, or a public accountant or firm of public accountants,
shall be appended to such statement of profit and loss and balance sheet,
stating that they are true and correct according to the books of the
corporation, and that they fairly represent the corporation's affairs according
to its books.
SECTION 10. ACTION WITHOUT MEETING. Any action which may be taken at any
meeting of shareholders may be taken without a meeting if authorized by a
5
<PAGE> 6
writing signed by all of the holders of shares who would be entitled to notice
of a meeting for such purpose.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. Until changed in accordance with the
provisions of this section, the number of directors of the corporation, none of
whom need be shareholders, shall be no less than three (3) if there are no
issued and outstanding shares of Type C Stock and no less than five (5) if
there are issued and outstanding shares of Type C Stock, but no more than
thirteen (13). The number of directors may be fixed or changed by resolution at
any annual meeting, or at any special meeting called for that purpose, adopted
by the vote of the holders of Type A and Type C Voting Shares combined, present
in person or by proxy, entitling them to exercise a majority of the voting
power on such proposal of the shares represented at such meeting with each Type
A share entitled to one (1) vote per share and with each Type C share entitled
to a one-sixth ( 1/6) vote per share, but no reduction shall have the effect of
removing any director prior to the expiration of his term of office.
SECTION 2. ELECTION OF DIRECTORS. Directors shall be elected in the
manner indicated herein at the annual meeting of shareholders. When the annual
meeting is not held or directors are not elected thereat, they may be elected at
a special meeting called and held for that purpose. Such election shall be by
ballot
6
<PAGE> 7
whenever requested by any shareholders entitled to vote at such elections, but,
unless such a request is made, the election may be conducted in any manner
approved by a majority of shareholders in attendance at such meeting.
Notwithstanding the total number of Directors, one director only shall be
known as the Type C Director and shall be nominated and elected before
nomination of other Directors. Nominations of candidates for the Type C Director
may only be made by holders or proxies of Type C Voting Stock. The election of
the Type C Director shall be by vote of the holders or proxies of Type C Voting
Stock only, with each Type C share being entitled to one vote. The candidate
receiving the greatest number of votes in the election (even if not a majority)
shall be elected the Type C Director.
Nominations for candidates for the remaining Directors may be made by
holders or proxies of Type A Voting and Type C Voting Stock. In the election for
the remaining directors, each holder or proxy of Type A Voting Stock shall be
entitled to cast votes equal to the product of the number of Type A shares held
or represented times the number of directors to be elected, and each holder or
proxy of Type C Voting Stock shall be entitled to cast votes equal to one-sixth
of the product of the number of Type C Voting shares held or represented times
the number of directors to be elected. Each shareholder or proxy may divide his
or her votes in any manner among the candidates and may cumulatively vote for
fewer candidates than the number to be elected (including casting all votes for
one candidate.) Those candidates receiving the greatest number of votes shall be
elected. Cumulative voting as described in this paragraph shall be used in all
elections of the
7
<PAGE> 8
remaining Directors, without any required notice to shareholders in advance.
Those candidates receiving the greatest number of votes shall be elected.
SECTION 3. TERM OF OFFICE. Directors shall hold office until the annual
meeting next succeeding their election and until their successors are elected
and qualified, according to Section 2 above.
SECTION 4. VACANCIES. Vacancies in the Board of Directors may be filled
by a majority vote of the remaining directors until an election to fill such
vacancies is had. Type C Shareholders entitled to elect one (1) director shall
have the right to fill that Type C vacancy in the board (whether the same has
been temporarily filled by the remaining directors or not) at any meeting of the
shareholders called for that purpose, and the director elected at any such
meeting of shareholders shall serve until the next annual election of directors
and until his or her successor is elected and qualified.
ARTICLE IV
POWERS, MEETINGS, AND COMPENSATION OF DIRECTORS
SECTION 1. GENERAL POWERS OF BOARD. The powers of the corporation shall
be exercised, its business and affairs conducted, and its property controlled,
by the Board of Directors, except as provided in the Articles of Incorporation,
amendments thereto, or the General Corporation Law of Ohio.
8
<PAGE> 9
SECTION 2. OTHER POWERS. Without prejudice to the general powers
conferred by or implied in the preceding section, the directors, acting as a
Board, shall have power:
(a) To fix, define and limit the powers and duties of all officers,
and to determine the compensation of all officers.
(b) To appoint, and at their discretion, with or without cause, to
remove, or suspend, such subordinate officers, assistants, managers, agents
and employees as the directors may from time to time deem advisable, and to
determine their duties and fix their compensation.
(c) To require any officer, agent or employee of the corporation to
furnish a bond for faithful performance in such amount and with such
sureties as the Board may approve.
(d) To designate a depository or depositories of the funds of the
corporation and the officer or officers of other persons who shall be
authorized to sign notes, checks, drafts, contracts, deeds, mortgages and
other instruments on behalf of the corporation.
(e) To appoint and remove transfer agents and/or registrars for the
corporation's shares.
(f) To fix a time, not exceeding forty-five (45) days preceding the
date of any meeting of shareholders, or the date fixed for the
9
<PAGE> 10
payment of any dividend or distribution, or the date for the allotment
of rights, or (subject to contract rights with respect thereto) the date
when any change or conversion or exchange of shares shall be made or go
into effect, as a record date for the determination of the shareholders
entitled to notice of and to vote at any such meeting, or entitled to
receive payments of any such dividend, distribution, or allotment of
rights, or to exercise the right in respect to any such change, conversion
or exchange of shares, and, in such case, only the persons who are
shareholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting, or to receive payment of such dividend,
distribution, or allotment of rights, or to exercise such rights, as the
case may be, notwithstanding any transfer of any shares on the books of
the corporation after any record date fixed as aforesaid, or redemption of
any shares by the corporation after any record date fixed as aforesaid,
and such persons shall conclusively be deemed to be the shareholders of
the corporation on such record date notwithstanding notice or knowledge to
the contrary; and the Board of Directors may close the books of the
corporation against transfers of shares during the whole or any part of
such period commencing on such record date.
(g) To establish such rules and regulations respecting the issuance
and transfer of shares and certificates for shares as the Board of
Directors may consider reasonable.
10
<PAGE> 11
SECTION 3. MEETINGS OF THE BOARD. A meeting of the Board of Directors
shall be held immediately following the adjournment of each shareholders'
meeting at which directors are elected, and notice of such meeting need not be
given.
The Board of Directors may, by by-laws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board, the President, a Vice President, or one-half
of the members of the Board.
Notice of any special meetings of the Board of Directors shall be mailed to
each director, addressed to him at his residence or usual place of business, at
least three (3) days before the day on which the meeting is to be held, or shall
be sent to him at such place by telegraph or be given personally or by
telephone, not later than the day before the day on which the meeting is to be
held. Every such notice shall state the time and place of the meeting but need
not state the purpose thereof. Notice of any meeting of the Board need not be
given to any director, however, if waived by him in writing or by telegraph,
whether before or after such meeting be held, or he shall be present at such
meeting; and any meeting of the Board shall be a legal meeting without any
notice thereof having been given, if all the directors shall be present thereat.
Any number of Directors may attend a meeting and vote by telephone, so long as
all Directors may speak to all Directors and hear all Directors.
11
<PAGE> 12
All meetings of the Board shall be held at the principal offices of the
corporation in Mahoning County, Ohio, or at such other place, within or without
the State of Ohio, as the Board may determine from time to time and as may be
specified in the notice thereof.
SECTION 4. QUORUM. A majority of the Board of Directors shall constitute
a quorum for the transaction of business, provided that whenever less than a
quorum is present at the time and place appointed for any meeting of the Board,
a majority of those present may adjourn the meeting from time to time, without
notice other than by announcement at the meeting, until a quorum shall be
present.
SECTION 5. COMPENSATION. The directors, as such, shall not receive any
salary for their services, but by resolution of the board, a fixed sum and
actual and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting, of the Board, or of any committee
of the Board; provided that nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 6. BY-LAWS. For the government of its actions, the Board of
Directors may adopt by-laws consistent with the Articles of Incorporation and
these Regulations.
12
<PAGE> 13
ARTICLE V
COMMITTEES
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, provide for such standing or special committees as
it deems desirable and discontinue the same at pleasure. Each such committee
shall have such powers and perform such duties, not inconsistent with law, as
may be delegated to it by the Board of Directors. Vacancies in any such
committees shall be filled by the Board of Directors or as it may provide.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The Board of Directors shall elect a
Chairman of the Board, a President, such number of Vice Presidents as the Board
may from time to time determine, a Secretary and a Treasurer. The Board of
Directors may from time to time create such offices and appoint such other
officers, subordinate officers and assistant officers as it may determine. The
Chairman of the Board and the President shall be, but the other officers need
not be, chosen from among the members of the Board of Directors. Any two or more
of such offices, other than that of President and Secretary, may be held by the
same person.
SECTION 2. TERM OF OFFICE. The officers of the corporation shall hold
office during the pleasure of the Board of Directors, and, unless sooner removed
by
13
<PAGE> 14
the Board of Directors, until the organization meeting of the Board of
Directors following the date of their election and until their successors are
chosen and qualified.
The Board of Directors may remove any officer at any time, with or without
cause, by a majority vote.
A vacancy in any office, however created, shall be filled by the Board of
Directors.
ARTICLE VII
DUTIES OF OFFICERS
SECTION 1. CHAIRMAN OF THE BOARD. The office and person of the Chairman
of the Board may also be known as "Board Chair," "Chairwoman," "Chair,"
"Chairperson," or other similar non-masculine descriptive title as adopted by
the incumbent officer and shall be exclusively so known if he or she so directs.
The Chairman of the Board shall preside at all meetings of the shareholders and
shall also preside at meetings of the Board of Directors. The Chairman shall
also be the Chief Executive Officer of the Corporation, and shall have general
supervision, direction and control over the business of the Corporation and over
its several officers, subject, however, to the control of the Board of
Directors.
14
<PAGE> 15
SECTION 2. PRESIDENT. The President shall be the Chief Administrative
Officer of the Corporation, and in that capacity shall manage the daily affairs
of the Corporation. Within this authority, the President shall have the
authority to sign all deeds, mortgages, bonds, contracts, notes, and other
instruments of the Corporation and shall have the authority to appoint, remove,
employ and discharge, and prescribe the duties and fix the compensation of all
agents and employees of the Corporation other than the duly appointed
officers, but subject to the direction of the Board of Directors and the
Chairman of the Board. The President shall seek the advice and consent of the
Chairman of the Board on all important corporate actions and policy matters.
SECTION 3. VICE PRESIDENTS. The Vice President or Vice Presidents, if
more than one is elected, shall perform such duties as may from time to time be
assigned by the Board of Directors or the President.
SECTION 4. SECRETARY. The Secretary shall keep minutes of all the
proceedings of the shareholders and Board of Directors, and shall make proper
record of the same, shall attest to records, sign all certificates for shares,
and all deeds, mortgages, bonds, contracts, notes, and other instruments
executed by the corporation requiring the Secretary's signature; give notice of
meetings of shareholders and directors; produce on request at each meeting of
shareholders for the election of directors a certified list of shareholders
arranged in alphabetical order; keep such books as may be required by the Board
of Directors, and file all reports to States and to the Federal Government; and
perform such other and further duties as may
15
<PAGE> 16
from time to time be assigned to the Secretary by the Board of Directors, or
by the Chairman or by the President.
SECTION 5. TREASURER. The Treasurer shall receive and have in charge all
moneys, bills, notes, bonds, and similar property belonging to the corporation
and shall do with the same as may be ordered by the Board of Directors. The
Treasurer shall keep such financial accounts as may be required and shall
generally perform such other duties as may from time to time be required of the
Treasurer by the Board of Directors. The Treasurer shall furnish such bond in
such amount and with such security as shall be required by the Board of
Directors and may prepare, for submission at each regular meeting of the
shareholders, a detailed statement of the financial condition of the corporation
and may sign or countersign all checks or notes or other evidences of
indebtedness issued or authorized for the benefit of the corporation and may
receive and collect all moneys or other credits due said corporation and deposit
them in a bank designated by the Directors to the credit of and for the benefit
of the corporation.
SECTION 6. ASSISTANT AND SUBORDINATE OFFICERS. The Board of Directors may
appoint such assistant and subordinate officers as it may deem desirable. Each
such officer shall hold office during the pleasure of the Board of Directors,
and perform such duties as the Board of Directors may prescribe.
The Board of Directors may, from time to time, authorize any officer to
appoint and remove subordinate officers, to prescribe their authority and
duties, and to fix their compensation.
16
<PAGE> 17
SECTION 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other office, or to any
director.
ARTICLE VIII
CERTIFICATES FOR SHARES
SECTION 1. FORM. Certificates for shares shall be in such form as the
Board of Directors may from time to time determine or approve, or in the event
the Board of Directors has not made such determinations or given such approval,
in such form as the Secretary shall determine or approve. Each shareholder of
this corporation whose shares have been paid in full shall be entitled to a
certificate or certificates showing the number of shares of each type registered
in his name on the books of the corporation. Each certificate shall be issued in
numerical order and shall be signed by the Chairman or President, and the
Secretary or any Assistant Secretary. Pursuant to Ohio Revised Code
sec.1701.591(H) each certificate issued shall have noted conspicuously on its
face or back that this corporation is subject to a Close Corporation Agreement
and thereby all shares of the corporation are subject to significant transfer
restrictions and that a copy of the Close Corporation Agreement will be
furnished by the Secretary to any shareholder or potential transferee upon
request. A full record of each certificate as issued shall be kept by the
Secretary of the corporation.
17
<PAGE> 18
SECTION 2. TRANSFERS. Subject to any transfer restrictions contained in a
Close Corporation Agreement, the Stock Option Plan of the Corporation, or noted
conspicuously on each certificate representing shares, shares shall be
transferable on the books of the corporation by the holders thereof in person
or by a duly authorized attorney, upon surrender and cancellation for
certificates for a like number of shares of the same class or series, with
duly executed assignment and power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures as
the corporation or its agents may reasonably require. Certificates so
surrendered shall be cancelled and attached to the stubs corresponding thereto
in the stock certificate books.
SECTION 3. LOST, DESTROYED OR MUTILATED CERTIFICATES. If any certificate
of shares in this corporation shall become worn, defaced or mutilated, the
Directors, upon production and surrender thereof, may order the same cancelled
and a new certificate issued in lieu thereof. If any such certificate be lost or
destroyed, the Directors, upon receipt of evidence satisfactory to them of such
loss or destruction and upon giving of such indemnity as they shall deem
satisfactory, may order a new certificate to be issued to the person last
appearing upon the books of the corporation to be the owner of such lost or
destroyed certificate.
18
<PAGE> 19
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of December in
each year, or on such other day as may be fixed from time to time by the Board
of Directors.
ARTICLE X
SEAL
The Board Directors may provide a suitable seal containing the name of the
corporation. If deemed advisable by the Board of Directors, duplicate seals may
be provided and kept for the purpose of the corporation.
ARTICLE XI
CONTRACTS, CHECKS, NOTES AND OTHER INSTRUMENTS
All contracts, agreements and other instruments authorized by the Board of
Directors, and all checks, drafts, notes, bonds, bills of exchange and orders
for the payment of money shall, unless otherwise directed by the Board of
Directors, or unless otherwise required by law, be signed by any two of the
following officers: Chairman of the Board, President, Treasurer, or Secretary.
The Board of Directors may, however, authorize any one of said officers to sign
checks, drafts, and orders
19
<PAGE> 20
for the payment of money singly and without the necessity of
counter-signature, and may designate officers and employees of the corporation
other than those named above, or different combinations of such officers and
employees, who may, in the name of the corporation, execute checks, drafts,
and orders for the payment of money in its behalf.
ARTICLE XII
AMENDMENTS
This Code of Regulations may be amended or repealed by the affirmative vote
of 50% of the total votes of Type A and Type C Voting Shares combined; each Type
A share being entitled to one (1) vote per share, and each Type C share being
entitled to one-sixth (1/6) vote per share.
20
<PAGE> 1
Exhibit 3.3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
SYGNET WIRELESS, INC.
ARTICLE ONE
NAME OF THE CORPORATION
The name of the Corporation shall be Sygnet Wireless, Inc.
ARTICLE TWO
LOCATION
The place in Ohio where the Corporation's principal office is located is
6550 Seville Drive, Suite B, Canfield, Mahoning County, Ohio.
ARTICLE THREE
PURPOSE
The purpose for which the Corporation is formed is to engage in any kind
of business, trade, or other activity for which a corporation, for profit, may
be lawfully organized under the corporation laws of the State of Ohio.
ARTICLE FOUR
STRUCTURE OF CAPITAL STOCK
A. CLASSES AND NUMBER OF SHARES. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
85,000,000 shares. The classes and the aggregate number of shares of stock of
each type which the Corporation shall have authority to issue are as follows:
- 60,000,000 shares of Class A Common Stock, par value one
cent (1 cent) (the "Class A Common Stock"); and
- 10,000,000 shares of Class B Common Stock, par value
one cent (1 cent) (the "Class B Common Stock"); and
- 10,000,000 shares of Voting Preferred Stock, par value one
cent (1 cent) (the "Voting Preferred Stock"); and
- 5,000,000 shares of Nonvoting Preferred Stock, par value
one cent (1 cent) (the "Nonvoting Preferred Stock").
1
<PAGE> 2
B. POWERS AND RIGHTS OF THE CLASS A COMMON STOCK AND THE CLASS B COMMON
STOCK.
1. VOTING RIGHTS AND POWERS. With respect to all matters upon
which stockholders are entitled to vote or to which stockholders are entitled
to give consent, the holders of the outstanding shares of Class A Common Stock
and the Holders of the outstanding shares of Class B Common Stock shall vote
(together with the holders of any outstanding shares of Preferred Stock
entitled to vote with the Class A Common Stock and the Class B Common Stock)
without regard to class, and every holder of the outstanding shares of Class A
Common Stock shall be entitled to cast thereon one (1) vote in person or by
proxy for each share of Class A Common Stock held in his name, and every
holder of any outstanding shares of Class B Common Stock shall be entitled to
cast thereon ten (10) votes in person or by proxy for each share of Class B
Common Stock held in his name.
In addition to any other votes as may be required by law, the
Class A Common Stock, voting separately as a class, will be required to
approve (i) the authorization of any new class of capital stock which is
entitled to more than one vote per share, (ii) any increase in the votes per
share of Class B Common Stock or the number of shares of Class A Common Stock
into which the shares of Class B Common Stock are convertible, or (iii) any
proposed Amendment to these Amended Articles of Incorporation that would
adversely affect the dividends on shares of Class A Common Stock or the voting
rights of the Class A Common Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
a. CASH DIVIDENDS. Cash dividends shall be payable to
holders of Class A Common Stock and Class B Common Stock only as and when
declared by the Board of Directors. The Board of Directors shall not declare
any cash dividends on shares of either Class A or Class B Common Stock unless
it also declares at the same time (and payable on the same date as the payment
date for such dividends) a cash dividend on shares of the other Class of
Common Stock in an amount per share that is equal to the amount of such
dividends.
b. OTHER DIVIDENDS AND DISTRIBUTIONS. Each Share of Class A
Common Stock and each share of Class B Common Stock shall be equal in respect
of rights to dividends and distributions, when and as declared in the form of
stock or other property of the Corporation, except that in the case of
dividends or other distributions payable in stock of the Corporation, other
than the Preferred Stock, including distributions pursuant to stock split-ups
or divisions, which occur after the date shares of Class B Common Stock are
first issued by the Corporation, only shares of Class A Common Stock shall be
distributed with respect to the Class A Common Stock and only shares of Class
B Common Stock shall be distributed with respect to the Class B Common Stock.
3. OTHER RIGHTS. Except as otherwise required by the General
Corporation Law of the State of Ohio and as otherwise provided in these
Amended Articles of Incorporation, each share of Class A Common Stock and each
share of Class B Common Stock shall have identical powers, preferences and
rights, including rights in liquidation.
2
<PAGE> 3
4. ISSUANCE OF THE CLASS A COMMON STOCK AND THE CLASS B COMMON
STOCK.
a. INITIAL ISSUANCE. The Board of Directors may authorize
by resolution the manner in which shares of Class A Common Stock shall
initially be issued and may set such terms and conditions as it deems
appropriate or advisable with respect thereto, without any vote or other
actions by the stockholders, except as otherwise required by law and by these
Amended Articles. The initial issuance of Class B Common Stock was governed
by the Agreement and Plan of Recapitalization which established these Amended
Articles.
b. SUBSEQUENT ISSUANCE. Following the initial issuance,
the Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of Class A Common Stock herein
authorized in accordance with the terms and conditions set forth in this
Amended Articles of Incorporation for such purposes, in such amounts, to such
persons, corporations or entities, and for such consideration, all as the
Board of Directors in its discretion may determine and without any vote or
other action by the stockholders, except as otherwise required by law. At any
time shares of Class B Common Stock are outstanding, the Board of Directors
may issue shares of Class A Common Stock in the form of a distribution or
distributions pursuant to a stock dividend on or split-up of the shares of
Class A Common Stock only to the then holders of the outstanding shares of
Class A Common Stock and in conjunction with and in the same ratio as a stock
dividend on or split-up of the shares of Class B Common Stock.
Following initial issuance, the Board of Directors may issue
shares of Class B Common Stock only in the form of a distribution or
distributions pursuant to a stock dividend on or split-up of the shares of
Class B Common Stock and only to the then holders of the outstanding shares of
Class B Common Stock in conjunction with and in the same ratio as a stock
dividend on or split-up of the shares of Class A Common Stock.
5. CONVERSION OF THE CLASS B COMMON STOCK. Each share of Class B
Common Stock (1) may at any time be converted into one fully paid and
non-assessable share of Class A Common Stock at the election of the holder
thereof and (2) shall automatically be converted into one fully paid and
non-assessable share of Class A Common Stock upon its transfer to a person or
entity that is not one of the following persons or a descendant of one of the
following persons (or a trust for the benefit or partially for the benefit of
one or more of them): Warren P. Williamson, Jr.; Ray S. Tittle, Jr.; E.P.
Boyle, Y.T. Chiu; A.D. MacDonell, Jr.; John W. MacDonell; Alex Shashaty;
Albert H. Pharis, Jr.; Maureen P. Gibbs; Paul J. Thomas; or John Boydston.
The conversion of a share of Class B Common Stock into Class A Common Stock is
irreversible and irrevocable. Under no circumstances shall a share of Class A
Common Stock ever be converted into a share of Class B Common Stock.
Any holder of shares of Class B Common Stock may elect to
convert any or all of such shares at one time or at various times in such
holder's discretion. Such right shall be exercised by the surrender of the
certificate or certificates representing each share of Class B Common Stock to
be converted to the agent for the registration of transfer of shares of Class
B Common Stock (the "Transfer Agent"), at its office, or to the Corporation,
at its principal executive offices, accompanied by a written notice of the
election by the holder thereof to convert and (if so required by the Transfer
Agent or by the Corporation) by instruments of transfer, in form satisfactory
to the Transfer Agent and to the Corporation, duly executed by such holder or
his duly authorized attorney. The issuance of a certificate or certificates
for shares of Class A Common Stock upon conversion of shares of Class B
3
<PAGE> 4
Common Stock shall be made without charge for any stamp or other similar tax
in respect of such issuance. However, if any such certificate or certificates
is or are to be issued in a name other than that of the holder of the share or
shares of Class B Common Stock converted, the person or persons requesting the
issuance thereof shall pay to the Transfer Agent or to the Corporation the
amount of any tax which may be payable in respect of any such transfer, or
shall establish to the satisfaction of the Transfer Agent or of the
Corporation that such tax has been paid. As promptly as practicable after the
surrender for conversion of a certificate or certificates representing shares
of Class B Common Stock and the payment of any tax as hereinbefore provided,
the Corporation will deliver or cause to be delivered at the office of the
Transfer Agent to, or upon the written order of, the holder of such
certificate of certificates, a certificate or certificates representing the
number of shares of Class A Common Stock issuable upon such conversion, issued
in such name or names as such holder may direct. Such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of surrender of the certificate or certificates representing shares of
Class B Common Stock (if on such date as the transfer books of the Corporation
shall be closed, then immediately prior to the close of business on the first
date thereafter that said books shall be open), and all rights of such holder
arising from ownership of shares of Class B Common Stock shall cease at such
time, and the person or persons in whose name or names the certificate or
certificates representing shares of Class A Common Stock is or are to be
issued shall be treated for all purposes as having become the record holder or
holders of such shares of Class A Common Stock at such time and shall have any
may exercise all the rights and powers appertaining thereto.
No adjustments in respect of past cash dividends shall be made
upon the conversion of any share of Class B Common Stock; provided, however,
that if any shares of Class B Common Stock shall be converted subsequent to
the record date for the payment of a cash or stock dividend or other
distribution on shares of Class A Common Stock and Class B Common Stock but
prior to such payment, the registered holder of such shares at the close of
business on such record date shall be entitled to receive the cash or stock
dividend or other distribution payable to holders of Class A Common Stock.
If any shares of Class A Common Stock require registration with
or approval of any governmental authority under any federal or state law
before such shares of Class A Common Stock may be issued upon conversion, the
Corporation will cause such shares to be duly registered or approved, as the
case may be. The Corporation will endeavor to list shares of Class A Common
Stock required to be delivered upon conversion, prior to such delivery, upon
any national securities exchange or national market system on which the
outstanding shares of Class A Common Stock may be listed at the time of such
delivery. All shares of Class A Common Stock which may be issued upon
conversion of shares of Class B Common Stock will, upon issue, be fully paid
and nonassessable.
C. PREFERRED STOCK. The Board of Directors is authorized, in its
sole discretion, subject only to limitations prescribed by law and the
provisions of this Article Four, to provide for the issuance of Voting
Preferred Stock and Nonvoting Preferred Stock, in series; to establish the
number of shares to be included in each such series; and to fix the
designation, power, preferences, rights, qualifications, limitations, and
restrictions pertaining to the Voting Preferred Stock and the Nonvoting
Preferred Stock, or any series thereof.
4
<PAGE> 5
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, the holders of the
outstanding shares of Voting Preferred Stock shall vote (together with the
holders of any outstanding shares of Class A Common Stock and Class B Common
Stock) without regard to class, and every holder of the outstanding shares of
Voting Preferred Stock shall be entitled to cast thereon one (1) vote in
person or by proxy for each share of Voting Preferred Stock held in his name.
The holders of any outstanding shares of Nonvoting Preferred Stock shall have
no voting rights whatsoever, except as may be required by law, in which case
every holder of Nonvoting Preferred Stock shall be entitled to cast thereon
one (1) vote in person or by proxy for each share of Nonvoting Preferred Stock
held in his name.
The Board of Directors of the Corporation may from time to time
authorize by resolution the issuance of any or all shares of the Preferred
Stock herein authorized in accordance with the terms and conditions set forth
in these Amended Articles of Incorporation for such purposes, in such amounts,
to such persons, corporations, or entities, for such consideration, and in one
or more series, all as the Board of Directors in its discretion may determine
and without any vote or other action by the stockholders, except as otherwise
required by law.
D. AUTHORITY OF BOARD OF DIRECTORS REGARDING ISSUANCE OF SECURITIES.
The Board of Directors of the Corporation, subject to the limitations
contained in Paragraph B of this Article Four, and the limitations, if any,
imposed by the holders of Preferred Stock, shall have authority to authorize
the issuance from time to time without any vote or other action by the
stockholders, of all or any shares of the stock of the Corporation of any
class now or hereafter authorized, part paid receipts or allotment
certificates in respect of any such shares and any securities convertible into
or exchangeable for any such shares (whether such shares, receipts,
certificates or securities be unissued, or issued and thereafter acquired by
the Corporation, unless in the case of acquired or redeemed shares, the
Corporation is required to retire the same), in each case to such
corporations, associations, partnerships, individuals or others, for such
consideration and on such terms as the Board of Directors from time to time in
its discretion lawfully may determine, without offering the same or any part
thereof to holders of any stock of the Corporation of any class now or
hereafter authorized. In the discretion of the Board of Directors any such
shares, receipts, certificates or securities which the Board of Directors
shall have authority to issue, may be offered from time to time to the holders
of any class or classes of stock (or of any one or more series thereof) to the
exclusion of the holders of any or all other classes of stock (or series
thereof) at the time outstanding.
E. RIGHTS OR OPTIONS TO SECURITIES. The Corporation, subject to the
limitations contained in Paragraph B of this Article Four and the limitations,
if any, imposed by the holders of Preferred Stock, upon vote of the Board of
Directors, without any vote or consent of the stockholders of any class or
classes, from time to time may grant rights or options to subscribe for,
purchase or otherwise acquire any shares of stock of the Corporation of any
class now or hereafter authorized or any bonds or other obligation of the
Corporation. Such rights or options (a) may relate to such amounts of any
class or classes of such securities, may be exercisable within such periods,
or without limit as to time, at such price or prices and otherwise upon such
terms and conditions and may confer such rights and privileges; (b) may be
granted for such consideration and on such terms and conditions as to such
corporations, associations, partnerships, individuals, or others, or to the
bearers or registered holders of such warrants or other instruments evidencing
such rights or options (without offering the same or any part thereof to the
holders of any stock of the Corporation of any class now or hereafter
authorized); and (c) may be granted separately or in connection with the
issuance of any bonds, debentures, notes or other evidences of indebtedness or
shares of stock of the Corporation of any class
5
<PAGE> 6
now or hereafter authorized, or otherwise, all as the Board of Directors may
determine. In the discretion of the Board of Directors, any such rights or
options that the Board of Directors shall have the authority to issue may be
granted from time to time to the holders of any class or classes of stock (or
of any one or more series thereof) to the exclusion of the holders of any or
all other classes of stock (or series thereof) at the time outstanding.
Nothing in this Paragraph E shall be deemed to authorize the issuance of
shares of capital stock of the Corporation of any class having a par value for
a consideration less than the par value thereof.
F. CLOSING TRANSFER BOOKS; RECORDS DATES. Nothing contained in this
Article Four shall prejudice any power that the Board of Directors may
otherwise have to close the stock transfer books of the Corporation or
prejudice any right that the Corporation may otherwise have to fix in its Code
of Regulations, or provide in its Code of Regulations that the Board of
Directors shall be authorized to fix, record dates for the determination of
stockholders entitled to notice of, and to vote at, meetings of stockholders
or any adjournment thereof, are entitled to receive dividends, or to any
allotment of rights, or to exercise rights in respect of any change,
conversion or exchange of capital stock, or to give a consent for any purpose,
and to provide that in such case such stockholders and only such stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of and to vote at such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or
to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
G. DESCRIPTIVE HEADINGS. The descriptive headings of the several
Paragraphs of this Article Four are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
ARTICLE FIVE
PREEMPTIVE RIGHTS
No holder of shares of any type of capital stock of the Corporation shall
have any preemptive right to subscribe for or to purchase any shares of the
Corporation of any type, whether those shares of that type be now or later
authorized.
ARTICLE SIX
CUMULATIVE VOTING
No holder of shares of any type of capital stock of the Corporation shall
have any cumulative voting rights whatsoever.
ARTICLE SEVEN
WORKING CAPITAL AND TREASURY STOCK
The Board of Directors is hereby authorized to fix and determine and to
vary the amount of working capital of the Corporation, to determine whether
any and, if any, what part of its surplus, however created or arising, shall
be used or disposed of or declared in dividends or paid to
6
<PAGE> 7
shareholders; and, without any action by the shareholders, to use and supply
such surplus, or any part thereof, at any time or from time to time in the
purchase or acquisition of shares of any type or class, voting trust
certificates for shares, bonds, debentures, notes, script, warrants,
obligations, evidences of indebtedness of the Corporation, or other securities
of the Corporation, to such extent or amount and in such manner and upon such
terms as the Board of Directors shall deem expedient.
ARTICLE EIGHT
STATED CAPITAL
Each authorized and outstanding share of Class A Common Stock and Class B
Common Stock shall have a stated value of one cent (1 cent) per share and each
authorized and outstanding share of Voting Preferred Stock and Nonvoting
Preferred Stock shall have a stated value of one cent (1 cent) per share,
resulting in a current stated value of $61,706.25.
ARTICLE NINE
CLASSIFICATION OF THE BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed and
controlled by a Board of Directors consisting of not less than nine (9) nor
more than fifteen (15) persons. The exact number of directors within the
minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors. At the 1997 annual
meeting of stockholders, the directors shall be divided into three classes, as
nearly equal in number as possible, with the term of office of the first class
to expire at the 1998 annual meeting of stockholders, the term of office of
the second class to expire at the 1999 annual meeting of stockholder, and the
term of office of the third class to expire at the 2000 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the
third succeeding annual meeting of shareholders after their election.
ARTICLE TEN
REMOVAL OF DIRECTORS
Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least sixty six and two-thirds percent (66 2/3%) of the voting
power of all shares of the Corporation entitled to vote for the election of
directors; each share of Class A Common Stock being entitled to one vote per
share, each share of Class B Common Stock being entitled to ten votes per
share, and each share of Voting Preferred Stock being entitled to one vote
per share.
7
<PAGE> 8
ARTICLE ELEVEN
VACANCIES IN THE BOARD OF DIRECTORS
The newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the directors then
in office, and directors so chosen shall hold office for a term expiring at
the annual meeting of shareholders at which the term of the class to which
they have been elected expires. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of an incumbent
director.
ARTICLE TWELVE
INDEMNIFICATION OF DIRECTORS, ET AL.
(1) The Corporation shall indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the Corporation, by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign, nonprofit or
for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a pleas of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(2) The Corporation shall indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action or suit, by or in the right of the Corporation to
procure a judgment in its favor (also known as shareholder derivative
actions), by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, trustee, officer, employee, member, manager, or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or other
enterprise, against expenses, including attorney's fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, except that no indemnification shall be made in
respect of any of the following:
8
<PAGE> 9
(a) Any claim, issue, or matter as to which such person is adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless, and only to the extent that, the court of common pleas
or the court in which such action or suit is brought determines, upon
application, that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other
court shall deem proper;
(b) Any action or suit in which the only liability asserted against
a director is pursuant to Section 1701.95 of the Ohio Revised Code, relating
to unlawful loans, dividends or distributions.
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in division (1) of (2) of this
section, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection with this action, suit, or
proceeding.
(4) Any indemnification under division (1) or (2) of this section,
unless ordered by a court, shall be made by the Corporation only as authorized
in the specific case, upon a determination that indemnification of the
director, trustee, officer, employee, member, manager, or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in division (1) or (2) of this section. Such determination shall be
made as follows:
(a) By a majority vote of the quorum consisting of directors of the
Corporation who were not and are not parties to or threatened with the action,
suit, or proceeding referred to in division (1) or (2) of this section;
(b) If the quorum described in division (4)(a) of this section is
not obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the Corporation or any person to
be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which the action,
suit, or proceeding referred to in division (1) or (2) of this section was
brought.
Any determination made by the disinterested directors under division
(4)(a) or by independent legal counsel under division (4)(b) of this section
shall be promptly communicated to the person who threatened or brought the
action or suit by or in the right of the Corporation under division (2) of
this section, and, within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
9
<PAGE> 10
(5)(a) Unless at the time of the director's act or omission that is
the subject of an action, suit, or proceeding referred to in division (1) or
(2) of this section, the only liability asserted against a director in an
action, suit, or proceeding referred to in division (1) or (2) of this section
is pursuant to Section 1701.95 of the Ohio Revised Code (which relates to
unlawful loans, dividends or distributions), expenses, including attorney's
fees, incurred by a director in defending the action, suit, or proceeding
shall be paid by the Corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to do both of the
following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his
action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the
Corporation or undertaken with reckless disregard for the
best interests of the Corporation;
(ii) Reasonably cooperate with the Corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any action,
suit, or proceeding referred to in division (1) or (2) of this section, shall
be paid by the Corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized by the directors
in the specific case, upon receipt of an undertaking by or on behalf of the
director, trustee, officer, employee, member, manager, or agent to repay such
amount, if it ultimately is determined that he is not entitled to be
indemnified by the Corporation.
ARTICLE THIRTEEN
SPECIAL MEETINGS OF THE SHAREHOLDERS
Special meetings of stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors, upon not less than seven (7) nor more than sixty
(60) days written notice.
ARTICLE FOURTEEN
STOCKHOLDER ACTION
Action shall be taken by the stockholders of the Corporation only at
annual or special meetings of stockholders. Stockholders may not act by
written consent.
10
<PAGE> 11
ARTICLE FIFTEEN
AMENDMENT AND TERMINATION
These Articles may be amended only by the affirmative vote of a majority
of the total votes of Class A and Class B shares combined (together with the
holders of any outstanding shares of Preferred Stock entitled to vote with the
Class A Common Stock and the Class B Common Stock); each Class A share being
entitled to one vote per share, each Class B share being entitled to ten
votes per share, and each Voting Preferred share being entitled to one vote
per share.
ARTICLE SIXTEEN
SUPERSEDE PRIOR ARTICLES
These Articles take the place of and supersede the existing Articles of
Incorporation as heretofore amended.
IN WITNESS WHEREOF, the above named officers, acting for and on behalf of
the Corporation, have hereunto subscribed their names this __________ day of
September, 1996.
By:
------------------------------------
Albert H. Pharis, Jr., President
By:
------------------------------------
Warren P. Williamson, III, Chairman
11
<PAGE> 1
Exhibit 3.4
SYGNET WIRELESS, INC.
CODE OF REGULATIONS
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the
corporation shall be at such place in Ohio as may be designated from time to
time by the Board of Directors. The present principal office of the
Corporation is at 6550 Seville Drive, Suite B, Canfield, Ohio.
SECTION 2. OTHER OFFICES. The corporation may also have offices at
such other places without, as well as within, the State of Ohio as the Board
of Directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders
of this corporation for the purpose of electing directors and transacting such
other business as may come before the meeting, shall be held on the second
Wednesday in June of each year, if not a legal holiday, but if a legal
holiday, then on the next business day following or at such other date and
time as the Board of Directors may determine.
SECTION 2. PLACE OF MEETINGS. Meetings of shareholders shall be held
at the principal office of the corporation unless the Board of Directors
decides that a meeting shall be held at some other place within or without the
State of Ohio and causes the notice thereof to so state.
SECTION 3. NOTICE OF MEETINGS. Unless waived, a written, printed or
typewritten notice of each annual or special meeting, stating the day, hour,
place and the purpose or purposes thereof, shall be served upon or mailed to
each shareholder of record entitled to vote or entitled to notice, not more
than sixty (60) days nor less than seven (7) days before any such meeting. If
mailed, it shall be directed to a shareholder at his or her address as the
same appears upon the records of the corporation.
SECTION 4. QUORUM. At any meeting of the shareholders, the holders
of Class A Common Stock, Class B Common Stock and Voting Preferred Stock
entitling them to exercise a majority of the voting power of the corporation,
present in person or represented by proxy, shall constitute a quorum.
1
<PAGE> 2
At any meeting at which a quorum is present, all questions and business
which shall come before the meeting shall be determined by the vote of the
holders of a majority of voting shares as are represented in person or by
proxy, except when a greater proportion is required by law or the Articles of
Incorporation.
At any meeting, whether a quorum is present or not, the holders of a
majority of the voting shares represented by shareholders present or by proxy
may adjourn from time to time and from place to place without notice other
than by announcement at the meeting. At any such adjourned meeting at which
quorum is present, any business may be transacted which might be transacted at
the meeting as originally notified or held.
SECTION 5. PROXIES. Any shareholder of record who is entitled to
attend a shareholders' meeting, or to vote thereat or to assent or give
consents in writing, shall be entitled to be represented at such meeting or to
vote thereat or to assent or give consents in writing, as the case may be, or
to exercise any other of his rights, by proxy or proxies appointed by a
writing signed by such shareholder, which need not be sealed, witnessed or
acknowledged.
SECTION 6. VOTING.
6.01 CLASS A. At any meeting of shareholders, each Class A
shareholder of the corporation shall, except as otherwise provided by law or
by the Articles of Incorporation or by these Regulations, be entitled to one
(1) vote in person or by proxy for each Class A Share of the corporation
registered in his name on the books of the corporation (1) on the date fixed
pursuant to subparagraph (f) of Section 2 of Article IV of these Regulations
as the record date for the determination of shareholders entitled to vote at
such meeting, notwithstanding the prior or subsequent sale, or other disposal
of such share or shares or transfer of the same on the books of the
corporation on or after the date so fixed, or (2) if no such record date shall
have been fixed, then at the time of such meeting.
6.02 CLASS B. At any meeting of shareholders, each Class B
shareholder of the corporation shall, except as otherwise provided by law or
by the Articles of Incorporation or by these Regulations, be entitled to ten
(10) votes in person or by proxy for each Class B Share of the corporation
registered in his name on the books of the corporation (1) on the date fixed
pursuant to subparagraph (f) of Section 2 of Article IV of these Regulations
as the record date for the determination of shareholders entitled to vote at
such meeting, notwithstanding the prior or subsequent sale, or other disposal
of such share or shares or transfer of the same on the books of the
corporation on or after the date so fixed, or (2) if no such record date shall
have been fixed, then at the time of such meeting.
6.03 PREFERRED STOCK. At any meeting of shareholders, each holder
of Preferred Stock, if any, shall , except as otherwise provided by law or by
the Articles of Incorporation or by these Regulations, be entitled to vote as
per the rights accorded to that shareholder by his ownership of each share of
Preferred Stock of the corporation registered in his name on the books of the
Corporation (1) on the date fixed pursuant to subparagraph (f) of Section 2 of
Article IV of these Regulations as the record date for the determination of
shareholders entitled to vote at such meeting, notwithstanding the prior or
subsequent sale, or other disposal of such share or shares or transfer of the
same on the books of the corporation on or after the date so fixed, or (2) if
no such record date shall have been fixed, then at the time of such meeting.
2
<PAGE> 3
SECTION 7. FINANCIAL REPORTS. At the annual meeting, there shall be
laid before the shareholders a statement of profit and loss and a balance
sheet containing a summary of the assets and liabilities, as at the end of the
preceding fiscal year, together with a statement of dividends paid, and other
changes in the surplus account of the corporation during such year.
A certificate signed by the President or a Vice President and the
Treasurer or an Assistant Treasurer, or a public accountant or firm of public
accountants, shall be appended to such statement of profit and loss and
balance sheet, stating that they are true and correct according to the books
of the corporation, and that they fairly represent the corporation's affairs
according to its books.
SECTION 8. ACTION WITHOUT MEETING. No shareholder action may be
taken otherwise than at a meeting of shareholders properly convened pursuant
to Article 2 of this Code of Regulations.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. As provided in Article Nine of
the Amended Articles of Incorporation of Sygnet Wireless, Inc., the number of
directors of the corporation, none of whom need be shareholders, shall be no
less than nine (9) and no more than fifteen (15).
SECTION 2. ELECTION OF DIRECTORS. Directors shall be elected in the
manner indicated herein and in the Articles of Incorporation at the annual
meeting of shareholders. When the annual meeting is not held or directors are
not elected thereat, they may be elected at a special meeting called and held
for that purpose. Such election shall be by ballot whenever requested by any
shareholders entitled to vote at such elections, but, unless such a request is
made, the election may be conducted in any manner approved by a majority of
shareholders in attendance at such meeting.
Nominations for candidates for the Directors shall be made by the Board
of Directors (or duly constituted committee thereof) and may be made by
holders or proxies of Class A Common Stock, Class B Common Stock and Voting
Preferred Stock provided that any such nomination by any shareholder shall be
made not less than sixty (60) days prior to the annual meeting or within ten
(10) days after the notice of the meeting is given, whichever is later. Those
candidates receiving the greatest number of votes shall be elected. Pursuant
to the Amended Articles of Incorporation, there shall be no cumulative voting.
SECTION 3. TERM OF OFFICE. Directors shall hold office as
provided in Articles Nine, Ten and Eleven of the Amended Articles of
Incorporation of Sygnet Wireless, Inc.
ARTICLE IV
POWERS, MEETINGS, AND COMPENSATION OF DIRECTORS
SECTION 1. GENERAL POWERS OF BOARD. The powers of the corporation
shall be exercised, its business and affairs conducted, and its property
controlled, by the Board of Directors, except as provided in the Articles of
Incorporation, amendments thereto, or the General Corporation Law of Ohio.
3
<PAGE> 4
SECTION 2. OTHER POWERS. Without prejudice to the general powers
conferred by or implied in the preceding section, the directors, acting as a
Board, shall have power:
(a) To fix, define and limit the powers and duties of all
officers, and to determine the compensation of all
officers.
(b) To appoint, and at their discretion, with or without
cause, to remove, or suspend, such subordinate officers,
assistants, managers, agents and employees as the
directors may from time to time deem advisable, and to
determine their duties and fix their compensation.
(c) To require any officer, agent or employee of the
corporation to furnish a bond for faithful performance in
such amount and with such sureties as the Board may
approve.
(d) To designate a depository or depositories of the funds of
the corporation and the officer or officers of other
persons who shall be authorized to sign notes, checks,
drafts, contracts, deeds, mortgages and other instruments
on behalf of the corporation.
(e) To appoint and remove transfer agents and/or registrars
for the corporation's shares.
(f) To fix a time, not exceeding seventy-five (75) days
preceding the date of any meeting of shareholders, or the
date fixed for the payment of any dividend or
distribution, or the date for the allotment of rights, or
(subject to contract rights with respect thereto) the date
when any change or conversion or exchange of shares shall
be made or go into effect, as a record date for the
determination of the shareholders entitled to notice of
and to vote at any such meeting, or entitled to receive
payments of any such dividend, distribution, or allotment
of rights, or to exercise the right in respect to any such
change, conversion or exchange of shares, and, in such
case, only the persons who are shareholders of record on
the date so fixed shall be entitled to notice of and to
vote at such meeting, or to receive payment of such
dividend, distribution, or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation
after any record date fixed as aforesaid, or redemption of
any shares by the corporation after any record date fixed
as aforesaid, and such persons shall conclusively be
deemed to be the shareholders of the corporation on such
record date notwithstanding notice or knowledge to the
contrary; and the Board of Directors may close the books
of the corporation against transfers of shares during the
whole or any part of such period commencing on such record
date.
(g) To establish such rules and regulations respecting the
issuance and transfer of shares and certificates for
shares as the Board of Directors may consider reasonable.
4
<PAGE> 5
SECTION 3. MEETINGS OF THE BOARD. A meeting of the Board of
Directors shall be held immediately following the adjournment of each
shareholders' meeting at which directors are elected, and notice of such
meeting need not be given.
The Board of Directors may, by by-laws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board, the President, a Vice President, or
one-half of the members of the Board.
Notice of any special meetings of the Board of Directors shall be mailed
to each director, addressed to him at his residence or usual place of
business, at least three (3) days before the day on which the meeting is to be
held, or shall be sent to him at such place by telegraph or be given
personally or by telephone, not later than the day before the day on which the
meeting is to be held. Every such notice shall state the time and place of
the meeting but need not state the purpose thereof. Notice of any meeting of
the Board need not be given to any director, however, if waived by him in
writing or by telegraph, whether before or after such meeting be held, or he
shall be present at such meeting; and any meeting of the Board shall be a
legal meeting without any notice thereof having been given, if all the
directors shall be present thereat. Any number of Directors may attend a
meeting and vote by telephone, so long as all Directors may speak to all
Directors and hear all Directors.
All meetings of the Board shall be held at the principal offices of the
corporation in Mahoning County, Ohio, or at such other place, within or
without the State of Ohio, as the Board may determine from time to time and as
may be specified in the notice thereof.
SECTION 4. QUORUM. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, provided that whenever
less than a quorum is present at the time and place appointed for any meeting
of the Board, a majority of those present may adjourn the meeting from time to
time, without notice other than by announcement at the meeting, until a quorum
shall be present.
SECTION 5. COMPENSATION. The directors shall be entitled to
reasonable compensation as determined by resolutions of the Board of
Directors.
SECTION 6. BY-LAWS. For the government of its actions, the Board of
Directors may adopt by-laws consistent with the Articles of Incorporation and
these Regulations.
ARTICLE V
COMMITTEES
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, provide for such standing or special committees
as it deems desirable and discontinue the same at pleasure. Each such
committee shall have such powers and perform such duties, not inconsistent
with law, as may be delegated to it by the Board of Directors. Vacancies in
any such committees shall be filled by the Board of Directors or as it may
provide.
5
<PAGE> 6
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The Board of Directors shall elect a
Chairman of the Board, a President, such number of Vice Presidents as the
Board may from time to time determine, a Secretary and a Treasurer. The Board
of Directors may from time to time create such offices and appoint such other
officers, subordinate officers and assistant officers as it may determine.
The Chairman of the Board and the President shall be, but the other officers
need not be, chosen from among the members of the Board of Directors. Any two
or more of such offices, other than that of President and Secretary, may be
held by the same person.
SECTION 2. TERM OF OFFICE. The officers of the corporation shall
hold office during the pleasure of the Board of Directors, and, unless sooner
removed by the Board of Directors, until the organization meeting of the Board
of Directors following the date of their election and until their successors
are chosen and qualified.
The Board of Directors may remove any officer at any time, with or
without cause, by a majority vote.
A vacancy in any office, however created, shall be filled by the Board of
Directors.
ARTICLE VII
DUTIES OF OFFICERS
SECTION 1. CHAIRMAN OF THE BOARD. The office and person of the
Chairman of the Board may also be known as "Board Chair," "Chairwoman,"
"Chair," "Chairperson," or other similar non-masculine descriptive title as
adopted by the incumbent officer and shall be exclusively so known if he or
she so directs. The Chairman of the Board shall preside at all meetings of the
shareholders and shall also preside at meetings of the Board of Directors.
The Chairman shall have general supervision, direction and control over the
business of the Corporation and over its several officers, subject, however,
to the control of the Board of Directors.
SECTION 2. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation, and in that capacity shall manage the daily
affairs of the Corporation. Within this authority, the President shall have
the authority to sign all deeds, mortgages, bonds, contracts, notes, and other
instruments of the Corporation and shall have the authority to appoint,
remove, employ and discharge, and prescribe the duties and fix the
compensation of all agents and employees of the Corporation other than the
duly appointed officers, but subject to the direction of the Board of
Directors and the Chairman of the Board. The President shall seek the advice
and consent of the Chairman of the Board on all important corporate actions
and policy matters.
SECTION 3. VICE PRESIDENTS. The Vice President or Vice Presidents,
if more than one is elected, shall perform such duties as may from time to
time be assigned by the Board of Directors or the President.
6
<PAGE> 7
SECTION 4. SECRETARY. The Secretary shall keep minutes of all the
proceedings of the shareholders and Board of Directors, and shall make proper
record of the same, shall attest to records, sign all certificates for shares,
and all deeds, mortgages, bonds, contracts, notes, and other instruments
executed by the corporation requiring the Secretary's signature; give notice
of meetings of shareholders and directors; produce on request at each meeting
of shareholders for the election of directors a certified list of shareholders
arranged in alphabetical order; keep such books as may be required by the
Board of Directors, and file all reports to States and to the Federal
Government; and perform such other and further duties as may from time to time
be assigned to the Secretary by the Board of Directors, or by the Chairman or
by the President.
SECTION 5. TREASURER. The Treasurer shall be the Chief Financial
Officer of the Corporation and shall receive and have in charge all moneys,
bills, notes, bonds, and similar property belonging to the corporation and
shall do with the same as may be ordered by the Board of Directors. The
Treasurer shall keep such financial accounts as may be required and shall
generally perform such other duties as may from time to time be required of
the Treasurer by the Board of Directors. The Treasurer shall furnish such
bond in such amount and with such security as shall be required by the Board
of Directors and may prepare, for submission at each regular meeting of the
shareholders, a detailed statement of the financial condition of the
corporation and may sign or countersign all checks or notes or other evidences
of indebtedness issued or authorized for the benefit of the corporation and
may receive and collect all moneys or other credits due said corporation and
deposit them in a bank designated by the Directors to the credit of and for
the benefit of the corporation.
SECTION 6. ASSISTANT AND SUBORDINATE OFFICERS. The Board of
Directors may appoint such assistant and subordinate officers as it may deem
desirable. Each such officer shall hold office during the pleasure of the
Board of Directors, and perform such duties as the Board of Directors may
prescribe.
The Board of Directors may, from time to time, authorize any officer to
appoint and remove subordinate officers, to prescribe their authority and
duties, and to fix their compensation.
SECTION 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of
any officer of the corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate, for the time being,
the powers or duties, or any of them, of such officer to any other office, or
to any director.
ARTICLE VIII
CERTIFICATES FOR SHARES
SECTION 1. FORM. Certificates for shares shall be in such form as
the Board of Directors may from time to time determine or approve, or in the
event the Board of Directors has not made such determinations or given such
approval, in such form as the Secretary shall determine or approve. Each
shareholder of this corporation whose shares have been paid in full shall be
entitled to a certificate or certificates showing the number of shares of each
type registered in his name on the books of the corporation. Each certificate
shall be issued in numerical order and shall be signed by the Chairman or
President, and the Secretary or any Assistant Secretary. A full record of
each certificate as issued shall be kept by the Secretary of the corporation.
7
<PAGE> 8
SECTION 2. TRANSFERS. Subject to any transfer restrictions
contained in the Stock Option Plan of the Corporation, or noted conspicuously
on each certificate representing shares, shares shall be transferable on the
books of the corporation by the holders thereof in person or by a duly
authorized attorney, upon surrender and cancellation for certificates for a
like number of shares of the same class or series, with duly executed
assignment and power of transfer endorsed thereon or attached thereto, and
with such proof of the authenticity of the signatures as the corporation or
its agents may reasonably require. Certificates so surrendered shall be
cancelled and attached to the stubs corresponding thereto in the stock
certificate books.
SECTION 3. LOST, DESTROYED OR MUTILATED CERTIFICATES. If any
certificate of shares in this corporation shall become worn, defaced or
mutilated, the Directors, upon production and surrender thereof, may order the
same cancelled and a new certificate issued in lieu thereof. If any such
certificate be lost or destroyed, the Directors, upon receipt of evidence
satisfactory to them of such loss or destruction and upon giving of such
indemnity as they shall deem satisfactory, may order a new certificate to be
issued to the person last appearing upon the books of the corporation to be
the owner of such lost or destroyed certificate.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of December
in each year, or on such other day as may be fixed from time to time by the
Board of Directors.
ARTICLE X
SEAL
The Board of Directors may provide a suitable seal containing the name of
the corporation. If deemed advisable by the Board of Directors, duplicate
seals may be provided and kept for the purposes of the corporation.
ARTICLE XI
CONTRACTS, CHECKS, NOTES AND OTHER INSTRUMENTS
All contracts, agreements and other instruments authorized by the Board
of Directors, and all checks, drafts, notes, bonds, bills of exchange and
orders for the payment of money shall, unless otherwise directed by the Board
of Directors, or unless otherwise required by law, be signed by any two of the
following officers: Chairman of the Board, President, Treasurer, or
Secretary. The Board of Directors may, however, authorize any one of said
officers to sign checks, drafts, and orders for the payment of money singly
and without the necessity of counter-signature, and may designate officers and
employees of the corporation other than those named above, or different
combinations of such officers and employees, who may, in the name of the
corporation, execute checks, drafts, and orders for the payment of money in
its behalf.
8
<PAGE> 9
ARTICLE XII
INDEMNIFICATION OF DIRECTORS, ET AL.
(1) The Corporation shall indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the Corporation, by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign, nonprofit or
for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a pleas of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(2) The Corporation shall indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action or suit, by or in the right of the Corporation to
procure a judgment in its favor (also known as shareholder derivative
actions), by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, trustee, officer, employee, member, manager, or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or other
enterprise, against expenses, including attorney's fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, except that no indemnification shall be made in
respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless, and only to the extent that, the court of common pleas
or the court in which such action or suit is brought determines, upon
application, that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other
court shall deem proper;
(b) Any action or suit in which the only liability asserted against
a director is pursuant to Section 1701.95 of the Ohio Revised Code, relating
to unlawful loans, dividends or distributions.
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in division (1) of (2) of this
section, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection with this action, suit, or
proceeding.
9
<PAGE> 10
(4) Any indemnification under division (1) or (2) of this section,
unless ordered by a court, shall be made by the Corporation only as authorized
in the specific case, upon a determination that indemnification of the
director, trustee, officer, employee, member, manager, or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in division (1) or (2) of this section. Such determination shall be
made as follows:
(a) By a majority vote of the quorum consisting of directors of the
Corporation who were not and are not parties to or threatened with the action,
suit, or proceeding referred to in division (1) or (2) of this section;
(b) If the quorum described in division (4)(a) of this section is
not obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the Corporation or any person to
be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which the action,
suit, or proceeding referred to in division (1) or (2) of this section was
brought.
Any determination made by the disinterested directors under division
(4)(a) or by independent legal counsel under division (4)(b) of this section
shall be promptly communicated to the person who threatened or brought the
action or suit by or in the right of the Corporation under division (2) of
this section, and, within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of the director's act or omission that is
the subject of an action, suit, or proceeding referred to in division (1) or
(2) of this section, the only liability asserted against a director in an
action, suit, or proceeding referred to in division (1) or (2) of this section
is pursuant to Section 1701.95 of the Ohio Revised Code (which relates to
unlawful loans, dividends or distributions), expenses, including attorney's
fees, incurred by a director in defending the action, suit, or proceeding
shall be paid by the Corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to do both of the
following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his
action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the
Corporation or undertaken with reckless disregard for the
best interests of the Corporation;
(ii) Reasonably cooperate with the Corporation concerning the
action, suit, or proceeding.
10
<PAGE> 11
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any action,
suit, or proceeding referred to in division (1) or (2) of this section, shall
be paid by the Corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized by the directors
in the specific case, upon receipt of an undertaking by or on behalf of the
director, trustee, officer, employee, member, manager, or agent to repay such
amount, if it ultimately is determined that he is not entitled to be
indemnified by the Corporation.
ARTICLE XIII
AMENDMENTS
This Code of Regulations may be amended or repealed by the affirmative
vote of 50% of the total votes of Class A Common Stock, Class B Common Stock
and Voting Preferred Stock combined; each Class A share being entitled to one
(1) vote per share, and each Class B share being entitled to ten (10) votes per
share, and each Voting Preferred share being entitled to one (1) vote per share.
11
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SYGNET WIRELESS, INC.
The undersigned being the chairman, president or vice
president and the secretary or assistant secretary, respectively, of Sygnet
Wireless, Inc., a corporation organized and existing under the laws of the
State of Ohio, hereby certify as follows:
I.
The name of the corporation is Sygnet Wireless, Inc. The
corporation was originally incorporated under the name SYGNET Communications,
Inc. by virtue of its original Articles of Incorporation filed with the
Secretary of State of the State of Ohio on _______________.
II.
Pursuant to Section 1701.70 of the General Corporation Law of
the State of Ohio and Article Four, Paragraph C. of the Amended and Restated
Articles of Incorporation, an amendment to Articles of Incorporation has been
duly adopted by the directors of the corporation in the manner and by the
unanimous written consent prescribed by Section 1701.54 of the General
Corporation Law of the State of Ohio for purposes of amending Article Four of
the Amended and Restated Articles of Incorporation of the corporation to
establish and fix the preferences, limitations and relative rights of a series
of Nonvoting Preferred Stock.
III.
Article Four of the Amended and Restated Articles of
Incorporation was amended by the addition of Paragraph H. to read in its
entirety as follows:
H. SERIES A SENIOR CUMULATIVE NONVOTING PREFERRED STOCK.
Of the 5,000,000 shares of Nonvoting Preferred Stock, par value $0.01 per
share, authorized pursuant to paragraph A hereof, ________ shall be designated
Series A Senior Cumulative Nonvoting Preferred Stock, par value $0.01 per
share, with the rights, preferences, privileges and restrictions set forth in
this Paragraph H.
<PAGE> 2
Section 1. Definitions. For purposes of this Paragraph H the
following definitions shall apply:
"Adjusted Operating Cash Flow" shall mean as of the
last day of each fiscal quarter, the Company's Operating Cash Flow for such
fiscal quarter, minus actual marketing and selling expense for such fiscal
quarter plus Average Marketing Expense as of the last day of such fiscal
quarter, all determined in accordance with GAAP.
"Annualized Adjusted Operating Cash Flow" shall mean
as of the last day of each fiscal quarter, the Company's Adjusted Operating
Cash Flow for the most recently completed two consecutive fiscal quarters,
multiplied by two, determined on a consolidated basis in accordance with GAAP.
For purposes of calculating Annualized Adjusted Operating Cash Flow during the
first two complete fiscal quarters immediately following the Issue Date, it
shall be assumed that the Company's acquisition of certain assets of Horizon
Cellular Telephone Company of Chautauqua, L.P. and affiliates occurred on
January 1, 1996.
"Applicable Rate" shall mean the annual rate at which
dividends shall accrue on the Cumulative Preferred Stock during the periods set
forth in Section 2(b).
"Average Marketing Expense" shall mean, as of the
last day of each fiscal quarter, the Company's actual marketing and selling
expense for the most recently completed four fiscal quarters, divided by four,
determined on a consolidated basis in accordance with GAAP.
"Board" shall mean the Board of Directors of the
Company.
"Business Day" shall mean a day on which banks and
foreign exchange markets are open for the transaction of business in London and
New York, as relevant to the determination to be made or action to be taken.
"Capitalized Lease Obligations" shall mean
obligations under a lease that are required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligations shall be the capitalized amount of such
obligations, as determined in accordance with GAAP.
"Change of Control" shall mean any transaction or
occurrence (or series of transactions or occurrences) which results at any time
in either (i) the shareholders of the Company as reflected in the records of
the Company on ___________, 1996 owning in the aggregate, whether directly or
indirectly, less than the number of shares which entitles them to at least 51%
of the votes entitled to be cast in an election of the Company's Board of
Directors, on a fully diluted basis, or (ii) the Company owning in the
aggregate, whether directly or indirectly, less than the number of shares which
entitles it to at least 51% of the votes entitled to be cast in an election of
the Board of Directors of any Subsidiary of the Company, on a fully-diluted
basis. A
<PAGE> 3
Change of Control shall be deemed to occur as of the effective date of the
first event, action or transaction leading to one of the results described
above.
"Common Stock" shall mean the Class A and Class B
Common Stock of the Company.
"Company" shall mean this corporation.
"Cumulative Preferred Stock" shall mean the Series A
Senior Cumulative Nonvoting Preferred Stock of the Company.
"Equity Security" shall mean any stock or similar
security of the Company or any security (whether stock or indebtedness)
convertible or exchangeable, with or without consideration, into or for any
stock or similar security, or any security (whether stock or indebtedness)
carrying any warrant or right to subscribe to or purchase any stock or similar
security, or any such warrant or right.
"Event of Default" shall mean (i) a default in the
payment of, or the acceleration of, any Indebtedness of the Company in excess
of Five Million Dollars ($5,000,000), which default shall remain uncured for a
period of more than ninety days; (ii) a Change of Control; (iii) the failure to
redeem the Preferred Stock on the Payment Date for a Mandatory Redemption
Event; and (iv) a breach of any restrictions and limitations set forth in
Section 7 hereof.
"GAAP" shall mean, as in effect from time to time,
generally accepted accounting principles used in the United States,
consistently applied.
"Indebtedness" of a person shall mean, without
duplication: (a) all liabilities and obligations, contingent or otherwise, of
such person, (i) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such person or only to a portion
thereof), (ii) evidenced by bonds, notes, debentures or similar instruments,
(iii) representing the balance deferred and unpaid of the purchase price of any
property or services, except (other than accounts payable or other obligations
to trade creditors which have remained unpaid for greater than 90 days past
their original due date or to financial institutions, which obligations are not
being contested in good faith and for which appropriate reserves have been
established) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
for the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all obligations of such person under
Interest Swap and Hedging Obligations; (c) all liabilities of others of the
kind described in the preceding clauses (a) or (b) that such person has
guaranteed or that are otherwise its legal liability or which are secured by
any assets or property of such person (or in the case of the Company, of any of
its Subsidiaries) and all obligations to purchase, redeem or acquire any
capital stock of such person; (d) all preferred stock of such person's
subsidiaries; and (e) any and all deferrals, renewals, extensions, refinancing
and
3
<PAGE> 4
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c) or (d) or this clause (e), whether or not between or
among the same parties; provided that the outstanding principal amount at any
date of any Indebtedness issued with original issue discount is the face amount
of such Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at such date.
"Interest Expense" shall mean amounts actually paid
by the Company or any of its Subsidiaries for interest on Indebtedness during
the period in question, determined on a consolidated basis in accordance with
GAAP.
"Interest Swap and Hedging Obligations" shall mean
any obligations of a person pursuant to any interest rate swaps, caps, collars
and similar arrangements providing protection against fluctuations in interest
rates. For purposes of this Paragraph H, the amount of such obligations shall
be the amount determined in respect thereof as of the end of the then most
recently ended fiscal quarter of such person, based on the assumption that such
obligation had terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such obligation provides for the
netting of amounts payable by and to such person thereunder or any such
agreement provides for the simultaneous payment of amounts by and to such
person, then, in each such case, the amount of such obligations shall be the
net amount so determined, plus any premium due upon default by such person.
"Issue Date" shall mean the date of the original
issuance of shares of the Cumulative Preferred Stock.
"Junior Stock" shall mean the Common Stock and all
other shares of capital stock of the Company, whether presently outstanding or
hereafter issued, other than the Cumulative Preferred Stock.
"Lien" shall mean any mortgage, lien, pledge, charge,
security interest, or other encumbrance of any kind, whether or not filed,
recorded or otherwise perfected under applicable law (including, any
conditional sale or other title retention agreement and any lease deemed to
constitute a security interest and any option or other agreement to give any
security interest).
"Mandatory Redemption Date" shall have the meaning
ascribed thereto in Section 4(c) hereof.
"Net Income" shall mean the Company's net income,
after deducting all operating expenses, provisions for all taxes and all other
proper deductions, all determined on a consolidated basis for the period in
question in accordance with GAAP.
"Operating Cash Flow" shall mean as of the last day
of each fiscal quarter, the sum of the Company's Net Income, depreciation,
amortization, other non-cash charges to Net Income and Interest Expense minus
non-cash credits to the
4
<PAGE> 5
Company's Net Income, all determined for such fiscal quarter on a consolidated
basis in accordance with GAAP.
"Optional Redemption Date" shall have the meaning
ascribed thereto in Section 4(b) hereof.
"Payment Date" shall have the meaning ascribed
thereto in Section 4(d) hereof.
"Permitted Indebtedness" shall mean (i) the Credit
Agreement dated as of _____________, 1996 among Sygnet Communications, Inc.,
the Company's wholly owned Subsidiary, as the borrower, the financial
institutions which are parties thereto as lenders, PNC Bank, National
Association and Toronto Dominion (Texas), Inc. as managing agents and
syndication agents, Toronto Dominion (Texas), Inc. as the administrative
agent, and PNC Bank, National Association as the documentation agent and the
collateral agent, together with all extensions, renewals, amendments,
substitutions and replacements thereto (the "Credit Agreement"); (ii) the
$110,000,000 principal amount of ___% Senior Notes due 2006 of the Company
together with all extensions, renewals, amendments, substitutions and
replacements thereto and (iii) such other Indebtedness as shall be permitted
to be incurred by Sygnet Communications, Inc. and its affiliates pursuant to
the Credit Agreement.
"Put" shall have the meaning ascribed thereto in
Section 5(a) hereof.
"Put Payment Date" shall have the meaning ascribed
thereto in Section 5(b) hereof.
"Redemption Price" shall have the meaning ascribed
thereto in Section 4(e) hereof.
"Subsidiary" shall mean any corporation of which
fifty (50%) percent or more of the Voting Stock, or any partnership of which
50% or more of outstanding partnership interests, is at any time owned by the
Company, or by one or more Subsidiaries of the Company, or by the Company and
one or more Subsidiaries of the Company.
"Total Indebtedness" shall mean the outstanding
principal amount of all the Company's Indebtedness.
"Total Leverage Test" shall mean the ratio, as set
forth in Section 8 hereof, of (i) Total Indebtedness to (ii) Annualized
Adjusted Operating Cash Flow.
"Voting Stock" shall mean any shares having general
voting power in electing the board of directors of any person (irrespective of
whether or not at the time
5
<PAGE> 6
stock of any other class or classes has or might have voting power by reason or
the happening of any contingency).
Section 2. Dividends.
(a) Right to Dividends. Dividends on each share
of Cumulative Preferred Stock shall accumulate and accrue from the Issue Date
and shall accrue from day to day thereafter, whether or not earned or declared,
at the Applicable Rate on the stated amount of $100 per share, as set forth
below, until paid. Dividends accruing pursuant to this Section 2(a) shall be
payable quarterly in arrears and shall be payable by the delivery of additional
shares of Cumulative Preferred Stock with a liquidation value equal to the
amount of the dividend. Such dividends shall be cumulative so that, if all
accrued dividends shall not have been paid, such accrued and unpaid dividends
shall first be fully paid before any dividend or other distribution shall be
paid or declared and set apart for any Junior Stock.
(b) Applicable Rate. The dividend rate on shares
of Cumulative Preferred Stock shall increase from time to time and shall be
equal to the Applicable Rate as set forth below. The Applicable Rate for each
period during which the Cumulative Preferred Stock is outstanding shall be as
follows:
(i) for the period commencing on the
Issue Date and ending on the first anniversary of the Issue
Date, the Applicable Rate shall be 15% per annum;
(ii) for the period commencing on the day
after the first anniversary of the Issue Date and ending on
the second anniversary of the Issue Date, the Applicable Rate
shall be 17% per annum;
(iii) for the period commencing on the day
after the second anniversary of the Issue Date and ending on
the third anniversary of the Issue Date, the Applicable Rate
shall be 19% per annum;
(iv) commencing on the day after the
third anniversary of the Issue Date and thereafter, the
Applicable Rate shall be 21% per annum; and
(v) notwithstanding and in addition to
the foregoing, if an Event of Default occurs or the Company
fails to meet the Total Leverage Test, then until such time as
all shares of Cumulative Preferred Stock shall be redeemed,
the Applicable Rate shall be the sum of the otherwise
Applicable Rate plus 5% per annum.
(c) Priority. Until such time as all current and
accrued dividends on the Cumulative Preferred Stock for all periods from and
after the Issue Date and the then current period shall have been paid (i) no
dividend whatsoever (other than a dividend payable solely in Common Stock)
shall be paid or declared, and no distribution
6
<PAGE> 7
shall be made, on any Junior Stock, and (ii) no shares of Junior Stock shall be
purchased, redeemed or acquired by the Company and no monies shall be paid into
or set aside or made available for a sinking fund for the purchase, redemption
or acquisition thereof. So long as any shares of Cumulative Preferred Stock
are outstanding, the Company shall not authorize or issue, or obligate itself
to issue, any other Equity Security senior to or on a parity with the
Cumulative Preferred Stock as to dividend or redemption rights, liquidation
preferences or otherwise.
Section 3. Liquidation Rights of Cumulative Preferred Stock.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of the then-outstanding shares of Cumulative Preferred Stock shall be
entitled to be paid out of the assets of the Company available for distribution
to its shareholders, whether such assets are capital, surplus or earnings,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of the Junior Stock, an amount equal to $100 per share
plus an amount equal to the liquidation preference of all accrued and unpaid
dividends thereon, whether or not earned or declared, to and including the date
full payment shall be tendered to the holders of the then-outstanding shares of
Cumulative Preferred Stock with respect to such liquidation, dissolution or
winding up, and no more. If upon any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, the assets to be distributed
to the holders of the then-outstanding shares of Cumulative Preferred Stock
shall be insufficient to permit the payment to such shareholders of the full
preferential amounts to which they are entitled, then all of the assets of the
Company shall be distributed ratably to the holders of the then-outstanding
shares of Cumulative Preferred Stock on the basis of the number of shares of
Cumulative Preferred Stock held by each such shareholder as compared to the
aggregate number of then-outstanding shares of Cumulative Preferred Stock.
(b) Remaining Assets. After the payment or
distribution to the holders of the then-outstanding shares of Cumulative
Preferred Stock of the full preferential amounts to which they are entitled,
the holders of the then-outstanding shares of Junior Stock shall be entitled to
receive ratably all assets of the Company which remain available for
distribution.
Section 4. Redemption.
(a) Restriction on Redemption and Purchase.
Except as expressly provided in this Section 4, the Company shall not have the
right to purchase, call, redeem or otherwise acquire for value any or all of
the Cumulative Preferred Stock.
(b) Optional Redemption. At any time the Company
may, at its option, redeem the Cumulative Preferred Stock, in whole or in part,
at the Redemption Price hereinafter specified; provided, that the Company shall
redeem shares of Cumulative Preferred Stock having an aggregate liquidation
preference of at least One Million Dollars ($1,000,000) upon each Optional
Redemption Date. The date on which
7
<PAGE> 8
any Cumulative Preferred Stock is to be redeemed pursuant to this Section 4(b)
being referred to herein as an "Optional Redemption Date."
(c) Mandatory Redemption. The Company shall
redeem all outstanding shares of Cumulative Preferred Stock at the Redemption
Price hereinafter specified upon the first to occur of the following events,
the occurrence date thereof being referred to herein as the "Mandatory
Redemption Date":
(i) the tenth anniversary of the Issue Date;
(ii) upon the occurrence of a Change of
Control;
(iii) upon the completion of an initial
public offering or private issuance of Equity Securities by the Company (other
than an issuance of Equity Securities of the Company to employees or directors
of the Company as compensation or management incentives) to the extent of the
proceeds of such initial public offering or private issuance; or
(iv) upon the exercise of the Put by holders
of 51% or more of the then-outstanding shares of Cumulative Preferred Stock.
(d) Redemption Notice. The Company shall, not
less than three (3) Business Days prior to an Optional Redemption Date, give
written notice to each holder of record of shares of Cumulative Preferred Stock
that the Company has determined to exercise its optional redemption rights
hereunder. This notice shall state the number of then-outstanding shares of
Cumulative Preferred Stock to be redeemed, the Optional Redemption Date and
Redemption Price, including the amount of dividends included in such price and
the calculation thereof, the Payment Date and the time, place and manner in
which the holder is to surrender to the Company the certificate or certificates
representing the shares of Cumulative Preferred Stock to be redeemed. Upon the
occurrence of one of the events described in Section 4(c) above, the Company
shall provide prompt, but in no event more than two Business Days after the
Mandatory Redemption Date, notice to the holders of the Cumulative Preferred
Stock of the occurrence of such event and of the Mandatory Redemption Date.
Such notice shall state the Redemption Price, including the amount of dividends
included in such price and the calculation thereof, and the Payment Date, place
and manner in which the holders are to surrender to the Company the
certificates representing shares of Cumulative Preferred Stock to be redeemed.
"Payment Date" shall mean the date set by the Company with respect to an
optional redemption or on or prior to the fifth Business Day after the
Mandatory Redemption Date (unless triggered by the exercise of the Put the
Payment Date for which shall be established in accordance with Section 5
hereof), as the case may be, designated by the Company for payment of the
Redemption Price.
(e) Redemption Price. In all events, the
Redemption Price of the Cumulative Preferred Stock (the "Redemption Price")
shall be an amount per share equal to $100 plus the liquidation preference of
all accrued and unpaid dividends thereon, whether or not declared, to and
including the Payment Date.
8
<PAGE> 9
(f) Payment of Redemption Price and Surrender of
Stock. On the Payment Date, the Redemption Price of the Cumulative Preferred
Stock shall be paid to the holders of the Cumulative Preferred Stock. On or
before the Payment Date, each holder of shares of Cumulative Preferred Stock to
be redeemed shall surrender the certificate or certificates representing such
shares to the Company, duly endorsed, together with such other instruments as
the Company may reasonably require to insure that such shares of Cumulative
Preferred Stock are duly and validly transferred to the Company, free of all
Liens, and on the Payment Date the Redemption Price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
cancelled and retired. Upon an optional redemption of less than all of the
then-outstanding shares of Cumulative Preferred Stock, upon the surrender to
the Company of a certificate or certificates representing shares of Cumulative
Preferred Stock to be redeemed and payment by the Company of the Redemption
Price, the Company shall issue to the holder thereof a certificate representing
any shares of Cumulative Preferred Stock not redeemed but represented by the
certificate or certificates surrendered.
(g) Insufficient Funds. If the funds of the
Company legally available for redemption of Cumulative Preferred Stock on the
Payment Date with respect to a Mandatory Redemption Date are insufficient to
redeem all of the Cumulative Preferred Stock pursuant to Section 4(c) on such
date, those funds that are so available will be used to redeem the maximum
possible number of shares of the Cumulative Preferred Stock ratably among the
holders thereof on the basis of the number of shares of Cumulative Preferred
Stock held by each such shareholder. At the earliest time thereafter as
additional funds of the Company are legally available for redemption of
Cumulative Preferred Stock in the manner provided above, such funds will be
immediately used to redeem the balance of the Cumulative Preferred Stock.
(h) Deposit of Funds. Prior to a Payment Date,
the Company shall deposit with any bank or trust company in the United States,
rated by its principal regulator as adequately or well capitalized, as defined
by bank regulatory authorities, or, if no such standard is applicable, having
public debt outstanding with a rating of at least AA, a sum equal to the
aggregate Redemption Price, with irrevocable instructions and authority to the
bank or trust company to pay, on or after the Payment Date, the Redemption
Price to the respective holders of then-outstanding shares of Cumulative
Preferred Stock upon the surrender of their share certificates. The deposit of
the aggregate Redemption Price shall constitute full payment of the shares to
their holders; provided, that, prior to such deposit, the holders thereof shall
continue to be considered shareholders with respect to such shares and shall
have all rights with respect thereto. Any monies so deposited and unclaimed at
the end of six months from the Payment Date shall be released or repaid to the
Company, after which the holders of shares of Cumulative Preferred Stock called
for redemption shall be entitled to receive payment of the Redemption Price
only from the Company.
9
<PAGE> 10
Section 5. Put Right.
(a) At any time on or after the fourth anniversary of the
Issue Date, each then holder of shares of Cumulative Preferred Stock shall have
the right, but not the obligation, to cause the Company to repurchase all
then-outstanding shares of Cumulative Preferred Stock (the "Put"). Due
exercise of the Put by holders of 51% or more of the then-outstanding shares of
Cumulative Preferred Stock shall be deemed a Mandatory Redemption Event
pursuant to Section 4 hereof and the Company shall purchase all
then-outstanding shares of Cumulative Preferred Stock for the Redemption Price.
A holder may exercise the Put by providing written notice of such holder's
desire to exercise the Put to the Company. If a holder exercises the Put, the
Company shall provide notice of such exercise to all other holders of record of
shares of Cumulative Preferred Stock stating that the Put has been exercised
and giving all other holders the right to participate therein. Upon exercise
of the Put by holders of at least 51% of the then-outstanding Cumulative
Preferred Stock, the Company shall provide notice to all holders of record of
shares of Cumulative Preferred Stock that such exercise constitutes a Mandatory
Redemption Event in accordance with the procedures set forth in Section 4(d)
hereof.
(b) Within ninety (90) days after the Company receives
the notice of exercise of a Put right (the "Put Payment Date"), and upon
surrender of each holder's shares of Cumulative Preferred Stock, the Company
shall pay to each surrendering holder an amount in cash or other immediately
available funds equal to the Redemption Price multiplied by the number of
shares of Cumulative Preferred Stock that have been surrendered by such holder.
Section 6. Right to Select Directors. Except as is provided
herein or otherwise required by law, the voting power of the Company shall be
vested in the holders of the shares of Class A and Class B Common Stock and
such other series of Voting Preferred Stock as are from time to time designated
and the holders of the shares of Cumulative Preferred Stock shall have no
voting power, but shall have the right to attend and participate in every
meeting of shareholders of the Company and shall be entitled to advance written
notice of every meeting of shareholders of the Company. At any time after the
first anniversary of the Issue Date each holder of shares of Cumulative
Preferred Stock shall have advance written notice of, and have the right to
attend, all meetings of the Board of Directors of the Company. At any time
after the third anniversary of the Issue Date, the holders of Cumulative
Preferred Stock shall have the right to designate directors constituting 15% of
the total number of then-members of the Board of Directors of the Company
(rounded up to the nearest whole number of directors). The Company shall take
such action as is necessary to increase the number of directors of the Company
or to otherwise create vacancies on the Board to be filled by the holders of
Cumulative Preferred Stock pursuant to this Section 6. Such directors shall be
designated by the affirmative vote of holders of a majority of the
then-outstanding Cumulative Preferred Stock. Any directors so designated by
the holders of Cumulative Preferred Stock may be removed or replaced only by a
vote of the holders of then-outstanding shares of Cumulative Preferred Stock;
provided that such directors may be removed for cause as otherwise provided by
these Articles of Incorporation or applicable law.
10
<PAGE> 11
Section 7. Restrictions and Limitations. So long as any
shares of Cumulative Preferred Stock remain outstanding, the Company shall not,
directly or indirectly, without the written consent of all the holders of the
then-outstanding shares of Cumulative Preferred Stock:
(a) Until the Cumulative Preferred Stock is
redeemed in full pursuant to Section 4 hereof or the holders thereof receive
payment upon liquidation, dissolution or winding up of the Company pursuant to
Section 3 hereof, purchase, redeem or otherwise acquire for value (or pay into
or set aside as a sinking fund for such purpose) any Junior Stock or any
warrant, option or right to purchase any Junior Stock; provided, that, such
restriction shall not apply to the purchase of Junior Stock or any warrant,
option or right to purchase Junior Stock from an employee or director of the
Company upon termination of his or her employment or service in accordance with
the terms of any employment agreement or employee benefit or incentive plan
maintained by the Company;
(b) Until the Cumulative Preferred Stock is
redeemed in full pursuant to Section 4 hereof or the holders thereof receive
payment upon the liquidation, dissolution or winding up of the Company pursuant
to Section 3 hereof, declare or pay any dividends on or declare or make any
other distribution, direct or indirect, (other than a dividend payable solely
in shares of Common Stock) on account of the Junior Stock or set apart any sum
for any such purpose;
(c) Amend its Amended and Restated Articles of
Incorporation or amend or repeal its bylaws in any manner that would
significantly and adversely affect the rights or preferences of the Cumulative
Preferred Stock;
(d) Take any action which would result in
taxation of the holders of the Cumulative Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as amended (the "Code") (or any comparable
provision of the Code as hereafter from time to time amended);
(e) Dissolve the Company; or
(f) Enter into any Indebtedness, or permit any of
its Subsidiaries to enter into any Indebtedness, other than Permitted
Indebtedness.
Section 8. Total Leverage Test. As of the end of any
calendar quarter, the Company shall not permit the application of the Total
Leverage Test to exceed 12:1.
Section 9. No Reissuance of Cumulative Preferred Stock. So
long as any shares of Cumulative Preferred Stock remain outstanding, no share
of Cumulative Preferred Stock acquired by the Company by reason of redemption,
purchase, or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue.
11
<PAGE> 12
WITNESS the execution hereof this _____ day of _____________, 1996 by
the undersigned authorized officers of Sygnet Wireless, Inc.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
12
<PAGE> 13
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: ATL-199394.4 Type: ART
13
<PAGE> 1
EXHIBIT 4.1
SYGNET WIRELESS, INC.
$110,000,000
% SENIOR NOTES DUE OCTOBER 1, 2006
-------------
INDENTURE
DATED AS OF SEPTEMBER [26], 1996
-------------
FLEET NATIONAL BANK
TRUSTEE
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- -------------- -----------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 10.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . 10.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 10.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . 4.03, 4.04; 10.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.02; 10.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(2)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 10.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(1)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(3)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
- ---------------------
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . 17
Section 1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . 19
Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.07 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.08 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.02 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . 23
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . 24
Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.08 No Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . 26
Section 4.03 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.04 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.05 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.06 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . 28
Section 4.07 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.08 Limitation on Incurrence of Additional Indebtedness . . . . . . . . . . . 30
Section 4.09 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . 31
Section 4.10 Limitation on Restricting Subsidiary Dividends . . . . . . . . . . . . . 32
Section 4.11 Limitation on Transactions with Related Persons . . . . . . . . . . . . . 32
Section 4.12 Limitation on Asset Sales and Sales of Subsidiary Stock . . . . . . . . . 33
Section 4.13 Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.14 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.15 Limitation on Use of Proceeds; Proceeds Purchase Offer . . . . . . . . . 35
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation or Sale of Assets . . . . . . . . . . . . . . . . . 37
Section 5.02 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.07 Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . 42
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . 43
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.06 Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . 47
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . 50
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.11 Preferential Collection of Claims Against Company . . . . . . . . . . . . 50
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . 51
Section 8.02 Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . 51
Section 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . 52
Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . 54
Section 8.06 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.07 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . 55
Section 9.02 With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . 56
Section 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . 58
Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . 58
Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . 58
Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 12
MISCELLANEOUS
Section 10.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.03 Communication by Holders of Notes with Other Holders of Notes . . . . . . 60
Section 10.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . 60
Section 10.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . 61
Section 10.06 Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.07 No Personal Liability of Directors, Officers, Employees and Stockholders 61
Section 10.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.09 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . 62
Section 10.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.12 Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.13 Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . 62
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B OPINIONS AND CERTIFICATES TO BE DELIVERED AT TIME OF HORIZON ACQUISITION
</TABLE>
iv
<PAGE> 7
INDENTURE, dated as of September [26], 1996, between Sygnet Wireless,
Inc., an Ohio corporation (the "Company"), and Fleet National Bank, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of each other and for the
equal and ratable benefit of the Holders of the % Senior Notes due 2006 (the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
"Annualized Operating Cash Flow" on any date, means with respect to
any Person the Operating Cash Flow for the Reference Period multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction
Date") means, with respect to any Person and it Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the
Transaction Date (after giving pro forma effect to the Incurrence of such
Indebtedness) divided by (ii) the aggregate amount of Annualized Operating Cash
Flow of such Person (determined on a pro forma basis after giving effect to all
dispositions of businesses made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
disposition has occurred at the beginning of such Reference Period); provided,
that for purposes of such computation, in calculating Annualized Operating Cash
Flow and consolidated Indebtedness: (a) the transaction giving rise to the need
to calculate the Annualized Operating Cash Flow Ratio will be assumed to have
occurred (on a pro forma basis) on the first day of the Reference Period; (b)
the incurrence of any Indebtedness during the Reference Period or subsequent
thereto and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to retire Indebtedness) will be assumed
to have occurred (on a pro forma basis) on the first day of such Reference
Period; (c) Consolidated Interest Expense attributable to any Indebtedness
(whether existing or being incurred) bearing a floating interest rate shall be
<PAGE> 8
2
computed as if the rate in effect on the Transaction Date had been the
applicable rate for the entire period; and (d) all members of the consolidated
group of such Person on the Transaction Date that were acquired during the
Reference Period shall be deemed to be members of the consolidated group of
such Person for the entire Reference Period. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries, references
to a Person and its Subsidiaries in the foregoing definition shall be deemed to
refer to the Company and its Restricted Subsidiaries.
"Bank Credit Facility" means, (a) until the consummation of the
Horizon Acquisition, the Credit Agreement, dated as of September 29, 1995,
entered into by and among Sygnet Communications, Inc. and certain of its
affiliates, the lenders which are parties thereto and PNC Bank, National
Association, as the agent for such lenders, as it may have been amended from
time to time, and (b) as of and after the consummation of the Horizon
Acquisition, and so long as there is Indebtedness under, or the borrower has
the ability to borrow thereunder, the Credit Agreement (in substantially the
form filed as an exhibit to Amendment No. 3 to the registration statement of
which the Prospectus is a part and consistent with the terms set forth in the
commitment letter, dated as of August 21, 1996), among Sygnet Communications,
Inc., as the borrower, the financial institutions which are parties thereto as
lenders, PNC Bank, National Association and Toronto Dominion (Texas), Inc. as
managing agents and syndication agents, Toronto Dominion (Texas), Inc. as the
administrative agent, and PNC Bank, National Association, as the documentation
agent and the collateral agent, or any other credit facility or loan agreement
designated by the Company to be the "Bank Credit Facility," as such Credit
Agreement or other credit facility or loan agreement may be amended, modified,
restated, renewed, increased, supplemented, refunded, replaced or refinanced
from time to time. There can be only one such credit facility or loan agreement
designated to be the "Bank Credit Facility" at any one time.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligations" means obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person and shares, interests, participations or other ownership
interests (however designated) of any Person and any rights (other than debt
securities convertible into capital stock), warrants and options to purchase
any of the foregoing, including (without
<PAGE> 9
3
limitation) each class of common stock and preferred stock of such Person if
such Person is a corporation and each general and limited partnership interest
of such Person if such Person is a partnership.
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (iii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the
assets of the Company, on a consolidated basis, in one transaction or a series
of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other
than an Excluded Person or Excluded Group, is or becomes the "beneficial owner"
(as such term is used in Rule 13d-3 promulgated pursuant to the Exchange Act),
directly or indirectly, of more than 50% of the total voting power in the
aggregate normally entitled to vote in the election of directors, managers, or
trustees, as applicable, of the transferee, (ii) any "person" or "group" (as
such terms are used for purposes of Section 13(d) and 14(d) of the Exchange
Act, whether or not applicable), other than an Excluded Person or Excluded
Group, is or becomes the "beneficial owner" (as such term is used in Rule 13d-3
promulgated pursuant to the Exchange Act), directly or indirectly, of more than
50% of the total voting power in the aggregate of all classes of Capital Stock
of the Company then outstanding normally entitled to vote in elections of
directors, or (iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the shareholders of
the Company was approved by a vote of a majority of the directors then still in
office who were either 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 Board of Directors of the Company then
in office.
<PAGE> 10
4
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of such
Person and its consolidated Subsidiaries during such period, including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations,
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, and (b) the amount of dividends accrued or payable
by such Person or any of its consolidated Subsidiaries in respect of preferred
stock (other than by Restricted Subsidiaries of such Person to such Person or
such Person's Wholly Owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y)
interest expense attributable to any Indebtedness represented by the guaranty
by such Person or a Subsidiary of such Person of an obligation of another
Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and
its Subsidiaries in the foregoing definition shall be deemed to refer to the
Company and its Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net
income (or loss) of such Person and its consolidated Subsidiaries for such
period, determined (on a consolidated basis) in accordance with GAAP, adjusted
to exclude (only to the extent included in computing such net income (or loss),
and without duplication (i) all extraordinary gains and losses and gains and
losses that are nonrecurring (including as a result of Asset Sales outside the
ordinary course of business), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together will all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period, (iii), except as provided in
the definition of "Annualized Operating Cash Flow Ratio," the net income (or
loss) of any Subsidiary acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration
or payment of dividends or similar distributions is not at the time permitted
by operation of the terms of its charter or any agreement or instrument
applicable to such Subsidiary. When the
<PAGE> 11
5
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an "Event of Default."
"Disqualified Capital Stock" means, with respect to any Person,
Capital Stock of such Person that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be redeemed
or repurchased (including at the option of the holder thereof) by such Person
or any of its Subsidiaries, in whole or in part, on or prior to the Stated
Maturity of the Notes; provided that Capital Stock will not be deemed to be
Disqualified Capital Stock if it may only be redeemed or repurchased solely in
consideration of Qualified Capital Stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Group" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that includes one or more Excluded
Persons; provided that the voting power of the Capital Stock of the Company
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a majority
of the voting power of the Capital Stock "beneficially owned" (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) by such group.
"Excluded Person" means the members of the Williamson family who owned
Capital Stock of the Company on the Issue Date and any wholly owned Affiliate
of any of the foregoing that is wholly owned by one of the foregoing.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"GAAP" means generally accepted accounting principles 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 ("FASB") or in such other statements
by such other entity
<PAGE> 12
6
as approved by a significant segment of the accounting profession which are in
effect in the United States; provided, however, that for purposes of
determining compliance with covenants in the Indenture, "GAAP" means such
generally accepted accounting principles as in effect as of the Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Holder" means a Person in whose name a Note is registered. The Holder
of a Note will be treated as the owner of such Note for all purposes.
"Horizon Acquisition" means the acquisition of assets made pursuant to
the Asset Acquisition Agreement, dated July 11, 1996, among the Company,
Horizon Cellular Telephone Company of Chautauqua, L.P., Horizon Cellular
Telephone Company of Crawford, L.P., and Horizon Cellular Telephone Company of
Indiana, L.P.
"Indebtedness" of any Person means, without duplication: (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except (other than accounts payable or other obligations
to trade creditors which have remained unpaid for greater than 90 days past
their original due date or to financial institutions, which obligations are not
being contested in good faith and for which appropriate reserves have been
established) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
for the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (b) all obligations of such Person under
Interest Swap and Hedging Obligations; (c) all liabilities of others of the
kind described in the preceding clauses (a) or (b) that such Person has
guaranteed or that is otherwise its legal liability or which are secured by any
assets or property of such Person and all obligations to purchase, redeem or
acquire any Capital Stock; (d) all Disqualified Capital Stock of such Person
and all preferred stock of such Person's Subsidiaries; and (e) any and all
deferrals, renewals, extensions, refinancing and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a), (b), (c), or (d) or
this clause (e), whether or not between or among the same parties; provided
that the outstanding principal amount at any date of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness
<PAGE> 13
7
less the remaining unamortized portion of the original issue discount of such
Indebtedness at such date.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Interest Swap and Hedging Obligations" means any obligations of any
Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of the Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such obligation provides for the netting of
amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person or in
any event until the counterparty thereunder defaults in its corresponding
payment, then in each such case, the amount of such obligations shall be the
net amount so determined, plus any premium due upon default by such Person.
"Investment" by any Person in any other Person means (without
duplication): (a) the acquisition (whether by purchase, merger, consolidation
or otherwise) by such Person (whether for cash, property, services, securities
or otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement
to make any such acquisition; (b) the making by such Person of any deposit
with, or advance, loan or other extension of credit to, such other Person
(including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such other Person) or any commitment to make any such advance, loan or
extension; (c) the entering into by such Person of any guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of such
other Person; (d) the making of any capital contribution by such Person to such
other Person; and (e) the designation by the Board of Directors of the Company
of any Person to be an Unrestricted Subsidiary. For purposes of Section 4.09,
(i) "Investment" shall include and be valued at the fair market value of the
net assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the fair market value of such Investment plus
the fair market value of all additional Investments by the Company or any of
its Restricted Subsidiaries at the time any such Investment is made; provided
that, for purposes of this sentence, the fair market value of net assets in
excess of $5,000,000 shall be as determined by an independent appraiser of
national reputation.
<PAGE> 14
8
"Issue Date" means the time and date of the first issuance of the
Notes under the Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal corporate
trust office of the Trustee is located, or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer or Asset Sale Offer).
"Net Cash Proceeds" means the aggregate amount of cash and Cash
Equivalents received by the Company and its Restricted Subsidiaries in respect
of an Asset Sale (including upon the conversion to cash and Cash Equivalents of
(a) any note or installment receivable at any time, or (b) any other property
as and when any cash and Cash Equivalents are received in respect of any
property received in an Asset Sale but only to the extent such cash and Cash
Equivalents are received within one year after such Asset Sale), less the sum
of (i) all reasonable out-of-pocket fees, commissions and other expenses
incurred in connection with such Asset Sale, including the amount (estimated in
good faith by the Board of Directors of the Company) of income, franchise,
sales and other applicable taxes required to be paid by the Company or any
Restricted Subsidiary of the Company in connection with such Asset Sale and
(ii) the aggregate amount of cash so received which is used to retire any
existing Indebtedness of its Restricted Subsidiaries, as the case may be, which
is required to be repaid in connection with such Asset Sale or is secured by a
Lien on the property or assets of the Company or any of its Restricted
Subsidiaries, as the case may be.
"Net Pops" of any Person with respect to any System means the Pops of
the MSA or RSA served by such System multiplied by the direct and/or indirect
percentage interest of such Person in the entity licensed or designated to
receive an authorization by
<PAGE> 15
9
the Federal Communications Commission to construct or operate a system in that
MSA or RSA.
"Net Proceeds" means the aggregate net proceeds (including the fair
market value of non-cash proceeds constituting equipment or other assets of a
type generally used in a Related Business in an amount reasonably determined by
the Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Obligations" means any principal, premium, interest (including
interest accruing subsequent to a bankruptcy or other similar proceeding
whether or not such interest is an allowed claim enforceable against the
Company in a bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
pursuant to the terms of the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"Operating Cash Flow" for any Person for any period means (a) the
Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of
such Person and its consolidated Subsidiaries and (iii) Consolidated Interest
Expense of such Person for such period, determined, in each case, on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, less (c) the sum, without duplication (and only to the
extent such amounts are included in such Consolidated Net Income) of (i) all
extraordinary gains of such Person and its consolidated Subsidiaries during
such period and (ii) the amount of all cash payments made during such period by
such Person and its Subsidiaries to the extent such payments relate to non-cash
charges that were added back in determining Operating Cash Flow for such period
or for any prior period. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and
<PAGE> 16
10
its Subsidiaries in the foregoing definition shall be deemed to refer to the
Company and its Restricted Subsidiaries.
"Opinion of Counsel" means an opinion in form and substance reasonably
satisfactory to the Trustee, and from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Acquisition Indebtedness" means, with respect to any
Person, Indebtedness Incurred in connection with the acquisition of property,
businesses or assets which, or Capital Stock of a Person all or substantially
all of whose assets, are of a type generally used in a Related Business;
provided that, in the case of the Company or its Restricted Subsidiaries, as
applicable, (x)(i) the Company's Annualized Operating Cash Flow Ratio, after
giving effect to such acquisition and such Incurrence on a pro forma basis, is
no greater than such ratio prior to giving pro forma effect to such acquisition
and such Incurrence, (ii) the Company's consolidated Indebtedness under the
Bank Credit Facility, divided by the Net Pops of the Company and its Restricted
Subsidiaries, in each case giving pro forma effect to the acquisition and such
Incurrence, does not exceed $60, (iii) the Company's consolidated Indebtedness
divided by the Net Pops of the Company and its Restricted Subsidiaries does not
increase as a result of the acquisition and such Incurrence and (iv) after
giving effect to such acquisition and such Incurrence the acquired property,
businesses or assets or such Capital Stock is owned directly by the Company or
a Wholly Owned Restricted Subsidiary of the Company or (y)(i) under the terms
of such Indebtedness and pursuant to applicable law, no recourse could be had
for the payment of principal, interest or premium with respect to such
Indebtedness or for any claim based thereon against the Company or any Person
that constituted a Restricted Subsidiary immediately prior to the consummation
of such acquisition or any of their property or assets, (ii) the obligor of
such Indebtedness shall have, immediately after giving effect to such
acquisition and such Incurrence on a pro forma basis, a ratio of Annualized
Operating Cash Flow as of the date of the acquisition to the product of
Consolidated Interest Expense for the Reference Period multiplied by four (but
excluding from Consolidated Interest Expense all amounts that are not required
to be paid in cash on a current basis) of at least 1 to 1 and (iii) immediately
subsequent to the Incurrence of such Indebtedness, the obligor thereof shall be
a Restricted Subsidiary and shall have been designated by the Company (as
evidenced by an Officers' Certificate delivered promptly to the Trustee) to be
a "Non-Recourse Restricted Subsidiary."
"Permitted Investment" means: (i) Investments in Cash Equivalents;
(ii) Investments in the Company or a Restricted Subsidiary (other than a
Non-Recourse Restricted Subsidiary); (iii) Investments in a Person
substantially all of whose assets are of a type generally used in a Related
Business (an "Acquired Person") if, as a result of such Investments, (A) the
Acquired Person immediately thereupon becomes a Restricted
<PAGE> 17
11
Subsidiary (other than a Non-Recourse Restricted Subsidiary) or (B) the
Acquired Person immediately thereupon either (1) is merged or consolidated with
or into the Company or any of its Restricted Subsidiaries (other than a
Non-Recourse Restricted Subsidiary) or (2) transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or any
of its Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary); (iv) Investments in accounts and notes receivable acquired in the
ordinary course of business; (v) any securities received in connection with an
Asset Sale (other than those of a Non-Recourse Restricted Subsidiary) and any
investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of a
Person, all or substantially all of whose assets are of a type used in a
Related Business, that complies with Section 4.12; (vi) any Investment pursuant
to the terms of the agreements described in or referred to under the caption
"Certain Relationships and Related Transactions" in the Prospectus, as such
agreements were in effect on the Issue Date; (vii) advances and prepayments for
asset purchases in the ordinary course of business in a Related Business of the
Company or a Restricted Subsidiary; and (viii) customary loans or advances made
in the ordinary course of business to officers, directors or employees of the
Company or any of its Restricted Subsidiaries for travel, entertainment, and
moving and other relocation expenses.
"Permitted Liens" means: (a) Liens existing on the Issue Date; (b)
Liens imposed by governmental authorities for taxes, assessments or other
charges not yet subject to penalty or which are being contested in good faith
and by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 30 days, and (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as
such property used by the Company or any of its Restricted Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries; (f) Liens arising by operation of law in
connection with judgments, only to the extent, for an amount and for a period
not resulting in an Event of Default with respect thereto; (g) pledges or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance and other types of social security
legislation; (h) Liens in favor of the Trustee arising under the Indenture; (i)
Liens securing Permitted Acquisition Indebtedness, which either (A) were
<PAGE> 18
12
not incurred or issued in anticipation of such acquisition or (B) secure
Permitted Acquisition Indebtedness meeting the requirements set forth in clause
(y) of the definition thereof; (j) Liens securing Indebtedness under the Bank
Credit Facility (including, without limitation, Indebtedness under Interest
Swap and Hedging Obligations required by the Bank Credit Facility) that was
incurred in accordance with Section 4.08; (k) Liens securing Indebtedness of a
Person existing at the time such Person becomes a Restricted Subsidiary or is
merged with or into the Company or a Restricted Subsidiary, provided that such
Liens were in existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not extend to
any other assets; (l) Liens arising from Purchase Money Indebtedness permitted
under the Indenture; (m) Liens securing Refinancing Indebtedness Incurred to
refinance any Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Notes than the terms of the Liens securing such
refinanced Indebtedness; (n) Liens in favor of the Company or a Wholly Owned
Restricted Subsidiary and (o) Liens arising out of judgments or awards against
the Company or a Subsidiary of the Company with respect to which enforcement
has been stayed and the Company at the time shall currently be prosecuting an
appeal or proceeding for review in good faith by appropriate proceedings
diligently conducted and with respect to which the Company has created adequate
reserves or has adequate insurance protection; provided, however, that at no
time may the aggegate amount of such judgment liens exceed $3,000,000.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Pops" means the estimate of the population of a Metropolitan
Statistical Area ("MSA") or Rural Service Area ("RSA") as derived from the most
recent Rand McNally Commercial Atlas and Marketing Guide or if such statistics
are no longer printed in the Rand McNally Commercial Atlas and Marketing Guide
or the Rand McNally Commercial Atlas and Marketing Guide is no longer
published, such other nationally recognized source of such information.
"Preferred Stock" means the $20,000,000 aggregate liquidation amount
of Cumulative Preferred Stock, par value $.01 per share, of the Company to be
issued on or prior to the Issue Date.
"Prospectus" means the final prospectus, dated as of September __,
1996, under the Company's registration statement on Form S-1 (No. 333-10161).
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property or
assets for the business of the Company or its Restricted Subsidiaries,
provided, that the recourse
<PAGE> 19
13
of the lenders with respect to such Indebtedness is limited solely to the
property or assets so purchased without further recourse to either the Company
or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is
not Disqualified Capital Stock.
"Reference Period" with regard to any Person means the last full
fiscal quarter of such Person for which financial information (which the
Company shall use its best efforts to compile in a timely manner) in respect
thereof is available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing", any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference (or if such
Indebtedness or Disqualified Capital Stock does not require cash payments prior
to maturity or is otherwise issued at a discount, the original issue price of
such Indebtedness or Disqualified Capital Stock), not to exceed the sum of (x)
the lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced and (ii) if such Indebtedness being Refinanced was issued
with an original issue discount, the accreted value thereof (as determined in
accordance with GAAP) at the time of such Refinancing, (y) the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness and (z) all other customary fees and expenses of the
Company or such Restricted Subsidiary reasonably incurred in connection with
such refinancing; provided, that (A) Refinancing Indebtedness issued by any
Restricted Subsidiary of the Company shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such Restricted
Subsidiary, (B) Refinancing Indebtedness shall (x) not have a Weighted Average
Life shorter than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and (y) in all respects, be no less
subordinated or junior, if applicable, to the rights of Holders of the Notes
than was the Indebtedness or Disqualified Capital Stock to be refinanced and
(C) such Refinancing Indebtedness shall have no installments or principal (or
redemption payment) scheduled to come due earlier than the scheduled maturity
of any installment of principal (or redemption payment) of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity of the Notes.
<PAGE> 20
14
"Related Business" means any business directly related to the
ownership, development, operation, and acquisition of wireless cellular
communications systems.
"Related Person" means, with respect to any Person, (i) any Affiliate
of such Person or any spouse, immediate family member, or other relative who
has the same principal residence of any Affiliate of such Person and (ii) any
trust in which any Person described in clause (i) above, has a beneficial
interest.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer or employee of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer or employee to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on shares of Capital Stock of such Person or any
Subsidiary of such Person, (ii) any payment on account of the purchase,
redemption or other acquisition or retirement for value, or any payment in
respect of any amendment (in anticipation of or in connection with any such
retirement, acquisition or defeasance) in whole or in part, of any shares of
Capital Stock of such Person or any Subsidiary of such Person held by Persons
other than such Person or any of its Restricted Subsidiaries, (iii) any
defeasance, redemption, repurchase or other acquisition or retirement for
value, or any payment in respect of any amendment (in anticipation of or in
connection with any such retirement, acquisition or defeasance) in whole or in
part, of any Indebtedness of the Company by such Person or a Subsidiary of such
Person that is subordinate in right of payment to, or ranks pari passu (other
than the Notes) with, the Notes and (iv) any Investment (other than a Permitted
Investment); provided, however, that the term "Restricted Payment" does not
include (i) any dividend, distribution or other payment on shares of Capital
Stock of the Company or any Restricted Subsidiary solely in shares of Qualified
Capital Stock, (ii) any dividend, distribution or other payment to the Company,
or any dividend to any of its Restricted Subsidiaries, by any of its
Subsidiaries, or (iii) any defeasance, redemption, repurchase or other
acquisition or retirement for value, in whole or in part, of Indebtedness of
such person payable solely in shares of Qualified Capital Stock of such Person.
"Restricted Subsidiary" means (i) Sygnet Communications, Inc. and (ii)
any Subsidiary of the Company which at the time of determination is not an
Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary only if, immediately
before and after giving effect to such designation, there would exist no
Default or Event of Default and the
<PAGE> 21
15
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test in Section 4.08, on a pro forma basis taking
into account such designation.
"SEC" means the Securities and Exchange Commission.
"Stated Maturity" means the date fixed for the payment of any
principal or premium pursuant to the Indenture and the Notes, including the
Maturity Date, upon redemption, acceleration, Asset Sale Offer, Change of
Control Offer or otherwise.
"Subsidiary" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of
such partnership, or (iii) any Person in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
(x) at least a fifty percent ownership interest or (y) the power to elect or
direct the election of the directors or other governing body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section Section
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company
that, at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below). The
Board of Directors of the Company may designate any Subsidiary of the Company
other than Sygnet Communications, Inc. (including any newly acquired or newly
formed Subsidiary at or prior to the time it is so formed or acquired) to be an
Unrestricted Subsidiary if (a) no Default or Event of Default is existing or
will occur as a consequence thereof, (b) such Subsidiary does not own any
Capital Stock of, or own or hold any Lien on any property or asset of, the
Company or any Restricted Subsidiary that is not a Subsidiary of the Subsidiary
to be so designated, and (c) such Subsidiary and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee, or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any
property or assets of the Company or any of its Restricted Subsidiaries (except
that such Subsidiary and its
<PAGE> 22
16
Subsidiaries may guarantee the Notes); 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 4.09. Each such designation shall be evidenced by
filing with the Trustee a certified copy of the resolution giving effect to
such designation and Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Voting Stock" means Capital Stock of the Company having generally the
right to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters
of the Company.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i)
a Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more other
Wholly Owned Subsidiaries of such Person, or (ii) any entity other than a
corporation in which such Person, directly or indirectly, owns not less than
99% of the Capital Stock of such entity.
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Asset Sale Offer" 4.12
"Asset Sale Offer Period" 4.12
"Asset Sale Offer Amount" 4.12
"Asset Sale Purchase Date" 4.12
"Bankruptcy Law" 6.01
"Change of Control Offer" 4.07
"Change of Control Offer Period" 4.07
"Change of Control Payment" 4.07
"Change of Control Purchase Date" 4.07
"Computation Period" 4.09
</TABLE>
<PAGE> 23
17
<TABLE>
<S> <C>
"Covenant Defeasance" 8.03
"Custodian" 6.01
"Legal Defeasance" 8.02
"Marketable Securities" 4.12
"Paying Agent" 2.03
"Payment Default" 6.01
"Proceeds Purchase Date" 4.15
"Proceeds Purchase Offer" 4.15
"Proceeds Purchase Offer Amount" 4.15
"Proceeds Purchase Offer Period" 4.15
"Registrar" 2.03
"Related Person Transaction 4.11
</TABLE>
SECTION 1.03 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 of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee means the
Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
<PAGE> 24
18
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and 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.
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
<PAGE> 25
19
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. 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 agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization
<PAGE> 26
20
proceedings relating to the Company, the Trustee shall serve as Paying Agent
for the Notes.
SECTION 2.05 HOLDER LISTS
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes, and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
Where Notes are presented to the Registrar with a request to register
the transfer of such Notes or to exchange such Notes for an equal principal
amount of Notes of other denominations, the Registrar shall register for
transfer or make the exchange if its requirements for such transactions are
met; provided, however, that any Note presented or surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee,
duly executed by the Holder thereof or his or her attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate upon the written order of the Company
Notes at the Registrar's request.
The Registrar shall not be required to issue, register the transfer of
or exchange Notes during the period beginning at the opening of business on a
Business Day 15 days before the date of any selection of Notes for redemption
under Section 3.07 and ending at the close of business on the day of selection,
(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 or (iii) to register the transfer or or exchange of a Note
between the record date and the next succeeding interest payment date.
No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith.
SECTION 2.07 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note,
<PAGE> 27
21
the Company shall issue and the Trustee, upon the written order of the Company
signed by two Officers of the Company, shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding. Except
as set forth in Section 2.09 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09 TREASURY NOTES
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company, shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned
shall be so disregarded.
<PAGE> 28
22
SECTION 2.10 TEMPORARY NOTES
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
<PAGE> 29
23
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period is acceptable to the Trustee) but not
more than 60 days before a redemption date, an Officers' Certificate setting
forth (i) the clause of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes on
a pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or integral multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not an integral
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
<PAGE> 30
24
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent immediately available funds
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Trustee or the Paying Agent
by the Company in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Notes to be redeemed.
<PAGE> 31
25
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Note was registered at the close of business on
such record date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes and in Section 4.01 hereof.
SECTION 3.06 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to October 1, 2001. Thereafter, the Company shall have the option
to redeem the Notes, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest to the applicable redemption date, if redeemed during the twelve-month
period beginning on October 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . %
2002 . . . . . . . . %
2003 . . . . . . . . %
2004 . . . . . . . . %
2005 and thereafter 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, during the first 36 months after the Issue Date, the Company may redeem
up to an aggregate of $38,500,000 in principal amount of Notes at a redemption
price of % of the principal amount thereof, in each case plus accrued and
unpaid interest thereon to the redemption date, with the net proceeds of an
offering of Qualified Capital Stock of the Company; provided that at least
$71,500,000 in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption; and provided, further,
<PAGE> 32
26
that such redemption shall occur within 30 days of the date of the closing of
such offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 NO MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in
the Notes. Principal, premium, if any, and interest shall be considered paid
on the date due if the Paying Agent, if other than the Company or a Subsidiary
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall 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
<PAGE> 33
27
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
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;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. 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.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
SECTION 4.03 REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the SEC, if the Company were subject to the requirements
of Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a report thereon by the Company's certified independent
public accountants as such would be required in such reports to the SEC, and in
each case, together with a management's discussion and analysis of financial
condition and results of operations which would be so required.
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained
in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her
<PAGE> 34
28
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(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 4.05 TAXES
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it shall not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.07 CHANGE OF CONTROL
<PAGE> 35
29
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Company shall comply with the requirements of 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 connection with the repurchase of the
Notes as a result of a Change of Control.
The Change of Control Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Change of Control
Offer Period"). No later than five Business Days after the termination of the
Change of Control Offer Period (the "Change of Control Purchase Date"), the
Company shall purchase all Notes tendered in response to the Change of Control
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
If the Change of Control Purchase Date is on or after an interest
record date and on or before the related interest payment date, any accrued and
unpaid interest shall be paid to the Person in whose name a Note is registered
at the close of business on such record date, and no additional interest shall
be payable to Holders who tender Notes pursuant to the Change of Control Offer.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (b) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce
<PAGE> 36
30
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
SECTION 4.08 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, issue, create, incur, assume,
guarantee or otherwise directly or indirectly become liable for (including as a
result of an acquisition), or otherwise become responsible for, contingently or
otherwise (individually or collectively, to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may incur
Indebtedness if, after giving effect thereto, the Company's Annualized
Operating Cash Flow Ratio on a pro forma basis calculated on the assumption
that such Indebtedness had been incurred on the first day of the applicable
Reference Period, would have been less than the ratios set forth below for the
calendar year periods indicated:
<TABLE>
<CAPTION>
FOR THE PERIOD RATIO
-------------- -----
<S> <C>
1996-1998 8.0x
1999 and after 7.0x
</TABLE>
In addition, if there exists no Event of Default immediately prior and
subsequent thereto, the foregoing limitations will not apply to the Incurrence
of (i) prior to the date of the consummation of the Horizon Acquisition,
Indebtedness incurred under the Bank Credit Facility (including, without
limitation, Indebtedness under Interest Swap and Hedging Obligations required
by the Bank Credit Facility) in an aggregate amount not to exceed $75,000,000
in aggregate principal amount; provided, however, that if such Indebtedness is
repaid with the net proceeds of the sale of the Notes pursuant to Section 4.15,
no Indebtedness in excess of $3,500,000 may be incurred thereunder except for
Indebtedness whose proceeds are paid as a dividend or loan payment to the
Company for the sole purpose of funding a repurchase of the Notes under Section
4.15, (ii) on and after the date of the consummation of the Horizon
Acquisition, Indebtedness incurred under the Bank Credit Facility (including,
without limitation, Indebtedness under Interest Swap and Hedging Obligations
required by the Bank Credit Facility) in an aggregate amount not to exceed
$300,000,000 in aggregate principal amount at any time, (iii) Indebtedness by
the Company or any of its Restricted Subsidiaries constituting Existing
Indebtedness, reduced by permanent repayments of and reductions thereof (and in
commitments with respect thereto) in satisfaction of the Net Cash Proceeds
application requirement set forth in Section 4.12 and by repayments and
permanent reductions in amounts outstanding pursuant to scheduled amortizations
and mandatory prepayments in accordance with the terms thereof, (iv)
Indebtedness by the Company evidenced by the
<PAGE> 37
31
Notes, (v) Permitted Acquisition Indebtedness, (vi) Indebtedness between the
Company and any Restricted Subsidiary of the Company or between Restricted
Subsidiaries of the Company, provided that, in the case of Indebtedness
incurred by the Company, such obligations shall be unsecured and subordinated
in all respects to the Holders' rights pursuant to the Notes, (vii) Capitalized
Lease Obligations and Purchase Money Indebtedness in an aggregate amount or
aggregate principal amount, as the case may be, outstanding at any time not to
exceed in the aggregate $15,000,000, and (viii) Refinancing Indebtedness
Incurred to extend, renew, replace or refund Indebtedness permitted under
clauses (iii) (as so reduced in amount) and (iv) of this paragraph.
Indebtedness of any Person that is not a Restricted Subsidiary of the
Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company shall be deemed to
have been Incurred, as the case may be, at the time such Person becomes such a
Restricted Subsidiary of the Company, or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company.
SECTION 4.09 LIMITATION ON RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if,
immediately prior or after giving effect thereto on a pro forma basis, (a) a
Default or an Event of Default would occur or be continuing, (b) the Company's
Annualized Operating Cash Flow Ratio for the Reference Period would have
exceeded 6 to 1, or (c) the aggregate amount of all Restricted Payments made by
the Company and its Restricted Subsidiaries, including such proposed Restricted
Payment (if not made in cash, then the fair market value of any property used
therefor) from and after the Issue Date and on or prior to the date of such
Restricted Payment, shall exceed the sum of (i) the amount determined by
subtracting (x) 2.0 times the aggregate Consolidated Interest Expense of the
Company for the period (taken as one accounting period) from the Issue Date to
the last day of the last full fiscal quarter prior to the date of the proposed
Restricted Payment (the "Computation Period") from (y) Operating Cash Flow of
the Company for the Computation Period, plus (ii) the aggregate Net Proceeds
received by the Company from the sale (other than to a Subsidiary of the
Company) of its Qualified Capital Stock after the Issue Date and on or prior to
the date of such Restricted Payment.
Notwithstanding the foregoing, the provisions set forth in clause (b)
or (c) of the immediately preceding paragraph shall not prohibit (i) the use of
an aggregate of $10,000,000 to be used solely for Investments in Unrestricted
Subsidiaries or Non-Recourse Restricted Subsidiaries, (ii) the payment of any
dividend within 60 days after
<PAGE> 38
32
the date of its declaration if such dividend could have been made on the date
of its declaration in compliance with the foregoing provisions, (iii) the
redemption, defeasance, repurchase or other acquisition or retirement of any
Indebtedness or Capital Stock of the Company or its Restricted Subsidiaries
either in exchange for or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of Qualified
Capital Stock of the Company or (iv) the redemption, repurchase or other
acquisition or retirement of the Preferred Stock for an aggregate price not to
exceed $25,000,000 if, after giving effect thereto on a pro forma basis, the
Company's Annualized Operating Cash Flow Ratio for the Reference Period would
have been less than 7.5 to 1.
SECTION 4.10 LIMITATION ON RESTRICTING SUBSIDIARY DIVIDENDS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to pay dividends or make other distributions on the
Capital Stock of any Restricted Subsidiary of the Company or pay or satisfy any
obligation to the Company or any of its Restricted Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Restricted Subsidiaries, except encumbrances and restrictions existing under
(i) the Indenture and the Notes or Refinancing Indebtedness incurred to
refinance the Notes; provided, that such encumbrances and restrictions are no
more restrictive than those contained in the Indenture as in effect on the
Issue Date, (ii) the Bank Credit Facility as in effect on and immediately after
the date of the Horizon Acquisition, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof; provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Bank Credit Facility as in
effect on the Issue Date, (iii) any agreement of a Person acquired by the
Company or a Restricted Subsidiary of the Company, which restrictions existed
at the time of acquisition, were not put in place in anticipation of such
acquisition and are not applicable to any person or property, other than the
Person or any property of the Person so acquired. Notwithstanding the
foregoing, customary provisions restricting subletting or assignment of any
lease entered into the ordinary course of business, consistent with past
practices shall not in and of themselves be considered a restriction on the
ability of the applicable Restricted Subsidiary to transfer such agreement or
assets, as the case may be.
SECTION 4.11 LIMITATION ON TRANSACTIONS WITH RELATED PERSONS
<PAGE> 39
33
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or Unrestricted Subsidiaries to, enter into any contract,
agreement, arrangement or transaction with any Related Person (each a "Related
Person Transaction"), or any series of Related Person Transactions, except for
transactions made in good faith, the terms of which are (i) fair and reasonable
to the Company or such Subsidiary, as the case may be, and (ii) are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$1,000,000 must first be approved by a majority of the Board of Directors of
the Company who are disinterested in the subject matter of the transaction
pursuant to a Board Resolution, and (b) with respect to any Related Person
Transaction or series of Related Person Transactions with an aggregate value in
excess of $5,000,000, the Company must first obtain a favorable written opinion
from an independent financial advisor of national reputation as to the fairness
from a financial point of view of such transaction to the Company or such
Subsidiary, as the case may be.
Notwithstanding the foregoing, any contract, agreement, arrangement or
transaction solely between or among the Company and any of its Wholly Owned
Restricted Subsidiaries or between or among Wholly Owned Restricted
Subsidiaries of the Company is not a Related Person Transaction.
SECTION 4.12 LIMITATION ON ASSET SALES AND SALES OF SUBSIDIARY STOCK
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, in one transaction or a series of related transactions,
convey, sell, transfer, assign or otherwise dispose of, directly or indirectly,
any of its property, business or assets, including any sale or other transfer
or issuance of any Capital Stock of any Restricted Subsidiary of the Company,
whether owned on the Issue Date or thereafter acquired (an "Asset Sale") unless
(a) such Asset Sale is for fair market value as determined by the Board of
Directors of the Company acting reasonably and in good faith, (b) at least 80%
of the value of the consideration for such Asset Sale consists of (i) cash,
(ii) the assumption by the transferee of pari passu Indebtedness or (iii)
notes, obligations or other marketable securities (collectively "Marketable
Securities") that are immediately converted into cash and (c) the Net Cash
Proceeds therefrom are applied on or prior to 360 days after the date of such
Asset Sale (i) to the permanent repayment of Indebtedness under the Bank Credit
Facility (which payment reduces the commitment thereunder) or (ii) to the
repurchase of the Notes pursuant to an offer to purchase (an "Asset Sale Offer)
described below or (iii) to an investment in a Related Business.
<PAGE> 40
34
Notwithstanding the foregoing provisions of the prior paragraph:
(i) any Restricted Subsidiary of the Company may convey,
sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or a Restricted Subsidiary
of the Company; (ii) the Company and its Restricted Subsidiaries may, in the
ordinary course of business, (A) convey, sell, lease, transfer, assign or
otherwise dispose of assets in the ordinary course of business and (B) exchange
assets for assets in Related Businesses; (iii) the Company and its Restricted
Subsidiaries may convey, sell, lease, transfer, assign or otherwise dispose of
assets pursuant to and in accordance with Section 5.01; (iv) the Company and
its Restricted Subsidiaries may (a) sell damaged, worn out or other obsolete
property in the ordinary course of business or other property no longer
necessary for the proper conduct of the business of the Company or any of its
Restricted Subsidiaries, or (b) abandon such property if it cannot, through
reasonable efforts, be sold; and (v) the Company may transfer the assets that
it acquires in the Horizon Acquisition to the Subsidiary after the Issue Date.
An Asset Sale Offer may be deferred until the accumulated Net Cash
Proceeds not applied to the uses set forth in subsections (c)(i) or (c)(iii) in
the first paragraph exceeds $5,000,000. An Asset Sale Offer shall remain open
for a period of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Asset Sale Offer Period"). No later than five Business Days after the
termination of the Asset Sale Offer Period (the "Asset Sale Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to this Section (the "Asset Sale Offer Amount") or, if less
than the Asset Sale Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Asset Sale Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section. The
Company, the Depository or the Paying Agent, as the case may be, shall promptly
<PAGE> 41
35
(but in any case not later than five days after the Asset Sale Purchase Date)
mail or deliver to each tendering Holder an amount equal to the purchase price
of the Notes tendered by such Holder and accepted by the Company for purchase,
and the Company shall promptly issue a new Note, and the Trustee, upon written
request from the Company shall authenticate and mail or deliver such new Note
to such Holder, in a principal amount equal to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.
SECTION 4.13 LIMITATIONS ON LIENS
The Company shall not and shall not permit any Restricted Subsidiary,
directly or indirectly, to incur or suffer to exist any Lien (other than
Permitted Liens) upon any of its property or assets, whether now owned or
hereafter acquired.
SECTION 4.14 CORPORATE EXISTENCE
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15 LIMITATION ON USE OF PROCEEDS; PROCEEDS PURCHASE OFFER
All proceeds (net of underwriting discounts and commissions and other
transaction expenses as set forth in the Prospectus under the caption "Use of
Proceeds") received by the Company from the sale of the Notes shall be applied
to the purchase of assets in the Horizon Acquisition or, as set forth below, to
repay indebtedness under the Subsidiary's existing Bank Credit Facility pending
such acquisition; provided, however, that no such proceeds may be applied to
the purchase of assets in Horizon Acquisition until (i) the Company has
received at least $19,000,000 in proceeds from the Preferred Stock Investment
and (ii) the Trustee has received the certificates and opinions set forth in
Exhibit B to the Indenture. Pending the consummation of the Horizon
Acquisition, all such proceeds shall be held by the Company in a separate bank
account, except that
<PAGE> 42
36
up to $71,500,000 of the net proceeds from the sale of the Notes may be
contributed to the Subsidiary to repay indebtedness under the Subsidiary's
existing Bank Credit Facility, but only to the extent that the banks thereunder
consent to allow the amounts repaid to be reborrowed and paid as a dividend or
other distribution to the Company for the sole purpose of funding a repurchase
of the Notes in the event that the Horizon Acquisition does not occur within
120 days following the closing of the sale of the Notes.
In the event that all of the net proceeds of the sale of the Notes
have not been so applied, directly or indirectly, to the purchase of assets in
the Horizon Acquisition within 120 days of the closing of the sale of the
Notes, the Company will make an offer (a "Proceeds Purchase Offer") to all
holders of Notes to purchase on a pro rata basis, at a price of 101% of the
principal amount thereof plus accrued interest to the purchase date, all Notes
that may be purchased at such price with such unapplied net proceeds.
If applicable, within five business days following the end of the
120-day period referred to above, the Company will mail a notice to each Holder
setting forth the Proceeds Purchase Offer and offering to repurchase Notes
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of 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 connection with the
repurchase of the Notes in the Proceeds Purchase Offer.
A Proceeds Purchase Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Proceeds Purchase Offer
Period"). No later than five Business Days after the termination of the
Proceeds Purchase Offer Period (the "Proceeds Purchase Date"), the Company will
purchase the principal amount of Notes required to be purchased pursuant to
this covenant (the "Proceeds Purchase Offer Amount") or, if less than the
Proceeds Purchase Offer Amount has been tendered, all Notes tendered in
response to the Proceeds Purchase Offer. Payment for any Notes so purchased
will be made in the same manner as interest payments are made.
If the Proceeds Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Proceeds Purchase Offer.
On or before the Proceeds Purchase Date, the Company will, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Proceeds Purchase Offer Amount of Notes or portions thereof tendered
pursuant to the Proceeds Purchase Offer, or if less than the Proceeds Purchase
Offer Amount has been tendered,
<PAGE> 43
37
all Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this covenant. The Company, the
Depository or the Paying Agent, as the case may be, will promptly (but in any
case not later than five Business Days after the Proceeds Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of
the Notes tendered by such Holder and accepted by the Company for purchase, and
the Company will promptly issue a new Note, and the Trustee, upon written
request from the Company will authenticate and mail or deliver such new Note to
such Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly announce the
results of the Proceeds Purchase Offer on the Proceeds Purchase Date.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company shall not consolidate with or merge with or into another
Person, or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets (computed on a consolidated basis), whether in
a single transaction or a series of related transactions, to another Person or
group of affiliated Persons, unless: (i) immediately after giving effect to
such transaction on a pro forma basis, the consolidated resulting surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash Flow
Ratio provision set forth in the second paragraph of Section 4.08, (ii)
immediately thereafter, no Event of Default (and no event which, after notice
or lapse of time or both, would become an Event of Default) shall have occurred
and be continuing; (iii) either (a) the Company is the surviving entity or (b)
the resulting, surviving or transferee entity (if other than the Company) is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Notes and the Indenture,
including the punctual payment of the principal of, and premium, if any, and
interest on the Notes and the performance and observance of every covenant of
the Indenture on the part of the Company to be performed; and (iv) the Company
shall have delivered to the Trustee an Officers' Certificate confirming
compliance with the requirements of this Section.
<PAGE> 44
38
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the
foregoing, the successor corporation formed by such consolidation or into which
the Company is merged or to which such transfer is made, shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under the Indenture with the same effect as if such successor corporation had
been named therein as the Company; provided, however, that the predecessor of
the Company shall not be relieved from the obligation to pay the principal of
and interest on the Notes except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on
any Note when the same becomes due and payable and the Default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal
of or premium, if any, on any Note when the same becomes due and
payable at maturity, upon redemption or otherwise;
(3) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed or
performed pursuant to Sections 4.07, 4.08, 4.09, 4.12, 4.13, 4.15 or
5.01 hereof;
(4) the Company fails to comply with any of its other
agreements or covenants in, or provisions of, the Notes or this
Indenture and the Default continues for the period and after the
notice specified below;
(5) default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of
the Indenture, which default (a) is caused by a failure to pay
principal of or
<PAGE> 45
39
premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default"); provided such Event of
Default shall not occur until 90 days after such Payment Default, or
(b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5,000,000 or
more;
(6) a final judgment or final judgments for the payment
of money (not fully covered by insurance) are entered by a court or
courts of competent jurisdiction against the Company or any of its
Subsidiaries and such judgment or judgments remain harged for a
period (during which execution shall not be effectively stayed) of 60
days, provided that the aggregate of all such undischarged judgments
exceeds $5,000,000;
(7) the Company or any of its Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(d) makes a general assignment for the benefit of
its creditors, or
(e) generally is not paying its debts as they
become due; or
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of the property of
the Company or any Subsidiary, or
<PAGE> 46
40
(c) orders the liquidation of the Company or any
Subsidiary,
and the order or decree remains unstayed and in effect for 60
consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under clause
(3), (5) or (6) until the Trustee shall have received written notice from the
Company or any of the Holders or unless a Responsible Officer shall have actual
knowledge of such Event of Default. A Default under clause (4) is not an Event
of Default until the Trustee notifies the Company, or the Holders of at least
25% in principal amount of the then outstanding Notes notify the Company and
the Trustee, of the Default and the Company does not cure the Default within 60
days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default."
SECTION 6.02 ACCELERATION
If an Event of Default (other than an Event of Default specified in
clauses (7) and (8) of Section 6.01 relating to the Company or any Subsidiary)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 25% in principal amount of the then outstanding Notes by written
notice to the Company and the Trustee may declare the unpaid principal of and
any accrued interest on all the Notes to be due and payable. Upon such
declaration the principal and interest shall be due and payable immediately
(together with the premium referred to in Section 6.01, if applicable). If an
Event of Default specified in clause (7) or (8) of Section 6.01 relating to the
Company or any Subsidiary occurs, such an amount 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 a majority in principal amount of
the then outstanding Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an
<PAGE> 47
41
Event of Default occurs prior to October 1, 2001 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
October 31, 2001, then the premium specified in the Indenture for optional
redemptions shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision
of the Notes 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. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase); provided, however, that
the Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration. 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 impair any right
consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY
Holders of a majority in principal amount of the then outstanding
Notes 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 it. However, the Trustee may refuse to follow any direction that
conflicts with law or this
<PAGE> 48
42
Indenture that the Trustee determines may be unduly prejudicial to the rights
of other Holders of Notes or that may involve the Trustee in personal
liability.
SECTION 6.06 LIMITATION ON SUITS
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not take enforcement action against the Company's assets
or stock and may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note (including in connection with 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.
<PAGE> 49
43
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest 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 is authorized to 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 the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian 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 agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. 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 Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, 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. Nothing herein contained shall be deemed to
authorize 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, 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, it shall
pay out the money in the following order:
<PAGE> 50
44
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, 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 of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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 a 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 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(a) If 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 man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trustee
need perform only those
<PAGE> 51
45
duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) of this Section 7.02.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
<PAGE> 52
46
SECTION 7.02 RIGHTS OF TRUSTEE
(a) The Trustee may conclusively 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.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(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 the
rights or powers conferred upon it by this Indenture.
(e) 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.
(f) 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.
(g) Except with respect to Section 4.01 hereof, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(1), 6.01(2) and 4.01 or (ii) any Default or
Event of Default of which the Trustee shall have received written notification
or obtained actual knowledge.
(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 may, in its discretion, make
<PAGE> 53
47
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.
SECTION 7.03 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 any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as defined in the TIA) it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also
<PAGE> 54
48
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
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 SEC 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.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation 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, advances and expenses incurred
or made by it in addition to the 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 against any and all losses,
liabilities or expenses (including reasonable attorneys' fees) incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company (including this Section 7.07) and defending
itself against any claim (whether asserted by the Company or any Holder or any
other Person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except to the extent any such loss,
liability or expense may be attributable to its negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall reasonably cooperate in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
<PAGE> 55
49
When the Trustee incurs expenses or renders services after an Event of
Default specified in Sections 6.01(8) or 6.01(9) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08 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.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of
a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) 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 principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder
<PAGE> 56
50
of a Note may petition any court of competent jurisdiction for the removal of
the Trustee and 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. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
state authorities and that has a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
<PAGE> 57
51
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (b) the Company's obligations with respect to such Notes
under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article Eight. Subject to compliance with
this Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15 and 5.01 hereof with respect to the outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed
<PAGE> 58
52
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.01 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(5) through 6.01(7) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders, cash in
United States dollars, non-callable Government Securities, or
a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent
public accountants or investment bankers, to pay the principal
of, premium, if any, and interest on the outstanding Notes on
the stated date for payment thereof or on the applicable
redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section 8.02
hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a
<PAGE> 59
53
result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03
hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of
which will be used to defease the Notes pursuant to this
Article Eight concurrently with such incurrence) or insofar as
Sections 6.01(8) or 6.01(9) hereof is concerned, at any time
in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a
default under, any material agreement or instrument (other
than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that on the 91st
day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any
other creditors of the Company; and
(h) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all
<PAGE> 60
54
conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants or investment bankers
expressed in a written certification thereof delivered to the Trustee (which
may be the opinion delivered under Section 8.04(a) hereof), are in excess of
the amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such
<PAGE> 61
55
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Note following 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 held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article Five hereof;
<PAGE> 62
56
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Note;
or
(f) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 4.07, 4.12
and 4.15 hereof) and 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 (including consents obtained in connection with a tender offer or
exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
<PAGE> 63
57
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. 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 amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of
a majority in aggregate principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed
maturity of any Note or alter or waive any of the provisions
with respect to the redemption of the Notes, except as
provided above with respect to Sections 4.07, 4.12 or 4.15
hereof;
(c) reduce the rate of or change the time for
payment of interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than
that stated in the Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of,
premium, if any, or interest on the Notes;
<PAGE> 64
58
(g) waive a redemption payment with respect to
any Note (other than a payment required by Sections 4.07, 4.12
or 4.15 hereof); or
(h) make any change in Section 6.04 or 6.07
hereof or in the foregoing amendment and waiver provisions.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
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 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive and (subject to Section 7.01) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
<PAGE> 65
59
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 12
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 10.02 NOTICES
Any notice or communication by the Company or the Trustee to the
others is duly 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, to the
others' address:
If to the Company:
Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Attention: Chief Financial Officer
Telephone No.: (330) 565-1000
Telecopier No.: (330)
If to the Trustee:
Fleet National Bank
777 Main Street
CT.MO 0238
Hartford, CT 06115
Telephone No.: (860) 986-4424
Telecopier No.: (860) 986-7920
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
<PAGE> 66
60
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; 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, or by overnight air
courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. 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.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES
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 10.04 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:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 10.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 10.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
<PAGE> 67
61
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she 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 satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this 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 waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
SECTION 10.08 GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
<PAGE> 68
62
SECTION 10.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 10.10 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 successors.
SECTION 10.11 SEVERABILITY
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 10.12 COUNTERPART 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 10.13 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 of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following pages]
<PAGE> 69
SIGNATURES
Dated as of , 1996 SYGNET WIRELESS, INC.
By:
------------------------
Name:
Title: Officer
Attest:
(SEAL)
- ----------------------------------
Name:
Title: Chief Financial Officer
Dated as of , 1996 FLEET NATIONAL BANK
By:
------------------------
Name:
Title:
Attest:
(SEAL)
- --------------------------
Name:
Title:
<PAGE> 70
EXHIBIT A
(Face of Note)
% Senior Notes due 2006
No. $
----------
SYGNET WIRELESS, INC.
promises to pay to or registered assigns,
the principal sum of Dollars on October 1, 2006.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated:
SYGNET WIRELESS, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
(SEAL)
Certificate of Authentication:
This is one of the Notes
referred to in the within-mentioned Indenture:
Fleet National Bank
By:
------------------------------
Authorized Signatory
Dated:
A-1
<PAGE> 71
(Back of Note)
% Senior Notes due 2006
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Sygnet Wireless, Inc., an Ohio corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
% per annum from September [26], 1996 until maturity. The Company will pay
interest semi-annually on April 1 and October 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). 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 the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be April 1, 1997.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the March 15 or September 15 next preceding the
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, interest and premium, if any, at the office or agency of the
Company maintained for such purpose within or without the City and State of New
York, or, at the option of the Company, payment of interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders. Such payment shall be in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts.
3. Paying Agent and Registrar. Initially, Fleet National Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of September [26], 1996 ("Indenture") between the Company and the Trustee.
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 of 1939, as
amended (15 U.S. Code Section Section 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to
A-2
<PAGE> 72
the Indenture and such Act for a statement of such terms. The Notes are
unsecured obligations of the Company limited to $110,000,000 in aggregate
principal amount.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Note, the
Company shall not have the option to redeem the Notes pursuant to this
paragraph 5 prior to October 1, 2001. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest to the applicable redemption date, if redeemed during the
twelve-month period beginning on October 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . %
2002 . . . . . . . . . %
2003 . . . . . . . . . %
2004 . . . . . . . . . %
2005 and thereafter . 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
paragraph 5, during the first 36 months after the Issue Date, the Company may
redeem up to an aggregate of $38,500,000 in principal amount of Notes at a
redemption price of % of the principal amount thereof, in each case plus
accrued and unpaid interest thereon to the redemption date, with the net
proceeds of an offering of Qualified Capital Stock of the Company; provided
that at least $71,500,000 in aggregate principal amount of Notes remain
outstanding immediately after the occurrence of such redemption; and provided,
further, that such redemption shall occur within 30 days of the date of the
closing of such offering.
(c) Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Notes are
to be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in integral multiples of $1,000, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Limitation on Use of Proceeds; Proceeds Purchase Offer.
All net proceeds received by the Company from the sale of the Notes
shall be applied to the purchase of assets in the Horizon Acquisition or, as
set forth below, to repay indebtedness under the Subsidiary's existing Bank
Credit Facility pending such acquisition; provided, however, that no such
proceeds may be applied to the purchase of assets in Horizon Acquisition until
the Company has received at least $19,000,000 in proceeds from the Preferred
Stock Investment and the Trustee has received certain opinions and certificates
regarding the Horizon Acquisition. Pending the consummation
A-3
<PAGE> 73
of the Horizon Acquisition, all such proceeds shall be held by the Company in a
separate bank account, except that up to $71,500,000 of the net proceeds from
the sale of the Notes may be contributed to the Subsidiary to repay
indebtedness under the Subsidiary's existing Bank Credit Facility, but only to
the extent that the banks thereunder consent to allow the amounts repaid to be
reborrowed and paid as a dividend or distribution to the Company for the sole
purpose of funding a repurchase of the Notes in the event that the Horizon
Acquisition does not occur within 120 days following the closing of the sale of
the Notes.
In the event that all of the net proceeds of the sale of the Notes
have not been so applied, directly or indirectly, to the purchase of assets in
the Horizon Acquisition within 120 days of the closing of the sale of the
Notes, the Company will make an offer (a "Proceeds Purchase Offer") to all
holders of Notes to purchase on a pro rata basis, at a price of 101% of the
principal amount thereof plus accrued interest to the purchase date, all Notes
that may be purchased at such price with such unapplied net proceeds.
8. Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Company shall comply with the requirements of 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 connection with the repurchase of the
Notes as a result of a Change of Control.
The Change of Control Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Change of Control
Offer Period"). No later than five Business Days after the termination of the
Change of Control Offer Period (the "Change of Control Purchase Date"), the
Company shall purchase all Notes tendered in response to the Change of Control
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
9. Limitation on Asset Sales and Sales of Subsidiary Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, in one transaction or a series of related transactions,
convey, sell, transfer, assign or otherwise dispose of, directly or indirectly,
any of its property, business or assets, including any sale or other transfer
or issuance of any Capital Stock of any Restricted Subsidiary of the Company,
whether owned on the Issue Date or thereafter acquired (an "Asset Sale") unless
(a) such Asset Sale is for fair market value as determined by the Board of
Directors of the Company acting reasonably and in good faith, (b) at least 80%
A-4
<PAGE> 74
of the value of the consideration for such Asset Sale consists of (i) cash,
(ii) the assumption by the transferee of pari passu Indebtedness or (iii)
notes, obligations or other marketable securities (collectively "Marketable
Securities") that are immediately converted into cash and (c) the Net Cash
Proceeds therefrom are applied on or prior to 360 days after the date of such
Asset Sale (i) to the permanent repayment of Indebtedness under the Bank Credit
Facility (which payment reduces the commitment thereunder) or (ii) to the
repurchase of the Notes pursuant to an offer to purchase (an "Asset Sale Offer)
described below or (iii) to an investment in a Related Business.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) any Restricted Subsidiary of the Company may convey,
sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or a Restricted Subsidiary
of the Company;
(ii) the Company and its Restricted Subsidiaries may, in the
ordinary course of business, (A) convey, sell, lease, transfer, assign or
otherwise dispose of assets in the ordinary course of business and (B) exchange
assets for assets in Related Businesses; (iii) the Company and its Restricted
Subsidiaries may convey, sell, lease, transfer, assign or otherwise dispose of
assets pursuant to and in accordance with Section 5.01; (iv) the Company and
its Restricted Subsidiaries may (a) sell damaged, worn out or other obsolete
property in the ordinary course of business or other property no longer
necessary for the proper conduct of the business of the Company or any of its
Restricted Subsidiaries, or (b) abandon such property if it cannot, through
reasonable efforts, be sold; and (v) the Company may transfer the assets that
it acquires in the Horizon Acquisition to the Subsidiary after the Issue Date.
An Asset Sale Offer may be deferred until the accumulated Net Cash
Proceeds not applied to the uses set forth in subsections (c)(i) or (c)(iii) in
the first paragraph exceeds $5,000,000. An Asset Sale Offer shall remain open
for a period of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Asset Sale Offer Period"). No later than five Business Days after the
termination of the Asset Sale Offer Period (the "Asset Sale Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to this Section (the "Asset Sale Offer Amount") or, if less
than the Asset Sale Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Asset Sale Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require
A-5
<PAGE> 75
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
12. Amendment, Supplement and 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 then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
13. Defaults and Remedies. Events of Default include: (i) a
default in the payment of interest on any Note when the same becomes due and
payable and the Default continues for a period of 30 days; (ii) a default in
the payment of the principal of or premium, if any, on any Note when the same
becomes due and payable at maturity, upon redemption or otherwise; (iii)
failure to observe or perform any covenant, condition or agreement on the part
of the Company to be observed or performed pursuant to Sections 4.07, 4.08,
4.09, 4.12, 4.13, 4.15 or 5.01 of the Indenture; (iv) failure by the Company to
comply with any of its other agreements or covenants in, or provisions of, the
Notes or the Indenture and the Default continues for the period and after the
notice specified below; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default"); provided such
Event of Default shall not occur until 90 days after such Payment Default, or
(b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more; (vii) a declaration that any of the
Subsidiary Guarantees is unenforceable; or (viii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Subsidiaries. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the
A-6
<PAGE> 76
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
14. Trustee Dealings with Company. The Trustee, 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.
15. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not 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 waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. 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).
18. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A-7
<PAGE> 77
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Attention: Chief Financial Officer
Telephone No.: (330) 565-1000
Telecopier No.: (330)
A-8
<PAGE> 78
EXHIBIT B
OPINIONS AND CERTIFICATES TO BE DELIVERED
AT TIME OF HORIZON ACQUISITION
At the time of the closing of the Horizon Acquisition (the "Horizon
Closing Date") the following shall occur:
(a) The Company shall deliver to the Trustee on behalf of the
holders of the Notes an officer's certificate stating, representing and
warranting that:
(i) The Company has received proceeds of not less than
$19.0 million from the sale of certain of its preferred stock;
(ii) The Asset Acquisition Agreement (the "Acquisition
Agreement") dated July 11, 1996, among the Company, Horizon Cellular
Telephone Company of Chatauqua, L.P., Horizon Cellular Telephone
Company of Crawford, L.P. and Horizon Cellular Telephone Company of
Indiana, L.P. has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms (except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability);
(iii) The execution, delivery and performance of the
Acquisition Agreement and compliance by the Company with all the
provisions thereof and the consummation of the transactions
contemplated thereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body and will not conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of its
subsidiaries or any agreement, indenture or other instrument to which
it or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Company, any of its subsidiaries or their
respective property;
(iv) The Company and each of its subsidiaries has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("permits"), including, without limitation,
under any applicable environmental laws, as are necessary to own,
lease and operate the cellular telephone systems acquired pursuant to
the Horizon Acquisition (the "Horizon Systems") and to conduct the
business of the Horizon Systems; the Company and each of its
subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such permit; and such permits contain
no restrictions that are materially burdensome to the Company or any
of its subsidiaries;
B-1
<PAGE> 79
(v) The Company and each of its subsidiaries has received
the consents of the Federal Communications Commission (the "FCC") to
the Horizon Acquisition. Those consents constitute all consents,
approvals and actions necessary for the assignment of the FCC licenses
necessary for the operation of the Horizon Systems. All applicable
administrative and judicial appeal, review and reconsideration periods
of such FCC consents have expired, without the timely filing of any
such appeal or request for review or reconsideration and without the
FCC having instituted review of the grant of such consent on its own
motion;
(vi) The Company and each of its subsidiaries validly
holds all FCC licenses necessary for the operation of the Horizon
Systems. Such FCC licenses are in full force and effect and are not
subject to any conditions other than those conditions listed thereon
and those conditions generally applicable to entities holding similar
licenses issued by the FCC. The FCC licenses constitute all of the
licenses, permits, consents or authorizations required by the FCC to
permit operation of a nonwireline cellular telephone system in the
Horizon Systems, and to permit interim operations in the PA-2 IOA.
The FCC licenses expire on the following dates: [insert dates]. The
five-year build-out periods for the Horizon Systems expire[d] on
[insert dates]; and
(vii) There are no judgments, decrees or orders issued by
the FCC that could result in a suspension, revocation, material
impairment, termination prior to its expiration date, non-renewal or
adverse modification of the FCC licenses necessary for the operation
of the Horizon Systems, or that could have a material adverse effect
upon, or cause material disruption to, the cellular operations
pursuant to such FCC licenses. To the best of the Company's knowledge,
there is no FCC complaint, investigation, action or proceeding pending
or threatened relative to the FCC licenses relating to its cellular
operations, including, without limitation, any Notice of Violation,
Notice of Apparent Liability or Order to Show Cause, other than
proceedings that affect the cellular telephone industry generally,
that could result in a suspension, revocation, material impairment,
termination prior to its expiration date, non-renewal or adverse
modification of the FCC licenses or which could have a material
adverse effect upon, or cause material disruption to, the cellular
operations in the Youngstown, OH MSA, the Sharon, PA MSA, the OH-11
RSA, the Erie, PA MSA, the NY-3 RSA, the PA-1 RSA, the PA-6 RSA, or
the PA-7 RSA, or the interim operations in the PA-2 IOA. Each of the
Company's cellular systems is operating in compliance in all material
respects with the Communications Act of 1934, as amended (the
"Communications Act") and the Rules and Regulations of the FCC.
(b) The Company shall deliver to the Underwriters an opinion of
Bryan Cave LLP, dated the Horizon Closing Date, to the effect that:
(i) the Acquisition Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms
(except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the
B-2
<PAGE> 80
availability of equitable remedies may be limited by equitable
principles of general applicability);
(ii) the execution, delivery and performance of the
Acquisition Agreement and compliance by the Company with all the
provisions thereof and the consummation of the transactions
contemplated thereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body and to the best of
such counsel's knowledge, will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its subsidiaries or
any material agreement, indenture or other instrument to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective properties is bound, or
violate or conflict with any laws, administrative regulations or
rulings or court decrees applicable to the Company or any of its
subsidiaries or their respective properties;
(iii) to the best of such counsel's knowledge, the Company and
each of its subsidiaries has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits"),
including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate the properties to be
owned, leased and operated following consummation of the transactions
under the Acquisition Agreement and to conduct its business in the
manner described in the Prospectus relating to the sale of the ___%
Senior Notes due 2006 of the Company (the "Prospectus"); to the best
of such counsel's knowledge, the Company and each of its subsidiaries
has fulfilled and performed all of its material obligations with
respect to such permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of
the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and, except as
described in the Prospectus, such permits contain no restrictions that
are materially burdensome to the Company or any of its subsidiaries;
(iv) to the best of such counsel's knowledge, all leases
to which the Company or any of its subsidiaries will become a party
following consummation of the transactions under the Acquisition
Agreement are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse
change in the business, prospects, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, with
such exceptions as do not materially interfere with the use made by
the Company or such subsidiary;
(v) the Company and each of its subsidiaries has received
the consents of the FCC to the Horizon Acquisition. Those consents
constitute all consents, approvals and actions necessary for the
assignment of the FCC licenses necessary for the operation of the
Horizon Systems (the "Horizon FCC Licenses"). All applicable
administrative and judicial appeal, review and reconsideration periods
of such FCC consents have expired, without the timely
B-3
<PAGE> 81
filing of any such appeal or request for review or reconsideration
and without the FCC having instituted review of the grant of such
consent on its own motion;
(vi) the Company and each of its subsidiaries validly
holds all the Horizon FCC Licenses. The Horizon FCC Licenses are in
full force and effect and are not subject to any conditions other than
those conditions listed thereon and those conditions generally
applicable to entities holding similar licenses issued by the FCC.
The Horizon FCC Licenses constitute all of the licenses, permits,
consents or authorizations required by the FCC to permit operation of
the Horizon Systems, and to permit interim operations in the PA-2 IOA.
The Horizon FCC Licenses expire on the following dates: [insert
dates]. The five-year build-out periods for the Horizon Systems
expire[d] on [insert dates];
(vii) there are no judgments, decrees or orders issued by the
FCC that could result in a suspension, revocation, material
impairment, termination prior to its expiration date, non-renewal or
adverse modification of the Horizon FCC Licenses, or that could have a
material adverse effect upon, or cause material disruption to, the
cellular operations pursuant to the Horizon FCC Licenses. To the best
of such counsel's knowledge, there is no FCC complaint, investigation,
action or proceeding pending or threatened relative to the Horizon FCC
Licenses relating to its cellular operations, including, without
limitation, any Notice of Violation, Notice of Apparent Liability or
Order to Show Cause, other than proceedings that affect the cellular
telephone industry generally, that could result in a suspension,
revocation, material impairment, termination prior to its expiration
date, non-renewal or adverse modification of the Horizon FCC Licenses
or which could have a material adverse effect upon, or cause material
disruption to, the cellular operations in the Youngstown, OH MSA, the
Sharon, PA MSA, the OH-11 RSA, the Erie, PA MSA, the NY-3 RSA, the
PA-1 RSA, the PA-6 RSA, or the PA-7 RSA, or the interim operations in
the PA-2 IOA; and
(viii) the Company and each of its subsidiaries has, or has
timely filed applications for, all permits of governmental or
regulatory authorities (including, as appropriate, the state public
utilities commissions of Ohio, Pennsylvania and New York) necessary to
engage in the business currently conducted in the Horizon Systems and
the Company's Systems, except where the failure to hold such permits
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and there is no reason to believe that
any governmental body or agency is considering limiting, suspending or
revoking any such permit. All such permits are valid and in full
force and effect.
(c) The transactions under the Acquisition Agreement shall have
been consummated in accordance with the terms of the Acquisition Agreement.
B-4
<PAGE> 1
Exhibit 5.1
BRYAN CAVE LLP
700 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20005-3960
(202) 508-6000
FACSIMILE: (202) 508-6200
September 16, 1996
Board of Directors
Sygnet Wireless, Inc.
6550 Seville Drive, Suite B
Canfield, OH 44406
Gentlemen:
We have acted as counsel to Sygnet Wireless, Inc., an Ohio corporation
(the "Company"), in connection with the Registration Statement on Form S-1, No.
333-10161 (the "Registration Statement") of the Company filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Act"), and covering the offering of $110,000,000
aggregate principal amount of Senior Notes due 2006 (the "Notes") proposed to
be issued by the Company under an Indenture (the "Indenture") between the
Company and Fleet National Bank, as trustee, which is filed as an exhibit to
the Registration Statement.
In connection therewith, we have examined and relied as to matters of fact
upon such certificates of public officials, such statements and certificates of
officers of the Company, and originals or copies certified to our satisfaction
of the Articles of Incorporation, as amended and Code of Regulations of the
Company, proceedings of the Board of Directors of the Company and such other
corporate records, documents, certificates and instruments as we have deemed
necessary or appropriate in order to enable us to render the opinion expressed
below.
In rendering this opinion, we have assumed the genuineness of all
signatures on all documents examined by us, the authenticity of all documents
submitted to us as originals and the conformity to authentic originals of all
documents submitted to us as certified or photostatted copies.
Subject to compliance with state securities laws and receipt from the SEC
of an order declaring the Registration Statement effective, we are of the
opinion that the Notes (i) have been duly authorized and, upon execution,
authentication and delivery thereof in accordance with the terms and provisions
of the Indenture, will be validly issued, and (ii) will constitute binding
obligations of the Company entitled to the benefits provided by the Indenture,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, rehabilitation, moratorium, fraudulent transfer, and other similar
laws relating to or affecting the rights and
<PAGE> 2
remedies of creditors and others generally and by general principles of equity,
including, without limitation, concepts of reasonableness, materiality, good
faith and fair dealing and the possible unavailability of specific performance,
injunctive relief or other equitable remedies, regardless of whether
enforceability is considered in a proceeding in equity or at law.
Furthermore, in reliance, with your permission, on the facts set forth in
the Registration Statement, it is our opinion that the material federal income
tax consequences are accurately set forth under the heading "Certain United
States Federal Income Tax Consequences" in the Registration Statement. No
opinion is expressed as to any matter not discussed therein. This opinion is
based on the Internal Revenue Code of 1986, as amended, regulations promulgated
thereunder and interpretations thereof by the Internal Revenue Service and the
courts having jurisdiction over such matters, all of which are subject to
change either prospectively or retroactively. In addition, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusions stated therein.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus filed as a part thereof. We also consent to your
filing copies of this opinion as an exhibit to the Registration Statement with
agencies of such states as you deem necessary in the course of complying with
the laws of such states regarding the offering and sale of the Notes. In
giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission relating thereto.
Very truly yours,
/s/ BRYAN CAVE LLP
--------------------
Bryan Cave LLP
<PAGE> 1
EXHIBIT 10.20
================================================================================
CREDIT AGREEMENT
Among
SYGNET COMMUNICATIONS, INC.
as the Borrower,
the Lenders Which are Parties Hereto,
TORONTO DOMINION (TEXAS), INC.
as the Administrative Agent,
and
PNC BANK, NATIONAL ASSOCIATION
as the Documentation Agent and as the Collateral Agent
Dated as of __________________, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 2. THE REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1 Revolving Credit Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.4 Requests for Loans, Interest Rate Options and Conversions . . . . . . . . . . . 30
2.5 Method of Disbursements and Payments . . . . . . . . . . . . . . . . . . . . . 30
2.6 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.8 Payment From Accounts Maintained by Borrower . . . . . . . . . . . . . . . . . 31
ARTICLE 3. SET-OFF, SECURITY INTERESTS AND GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 Personal and Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3 Pledge of Borrower's and Subsidiaries Stock . . . . . . . . . . . . . . . . . . 33
ARTICLE 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1 Existence and Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Capitalization; Ownership; Title to Shares . . . . . . . . . . . . . . . . . . 33
4.3 Subsidiaries and Other Investments . . . . . . . . . . . . . . . . . . . . . . 34
4.4 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.5 Validity and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.6 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.7 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.8 Cellular Systems; Governmental Approvals . . . . . . . . . . . . . . . . . . . 35
4.9 Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.10 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.13 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.14 Labor Matters; Payment of Wages . . . . . . . . . . . . . . . . . . . . . . . . 37
4.15 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.16 Condition of and Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 38
4.17 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.20 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.21 No Defaults or Material Adverse Changes . . . . . . . . . . . . . . . . . . . . 39
4.22 Horizon Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.23 Structurally Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . 40
4.24 Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.25 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.26 Plans and Benefit Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 40
4.27 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.28 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.29 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.30 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . 44
4.31 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.2 Delivery of Financial Statements and Other Information . . . . . . . . . . . . 45
5.3 Preservation of Existence; Qualification . . . . . . . . . . . . . . . . . . . 49
5.4 Compliance with Laws, Contracts and Licenses . . . . . . . . . . . . . . . . . 49
5.5 Continuance of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.6 Accounting System; Books and Records . . . . . . . . . . . . . . . . . . . . . 50
5.7 Payment of Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . 50
5.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.9 Interest Hedge Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.10 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.11 Maintenance of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
5.12 Maintenance of Patents, Trademarks, Permits, Etc. . . . . . . . . . . . . . . . 52
5.13 Plans and Benefit Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 53
5.14 Environmental Matters and Indemnification . . . . . . . . . . . . . . . . . . . 53
5.15 Key Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.16 Covenants Regarding Formation of Subsidiaries and Acquisitions. . . . . . . . . 54
5.17 Payment of Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.18 Further Assurances; Power of Attorney . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.2 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.3 Encumbrances; Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.4 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.5 Limitation on Dividends, Distributions and Other Payments . . . . . . . . . . . 57
6.6 Restrictions on Subsidiary Dividends or Distribution. . . . . . . . . . . . . . 58
6.7 Liquidations, Mergers, Consolidations, Acquisitions, Etc. . . . . . . . . . . . 59
6.8 Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.10 Loans and Other Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.11 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.12 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.14 Change of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.15 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.16 Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.17 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 7. CONDITIONS TO MAKING LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.1 All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.2 Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 8. EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 9. ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT . . . . . . . . . . . . . 71
9.1 Appointment and Grant of Authority . . . . . . . . . . . . . . . . . . . . . . 71
9.2 Non-Reliance on Administrative Agent . . . . . . . . . . . . . . . . . . . . . 72
9.3 Responsibility of Agents and Other Matters . . . . . . . . . . . . . . . . . . 72
9.4 Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.5 Action on Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.6 Action Upon Occurrence of a Default or Event of Default . . . . . . . . . . . . 74
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.8 Agents' Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.9 Loan Advances by Administrative Agent . . . . . . . . . . . . . . . . . . . . . 75
9.10 Payment to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.11 Pro Rata Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.12 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.13 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.14 Successor Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE 10. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.5 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.6 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.7 Withholding of Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.8 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
10.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.10 FCC and Other Governmental Authority Matters . . . . . . . . . . . . . . . . . 84
10.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.14 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.15 FORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.17 Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.18 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.19 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
10.20 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
-v-
<PAGE> 7
EXHIBITS
<TABLE>
<CAPTION>
Principal
Exhibit Section
Designation Exhibit Reference
----------- ------- ---------
<S> <C> <C>
A Revolving Credit Note 2.1f
B Request for/Confirmation of Loan 2.4
C Security Agreement 3.2
D Mortgage 3.2
E Assignment of Leases and Rents 3.2
F Pledge Agreement 3.3
G Management Agreement 6.5
H Compliance Certificate 5.2c
I Perfection Certificate 7.2i
J Assignment and Assumption Agreement 10.5a
</TABLE>
-vi-
<PAGE> 8
SCHEDULES
<TABLE>
<CAPTION>
Schedule
Designation Schedule
----------- --------
<S> <C>
4.2 Matters Relating to Borrower's and Wireless' Capital Stock
4.8 Cellular Systems; FCC Licenses and Other Governmental Approvals
4.11 Litigation and Other Matters
4.13 Material Contracts
4.18 Intellectual Property
4.19 Insurance
4.26 Plans and Benefit Arrangements
4.27 Environmental Matters
6.1 Existing Indebtedness
6.3 Existing Encumbrances Permitted to Remain Outstanding
6.10 Existing Loans Made by Borrower
</TABLE>
-vii-
<PAGE> 9
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of _____________________,
1996, is entered into by and among SYGNET COMMUNICATIONS, INC., an Ohio
corporation (the "BORROWER"), the financial institutions which are or which
become parties hereto in accordance with Section 10.5 (each a "LENDER" and
collectively the "LENDERS"), TORONTO DOMINION (TEXAS), INC., as the
administrative agent for the Lenders (in such capacity the "ADMINISTRATIVE
AGENT"), PNC BANK, NATIONAL ASSOCIATION as the documentation agent for the
Lenders (in such capacity the "DOCUMENTATION AGENT") and PNC BANK, NATIONAL
ASSOCIATION as the collateral agent for the Lenders (in such capacity the
"COLLATERAL AGENT").
WITNESSETH:
WHEREAS, the Borrower has requested that the Lenders make
available to it a secured, reducing revolving credit facility in the initial
maximum principal amount of $300,000,000, and the Lenders have agreed to do so,
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises (each of
which is incorporated herein by reference) and other valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and with the intent
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, including the
preamble and recitals hereto, the following terms shall have the meanings set
forth below or in the Section or Subsection of this Agreement referred to,
unless the context otherwise requires:
ACCOUNT: An account, as that term is defined in the Uniform
Commercial Code, due the Borrower or any Subsidiary of the Borrower, whether
now in existence or hereafter created or acquired.
-1-
<PAGE> 10
ACCOUNT DEBTOR: Any Person who is or becomes obligated under
or with respect to an Account.
ADJUSTED ANNUALIZED OPERATING CASH FLOW: As of the last day
of each Fiscal Quarter, the Borrower's Adjusted Operating Cash Flow for the
most recently completed two consecutive Fiscal Quarters, multiplied by two,
determined on a consolidated basis in accordance with GAAP. For purposes of
calculating Adjusted Annualized Operating Cash Flow during the first two
complete Fiscal Quarters immediately following the Closing Date, it shall be
assumed that the Horizon Acquisition occurred on January 1, 1996.
ADJUSTED OPERATING CASH FLOW: As of the last day of each
Fiscal Quarter, the Borrower's Operating Cash Flow for such Fiscal Quarter,
minus actual marketing and selling expense for such Fiscal Quarter plus Average
Marketing Expense as of the last day of such Fiscal Quarter, all determined in
accordance with GAAP.
ADMINISTRATIVE AGENT: Toronto Dominion (Texas), Inc., and its
successors and assigns, in its capacity as administrative agent for the Lenders
hereunder, and any Person that becomes a successor administrative agent
hereunder.
AFFILIATE: As to any Person, any other Person directly or
indirectly through one or more intermediaries Controlling, Controlled by, or
under direct or indirect common Control with such Person.
AGENT: Any of the Administrative Agent, the Collateral Agent
or the Documentation Agent and, collectively, all of the Administrative Agent,
the Collateral Agent and the Documentation Agent, and their respective
successors and assigns.
AGREEMENT: This Credit Agreement, together with all exhibits
and schedules hereto and all extensions, renewals, amendments, substitutions
and replacements hereto and hereof.
ANNUALIZED OPERATING CASH FLOW: As of the last day of each
Fiscal Quarter, the Borrower's Operating Cash Flow for the most recently
completed two consecutive Fiscal Quarters, multiplied by two, determined on a
consolidated basis in accordance with GAAP. For purposes of calculating
Annualized Operating Cash Flow during the first two complete Fiscal Quarters
immediately following the Closing Date, it shall be assumed that the Horizon
Acquisition occurred on January 1, 1996.
-2-
<PAGE> 11
APPLICABLE MARGIN: An incremental amount in excess of the
Base Rate and/or the Euro-Rate which will fluctuate as a function of the Total
Indebtedness to Adjusted Annualized Operating Cash Flow Ratio, pursuant to
Section 2.2a(i).
ASSIGNMENT AND ASSUMPTION AGREEMENT: An Assignment and
Assumption Agreement entered into by and between a Purchasing Lender and a
Transferor Lender, substantially in the form of Exhibit "J" hereto, with
appropriate insertions, and all exhibits, schedules, extensions, renewals,
amendments, substitutions and replacements thereto and thereof.
ASSIGNMENT OF LEASES AND RENTS: An assignment of leases and
rents delivered hereunder substantially in the form of Exhibit "E", together
with all extensions, renewals, amendments, substitutions and replacements
thereto and thereof.
AUTHORIZED OFFICER: The Chairman, President and Chief
Financial Officer of the Borrower or Wireless, as the context requires. The
Agents and the Lenders shall be entitled to rely on the incumbency certificates
delivered pursuant to Section 7.2 for the initial designation of each
Authorized Officer. Additions or deletions to the list of Authorized Officers
may be made by the Borrower at any time by delivering to the Administrative
Agent a revised, fully-executed incumbency certificate.
AVERAGE MARKETING EXPENSE: As of the last day of each Fiscal
Quarter, the Borrower's actual marketing and selling expense for the most
recently completed four Fiscal Quarters, divided by four, determined on a
consolidated basis in accordance with GAAP.
BASE RATE: For any day, a rate of interest per annum equal to
the greater of (i) the Prime Rate or (ii) the sum of (A) the Federal Funds Rate
plus (B) one-half percent (1/2%).
BASE RATE LOAN: A Loan bearing interest under the Base Rate
Option, as set forth in Subsection 2.2a.
BASE RATE OPTION: The ability of the Borrower to elect Base
Rate Loans, as set forth in Subsection 2.2a.
BENEFIT ARRANGEMENT: An "employee benefit plan", within the
meaning of Section 3(3) of ERISA, which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Borrower or any
ERISA Affiliate for the benefit of employees of the Borrower or any ERISA
Affiliate.
BORROWER: Sygnet Communications, Inc., an Ohio corporation.
-3-
<PAGE> 12
BUSINESS DAY: With respect to any borrowing or payment of
Euro-Rate Loans or a selection of the Euro-Rate Option, a day other than a
Saturday or a Sunday on which banks are open for business in New York, New York
and Houston, Texas, and on which dealings in Dollars are carried on in the
London interbank market; and for all other purposes, a day other than a
Saturday or a Sunday on which commercial banks in New York, New York and
Houston, Texas are open for business.
CAPITAL ADEQUACY EVENT: This term shall have the meaning
given it in Section 2.3.
CAPITAL COMPENSATION AMOUNT: This term shall have the meaning
given it in Section 2.3.
CAPITAL EXPENDITURE: Any expenditure of the Borrower or any
Subsidiary of the Borrower which would be classified as a capital expenditure
in accordance with GAAP.
CAPITALIZED LEASE: Any lease of property by the Borrower or
a Subsidiary of the Borrower as lessee which would be capitalized on a balance
sheet of the Borrower or such Subsidiary prepared in accordance with GAAP.
CELLULAR SYSTEM: The Borrower's and its Subsidiaries'
cellular mobile radio telephone systems, whether now owned or hereafter
acquired, constructed and operated in an MSA or RSA.
CAPITALIZED LEASE OBLIGATIONS: The amount of the obligations
of the Borrower or a Subsidiary of the Borrower under Capitalized Leases which
would be shown as a liability on a balance sheet of such Borrower or a
Subsidiary of the Borrower prepared in accordance with GAAP.
CHANGE OF CONTROL: Any transaction or occurrence or series of
transactions or occurrences which results at any time in either (i) the current
shareholders of Wireless, as shown on Schedule 4.2, owning in the aggregate,
whether directly or indirectly, less than the number of shares which entitles
them to at least 51% of the votes entitled to be cast in an election of
Wireless' board of directors, on a fully-diluted basis, or (ii) Wireless owning
in the aggregate, whether directly or indirectly, at least 51% of the votes
entitled to be cast in an election of the Borrower's board of directors, on a
fully-diluted basis.
-4-
<PAGE> 13
CHATTEL PAPER: Any chattel paper, as that term is defined in
the Uniform Commercial Code, of the Borrower or any Subsidiary of the Borrower,
whether now owned or hereafter created or acquired.
CLOSING DATE: _________________________, 1996 or such later
date as is mutually agreeable to the parties hereto.
COLLATERAL: Collectively, all of the property (whether real,
personal or mixed, and whether tangible or intangible), rights, titles and
interests subject to the Security Interest in favor of the Collateral Agent for
the benefit of the Lenders pursuant to this Agreement or any of the Security
Documents.
COLLATERAL AGENT: PNC Bank, National Association, a national
banking association, and its successors and assigns, in its capacity as the
collateral agent for the Lenders hereunder, and any Person that becomes a
successor collateral agent hereunder.
COMMITMENT: With respect to each Lender, the commitment of
such Lender to make Loans pursuant to Section 2.1 in the aggregate Dollar
amount not to exceed at any one time outstanding: (i) as to any Lender which
is an original signatory to this Agreement, the Dollar amount set forth on the
signature page hereto signed by such Lender or as modified on Schedule I to the
most recent Assignment and Assumption Agreement, if any, which such Lender
executes as a Transferor Lender, as the case may be, or (ii) as to any Lender
which is not an original signatory to this Agreement but which becomes a Lender
by executing an Assignment and Assumption Agreement as a Purchasing Lender, the
Dollar amount for such Lender set forth on Schedule I to such Assignment and
Assumption Agreement, or as modified on Schedule I to the most recent
Assignment and Assumption Agreement, if any, which such Lender executes as a
Transferor Lender.
COMMITMENT FEE: The fee described in Subsection 2.7a.
COMMITMENT PERCENTAGE: With respect to each Lender, its
percentage commitment of the Revolving Credit Commitment, which shall be (i) as
to any Lender which is an original signatory to this Agreement, the percentage
set forth on the signature page hereto signed by such Lender or as modified on
Schedule I to the most recent Assignment and Assumption Agreement, if any,
which such Lender executes as a Transferor Lender, as the case may be, or (ii)
as to any Lender which is not an original signatory to this Agreement but which
becomes a Lender by executing an Assignment and Assumption Agreement as a
Purchasing Lender, the percentage set forth on Schedule I to such Assignment
and Assumption Agreement, or as modified on Schedule I to the most recent
Assignment and Assumption Agreement, if any, which such Lender executes as a
Transferor Lender.
-5-
<PAGE> 14
COMPLIANCE CERTIFICATE: A certificate substantially in the
form of Exhibit "H" which has been executed by an Authorized Officer of the
Borrower and delivered to the Administrative Agent.
CONSOLIDATED OR CONSOLIDATED: With reference to any term
defined herein, that term as applied to the accounts of the Borrower and its
Subsidiaries (or, if specifically stated, to the accounts of Wireless and its
Subsidiaries), consolidated in accordance with GAAP.
CONTAMINATION: The uncontained presence of Hazardous
Substances at any real property of the Borrower or any Subsidiary, whether
owned or leased, which may require clean-up or remediation under any
Environmental Law.
CONTROL: The ownership of fifteen percent (15%) or more of
any class of voting securities, partnership interests or other equity interests
of another Person, or the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of any Person,
whether through the ownership of voting securities, by contract, or otherwise,
including the power to elect a majority of the directors of a corporation or
trustees of a trust, as the case may be. The terms "Controlled" and
"Controlling" shall have correlative meanings.
DEBT SERVICE: Scheduled payments of principal (including
without limitation principal payments made in order to make scheduled
reductions of the Revolving Credit Commitment, as required pursuant to Section
2.1c(i)) and interest on the Borrower's Indebtedness, determined on a
consolidated basis.
DEFAULT: Any condition, event, omission or act which with the
giving of notice, the passage of time or both would constitute an Event of
Default.
DOCUMENT: Any document, as that term is defined in the
Uniform Commercial Code, of the Borrower or any Subsidiary, whether now owned
or in existence or hereafter created or acquired.
DOCUMENTATION AGENT: PNC Bank, National Association, a
national banking association, and its successors and assigns, in its capacity
as the documentation agent for the Lenders hereunder, and any Person that
becomes a successor documentation agent hereunder.
DOLLARS OR $: The legal tender of the United States of
America.
-6-
<PAGE> 15
ENCUMBRANCE: Any security interest, mortgage, charge, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any Capitalized Lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the Uniform Commercial Code), in, upon
or against any asset of the Borrower or any Subsidiary of the Borrower, whether
or not voluntarily given, other than financing statements filed in connection
with Permitted Encumbrances.
ENVIRONMENTAL CLAIM: Any claim, suit, notice, order, demand
or other written communication made by any Person with respect to the Borrower
or any of its properties, whether owned or leased, that: (i) asserts a
violation of an Environmental Law; (ii) asserts a liability under an
Environmental Law; (iii) orders investigation, corrective action, remediation
or other response under an Environmental Law; (iv) demands information under an
Environmental Law; (v) alleges personal injury or property damage resulting
from Hazardous Substances; or (vi) alleges that there is or may be
Contamination.
ENVIRONMENTAL LAW: Any Governmental Rule, permit, license,
writ, injunction, decree, award or standard concerning health, safety and
protection of, or regulation of the discharge of substances into, the
environment, whether now in existence or hereafter enacted, agreed to, issued
or otherwise becoming effective.
EQUIPMENT: Any equipment, as that term is defined in the
Uniform Commercial Code, owned by the Borrower or any Subsidiary of the
Borrower, whether now owned or hereafter acquired and wherever located.
ERISA: The Employee Retirement Income Security Act of 1974 as
it may from time to time be amended, supplemented or otherwise modified, or any
successor statute, and the rules and regulations promulgated thereunder.
ERISA AFFILIATE: At any time any member of a controlled group
of corporations under Section 414(b) of the Internal Revenue Code of which the
Borrower is a member, and any trade or business (whether or not incorporated)
under common control with the Borrower under Section 414(c) of the Internal
Revenue Code, and all other entities which, together with the Borrower, are or
were treated as a single employer under Sections 414(m) or 414(o) of the
Internal Revenue Code.
EURO-RATE: With respect to Euro-Rate Loans, the interest rate
per annum determined by the Administrative Agent by dividing (the resulting
quotient to be rounded
-7-
<PAGE> 16
upward to the nearest 1/100 of 1%) (i) the rate of interest determined by the
Administrative Agent in accordance with its usual procedures (which
determination shall be presumed correct absent manifest error on the part of
the Administrative Agent) to be equal to the offered rate for deposits in
Dollars for the applicable Euro-Rate Interest Period which appear on page 3750
of the TELERATE rate reporting system or other similar system as of
approximately 11:00 a.m., Greenwich mean time, two (2) Business Days prior to
the first day of such Euro-Rate Interest Period for an amount comparable to
such Loan and having a borrowing date and a maturity comparable to such
Euro-Rate Interest Period, by (ii) a number equal to 1.00 minus the Euro-Rate
Reserve Percentage. If more than one offered rate appears on page 3750 of the
TELERATE rate reporting system or other similar system, the Euro-Rate will be
the arithmetic mean of such offered rates.
EURO-RATE INTEREST PERIOD: Any individual period of one, two,
three or six months, or, if made available at the option of all of the Lenders,
nine or twelve months, commencing on the date a Euro-Rate Option is exercised;
provided, however, that (i) any Euro-Rate Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to the next Business
Day unless such Business Day falls in the succeeding calendar month, in which
case such Euro-Rate Interest Period shall end on the next preceding Business
Day, (ii) any Euro-Rate Interest Period which begins on the last day of a
calendar month or on a day for which there is no numerically corresponding day
in the subsequent calendar month during which such Euro-Rate Interest Period is
to end shall end on the last Business Day of such subsequent month, and (iii)
no Euro-Rate Interest Period may end after the Maturity Date.
EURO-RATE LOAN: A Loan bearing interest under the Euro-Rate
Option, as set forth in Subsection 2.2a.
EURO-RATE OPTION: The ability of the Borrower to elect
Euro-Rate Loans, as set forth in Subsection 2.2a.
EURO-RATE RESERVE PERCENTAGE: For each Euro-Rate Interest
Period, that percentage (expressed as a decimal), as determined by the
Administrative Agent as to the Euro-Rate Loan as to which the rate is then
being set, which is in effect on the first day of such Euro-Rate Interest
Period, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), for determining the maximum reserve requirements (including
without limitation supplemental, marginal or emergency reserve requirements)
with respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities") of a member bank in such system.
EVENT OF DEFAULT: Any of the events specified in Section 8.1.
-8-
<PAGE> 17
EXCESS CASH FLOW: The excess, if any, of the Borrower's
Operating Cash Flow over the Borrower's Fixed Charges, all for the Fiscal Year
in question, determined on a consolidated basis in accordance with GAAP.
EXISTING CREDIT AGREEMENT: The Credit Agreement dated as of
September 29, 1995 entered into by and among the Borrower (then known as
Sharron Youngstown Cellular, Inc.) and certain of its then existing affiliates
as the borrowers, the lenders which are parties thereto and PNC Bank, National
Association, as the Agent for such lenders, as it may have been amended from
time to time.
FCC: The Federal Communications Commission or any successor
agency, commission, bureau, department or other political subdivision of the
United States of America.
FCC LICENSE: Any license, permit, authorization or
certificate, whether now owned or hereafter acquired, issued by the FCC to
Wireless, the Borrower or any Subsidiary of the Borrower in order that the
Borrower's or such Subsidiary's Cellular Systems will be operated in compliance
with all applicable Governmental Rules.
FEDERAL FUNDS RATE: For any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 11:00 a.m. Eastern time on such day
on such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by the Administrative Agent in
its sole discretion.
FEE: Any of the Commitment Fee or any other fee payable by
the Borrower to the Agents or the Lenders hereunder, under any Fee Letter or
under any of the other Loan Documents.
FEE LETTER: Any letter agreement or other agreement entered
into on or prior to the Closing Date by and among the Borrower and the Agents
or among the Borrower and the Lenders, pursuant to which the Borrower agrees to
pay the Fees described therein to the Agents or the Lenders, together with all
extensions, renewals, amendments, substitutions and replacements thereto and
thereof.
FISCAL QUARTER: Each three-month fiscal period of the
Borrower beginning respectively on each successive January 1, April 1, July 1
and October 1 during the term
-9-
<PAGE> 18
hereof and ending on the immediately succeeding March 31, June 30, September 30
and December 31.
FISCAL YEAR: Each annual fiscal period of the Borrower
beginning January 1 and ending on the immediately succeeding December 31.
FIXED CHARGES: As of the last day of each Fiscal Quarter, the
sum (without duplication) of the Borrower's Capital Expenditures, payments
pursuant to Capitalized Leases, Debt Service and Permitted Payments for the
immediately preceding period of twelve (12) consecutive months, all determined
on a consolidated basis in accordance with GAAP.
FIXTURE: Any fixture, as that term is defined in the Uniform
Commercial Code, owned by the Borrower or a Subsidiary of the Borrower, whether
now owned or hereafter acquired, and wherever located.
GAAP: Generally accepted accounting principles which are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board, its predecessors and its successors, including any
official interpretations thereof, consistently applied.
GENERAL INTANGIBLE: Any general intangible, as that term is
defined in the Uniform Commercial Code, of the Borrower or a Subsidiary of the
Borrower, whether now owned or in existence or hereafter created or acquired,
including without limitation any cause of action, business record, deposit
account, invention, design, patent, patent application, trademark, a trademark
application, service mark, service mark application, trade name, trade name
application, trade secret, goodwill, copyright, copyright application,
registration, license, franchise, customer guaranty, security interest, right
to indemnification or any other intangible property of any kind or nature
(other than an Account).
GOODS: All goods, as that term is defined in the Uniform
Commercial Code, of the Borrower or a Subsidiary of the Borrower, whether now
owned or hereafter acquired and wherever located.
GOVERNMENTAL APPROVAL: Any order, consent, authorization,
license, validation, approval and permit, including but not limited to any FCC
License, issued to or required to be obtained by the Borrower or a Subsidiary
of the Borrower in connection with the ownership, construction, erection,
installation, operation and maintenance of the Borrower's or such Subsidiary's
properties, including but not limited to the Cellular Systems, and the conduct
of the present and proposed business of the Borrower or such Subsidiary.
-10-
<PAGE> 19
GOVERNMENTAL AUTHORITY: The government of the United States
or the government of any state or locality therein, any political subdivision
or any governmental, quasi-governmental, judicial, public or statutory
instrumentality, court, arbitrator, authority, body or entity or other
regulatory bureau, authority, body or entity of the United States or any state
or locality therein, including but not limited to the Federal Deposit Insurance
Corporation, the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, any central bank or any comparable authority, and any
successor to any of the foregoing.
GOVERNMENTAL RULE: Any law, statute, rule, regulation,
treaty, ordinance, order, writ, injunction, decree, judgment, guideline,
directive or decision of any Governmental Authority, whether in existence on
the Closing Date or whether issued, enacted or adopted after the Closing Date,
and any change therein or in the interpretation or application thereof
following the Closing Date.
GUARANTY: As to any Person, any obligation, direct or
indirect, by which such Person undertakes to guaranty, assume or remain liable
for the payment of a second Person's obligations, including but not limited to
(i) endorsements of negotiable instruments, (ii) discounts with recourse, (iii)
agreements to pay or perform upon a second Person's failure to pay or perform,
(iv) agreements to remain liable on obligations assumed by a second Person, (v)
agreements to maintain the capital, working capital, solvency or general
financial condition of a second Person and (vi) agreements for the purchase or
other acquisition of products, materials, supplies or services, if in any case
payment therefor is to be made regardless of the nondelivery of such products,
materials or supplies or the nonfurnishing of such services.
HAZARDOUS SUBSTANCE: Any (i) substance which is defined as
such or regulated in any manner by any Environmental Law and (ii) petroleum
products, including crude oil and any fraction thereof.
HORIZON ACQUISITION: The acquisition by Wireless of all
licenses, permits, franchises, registrations, approvals and operating rights
owned by Horizon Cellular Telephone Company of Chautauqua, L.P., Horizon
Cellular Telephone Company of Crawford, L.P., and Horizon Cellular Telephone
Company of Indiana, L.P., relating to the following non-wireline RSAs:
Pennsylvania RSA #1, Pennsylvania RSA # 2 (operated under interim operating
authority), Pennsylvania RSA #6, Pennsylvania RSA #7 and New York RSA #3,
together with certain other assets of the sellers, all pursuant to and in
accordance with the terms of the Horizon Acquisition Agreement, and the
contemporaneous assignment or transfer by Wireless to the Borrower of all of
such assets [other than certain Governmental Approvals to be temporarily
retained by Wireless].
-11-
<PAGE> 20
HORIZON ACQUISITION AGREEMENT: The Asset Acquisition
Agreement made as of July 11, 1996 among Horizon Cellular Telephone Company of
Chautauqua, L.P., Horizon Cellular Telephone Company of Crawford, L.P. and
Horizon Cellular Telephone Company of Indiana, L.P. as the sellers and Sygnet
Communications, Inc. (now Sygnet Wireless, Inc.) as the purchaser, together
with all exhibits and schedules thereto and thereof.
HORIZON ACQUISITION DOCUMENTS: The Horizon Acquisition
Agreement and all documents, agreements and instruments entered into in
connection therewith, together with all exhibits and schedules thereto.
INDEBTEDNESS: Individually and collectively, (i) all
obligations and indebtedness for borrowed money, including but not limited to
the Obligations hereunder and the Borrower's Senior Indebtedness and
Subordinated Indebtedness, (ii) all obligations evidenced by bonds, debentures,
notes, including but not limited to the Revolving Credit Notes, or similar
instruments; (iii) all obligations under conditional sale or other title
retention agreements relating to property purchased; (iv) all obligations
issued or assumed as the deferred purchase price of property or services; (v)
all Capitalized Lease Obligations; (vi) all obligations with respect to letters
of credit, whether matured or contingent; (vii) all obligations with respect to
Interest Hedge Agreements; (viii) all obligations of others secured by any
Encumbrance on property or assets owned or acquired by the Borrower or a
Subsidiary of the Borrower, whether or not the obligations secured thereby have
been assumed; and (ix) all Guarantees; provided, however, that Indebtedness
shall not include accounts payable incurred in the ordinary course of business
if those accounts payable do not constitute obligations to repay borrowed
money.
INSTRUMENT: Any instrument, as that term is defined in the
Uniform Commercial Code, owned or held by the Borrower or a Subsidiary of the
Borrower, whether now owned or in existence or hereafter created or acquired.
INTEREST EXPENSE: Amounts actually paid by the Borrower for
interest on Indebtedness during the period in question, determined on a
consolidated basis in accordance with GAAP.
INTEREST HEDGE AGREEMENT: Any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
insurance or any other agreement or arrangement designed to provide protection
against fluctuations in interest rates, together with all extensions, renewals,
amendments, substitutions and replacements to and of any of the foregoing.
INTEREST RATE OPTION: Either of the Base Rate Option or the
Euro-Rate Option.
-12-
<PAGE> 21
INTERNAL REVENUE CODE: The Internal Revenue Code of 1986 or
any successor legislation thereto, and the rules and regulations issued or
promulgated thereunder, including any amendments to any of the foregoing.
INVENTORY: All inventory, as that term is defined in the
Uniform Commercial Code, including but not limited to any and all new or used
goods, merchandise and other personal property, including but not limited to
goods in transit, of the Borrower or any Subsidiary of the Borrower, and which
is or may at any time be held as finished goods, raw materials,
work-in-process, supplies or materials used or consumed in the Borrower's or
any Subsidiary's business or held for sale or lease or furnished under a
contract of service in the ordinary course of the Borrower's or any
Subsidiary's business, including but not limited to all returned and
repossessed goods and all supplementary items, packing and shipping supplies
and advertising materials, all of the foregoing whether now owned or hereafter
acquired and wherever located.
LENDER: Any financial institution which is or which becomes a
party hereto as a lender in the future, and their respective successors and
assigns.
LOAN: An individual borrowing by the Borrower under the
Revolving Credit Commitment.
LOAN ACCOUNT: Any loan account referred to in Section 2.6.
LOAN DOCUMENT: Any of this Agreement, any Revolving Credit
Note, any Security Document, any Subsidiary Guaranty Agreement, any Fee Letter,
any Interest Hedge Agreement entered into with a Lender, the Management
Agreement and all other agreements, documents and instruments executed and
delivered to govern, evidence or secure the Obligations, and the statements,
reports, certificates and other documents required by, or related to, any of
the foregoing, together with all extensions, renewals, amendments,
substitutions and replacements to and of any of the foregoing.
MANAGEMENT AGREEMENT: The Management Agreement between the
Borrower and Wireless substantially in the form of Exhibit "G" pursuant to
which Wireless performs certain administrative functions for the Borrower.
MATERIAL ADVERSE CHANGE: Any set of circumstances or events
which (i) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement in its
entirety or any other Loan Document in its entirety, (ii) is or could
reasonably be expected to be material and adverse to the business,
-13-
<PAGE> 22
properties, assets, financial condition, results of operations or prospects of
(A) the Borrower and its Subsidiaries taken as a whole or (B) Wireless, (iii)
impairs materially or could reasonably be expected to impair materially the
ability of (A) the Borrower or any of its Subsidiaries to duly and punctually
pay or perform the Obligations and their obligations under the Loan Documents
or (B) Wireless to perform its obligations under the Pledge Agreement, or (iv)
impairs materially or could reasonably be expected to impair materially the
ability of any Agent or any Lender, to the extent permitted, to enforce their
respective legal remedies pursuant to this Agreement and the other Loan
Documents.
MATERIAL ADVERSE EFFECT: An effect that results in or causes
or has a reasonable likelihood of resulting in or causing a Material Adverse
Change.
MATERIAL CONTRACT: Any contract or agreement to which the
Borrower or a Subsidiary is a party the loss or breach of which would have a
Material Adverse Effect.
MATERIAL DEFAULT: Any Default other than an event or
occurrence which would not have a Material Adverse Effect or result in a
Material Adverse Change.
MATURITY DATE: June 30, 2005.
MONEY PURCHASE PLAN: Any Benefit Arrangement subject to the
minimum funding standards under Section 302 of ERISA and Section 412 of the
Internal Revenue Code.
MORTGAGE: Any mortgage or deed of trust executed and
delivered pursuant to this Agreement, together with all extensions, renewals,
amendments, substitutions and replacements thereto and thereof.
MSA: Any "metropolitan statistical area" as defined and
modified by the FCC for the purpose of licensing public cellular radio
telecommunications service systems.
MSA FCC LICENSE: Any FCC License granting the right to
operate a Cellular System within a MSA.
MULTIEMPLOYER PLAN: A "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
NET CASH PROCEEDS: The cash proceeds to the Borrower or any
Subsidiary of any sale, assignment, transfer or other disposition of any of its
assets, less the sum of (i)
-14-
<PAGE> 23
reasonable costs associated with such sale, assignment, transfer or other
disposition, such as brokers' commissions and attorneys' and accountants' fees,
(ii) all Federal, state and local taxes assessed in connection therewith and
(iii) the principal amount of any Indebtedness which is secured by any such
asset and which is required to be and is repaid in connection therewith.
NET INCOME: The Borrower's net income, after deducting all
operating expenses, provisions for all taxes and all other proper deductions,
all determined on a consolidated basis for the period in question in accordance
with GAAP.
OBLIGATIONS: Collectively, (i) all unpaid principal and
accrued and unpaid interest under the Loans, (ii) all accrued and unpaid Fees,
(iii) any other amounts due hereunder or under any of the other Loan Documents,
including all reimbursements, indemnities, fees, costs, expenses, prepayment
premiums, break-funding costs and other obligations of the Borrower to any
Agent, any Lender or any indemnified party hereunder and thereunder, (iv) any
obligations owed by the Borrower to any Lender or to any Affiliate of any
Lender pursuant to an Interest Hedge Agreement, and (v) all out-of-pocket costs
and expenses incurred by the Agents and the Lenders in connection with this
Agreement and the other Loan Documents, including but not limited to the
reasonable fees and expenses of the Agents' counsel, which the Borrower is
responsible to pay pursuant to the terms of this Agreement and the other Loan
Documents.
OPERATING CASH FLOW: As of the last day of each Fiscal
Quarter, the sum of the Borrower's Net Income, depreciation, amortization,
other non-cash charges to Net Income, Interest Expense and Permitted Payments,
minus non-cash credits to the Borrower's Net Income, all determined for such
Fiscal Quarter on a consolidated basis in accordance with GAAP.
PARTICIPANT: Any bank or financial institution which acquires
from any Lender an undivided interest in such Lender's Revolving Credit
Commitment and Loans, pursuant to Section 10.6.
PARTICIPATION: The sale, made in accordance with the
provisions of Section 10.6, by a Lender to any Participant of an undivided
interest in such Lender's Revolving Credit Commitment and Loans.
PBGC: The Pension Benefit Guaranty Corporation established
pursuant to ERISA, or any entity succeeding to any or all of its functions
under ERISA.
-15-
<PAGE> 24
PERFECTION CERTIFICATE: The Perfection Certificate
substantially in the form of Exhibit "I", together with all exhibits,
schedules, extensions, renewals, amendments, substitutions and replacements
thereto and thereof.
PERMITTED ACQUISITION: Any acquisition permitted to be made
by the Borrower pursuant to Section 6.7.
PERMITTED DISPOSITION: Any disposition of assets permitted to
be made by the Borrower pursuant to Section 6.8.
PERMITTED ENCUMBRANCE: Any of the following:
(i) The Security Interests;
(ii) Security interests in the Collateral granted to the
Collateral Agent for the benefit of any Lender or any Affiliate of any Lender
which enters into an Interest Hedge Agreement with the Borrower pursuant to
Section 5.9, as security for the Borrower's obligations pursuant to such
Interest Hedge Agreement, which security interests may rank pari passu with the
Security Interests in the Collateral granted to the Collateral Agent hereunder
or under the Security Documents; provided, however, that such security
interests must be reasonably satisfactory to the Collateral Agent in all
respects;
(iii) Liens for taxes, assessments, governmental charges or
levies on the Borrower's or its Subsidiaries' properties if such taxes,
assessments, governmental charges or levies (A) are not at the time due and
payable or if they can thereafter be paid without penalty or are being
contested in good faith by appropriate proceedings diligently conducted and
with respect to which the Borrower or such Subsidiary has created adequate
reserves or (B) are not pursuant to any Environmental Law;
(iv) Pledges or deposits to secure payment of workers'
compensation obligations, unemployment insurance, deposits or indemnities to
secure public or statutory obligations or for similar purposes;
(v) Liens arising out of judgments or awards against the
Borrower or a Subsidiary of the Borrower with respect to which enforcement has
been stayed and the Borrower at the time shall currently be prosecuting an
appeal or proceeding for review in good faith by appropriate proceedings
diligently conducted and with respect to which the Borrower has created
adequate reserves or has adequate insurance protection; provided, however, that
(A) at no time may the aggregate Dollar amount of such judgment liens for the
Borrower
-16-
<PAGE> 25
exceed $1,500,000 and (B) at no time may the aggregate Dollar amount of such
judgment liens for the Borrower and its Subsidiaries exceed $3,000,000;
(vi) Mechanics', carriers', workmen's, repairmen's and other
similar statutory liens incurred in the ordinary course of the Borrower's or
its Subsidiaries' business, so long as the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate actions or
proceedings being diligently conducted;
(vii) Security interests in favor of lessors of personal
property, which property is the subject of a true lease between such lessor and
the Borrower or a Subsidiary of the Borrower;
(viii) Purchase money security interests in favor of sellers
of real or personal property, to the extent the Indebtedness secured by such
security interest is permitted pursuant to Section 6.1(ii); and
(ix) Encumbrances existing on the Closing Date and listed on
Schedule 6.3.
PERMITTED PAYMENT: Any payment, dividend or distribution
permitted to be made by the Borrower to Wireless pursuant to Section 6.5.
PERSON: Any individual, partnership, corporation, trust,
joint venture, limited liability company, unincorporated organization,
association, entity or Governmental Authority.
PLAN: As to any Person, any employee pension benefit plan
other than a Multiemployer Plan which is covered by Title IV of ERISA and which
either (i) is maintained by such Person and/or any ERISA Affiliate of such
Person for employees of such Person and/or any ERISA Affiliate or (ii) has at
any time within the preceding five years been maintained by such Person and/or
any entity which was an ERISA Affiliate at such time for their respective
employees.
PLEDGE AGREEMENT: The Pledge and Security Agreement
substantially in the form of Exhibit "F" hereto, pursuant to which Wireless or
any other owner of such stock grants to the Collateral Agent for the benefit of
the holders of the Obligations a lien and security interest in the issued and
outstanding stock of the Borrower, together with all extensions, renewals,
amendments, substitutions and replacements hereto and hereof.
PREFERRED SUBSIDIARY: Any Subsidiary 85% or more of the
outstanding voting securities of which shall be owned or controlled by the
Borrower or a wholly-owned Subsidiary of the Borrower.
-17-
<PAGE> 26
PRIME RATE: For any day, a fluctuating interest rate per
annum equal to the rate of interest which the Administrative Agent announces
from time to time as its prime lending rate, which rate may not be the lowest
rate then being charged by the Administrative Agent to commercial borrowers.
PRO FORMA DEBT SERVICE: As of the last day of each Fiscal
Quarter, the sum of (i) all principal payments required to be made as a result
of scheduled reductions of the Revolving Credit Commitment required pursuant to
Subsection 2.1c(i), which reductions are scheduled to be made during the four
consecutive Fiscal Quarters immediately succeeding the date Pro Forma Debt
Service is calculated (which amount shall be based on the principal amount of
Loans outstanding on the date of calculation), plus (ii) all projected payments
of interest on the Borrower's Indebtedness (based on the interest rates in
effect under the Interest Rate Options at the time Pro Forma Debt Service is
calculated), which interest payments are projected to be made during the four
consecutive Fiscal Quarters immediately succeeding the date Pro Forma Debt
Service is calculated, plus, (iii) all Permitted Payments which are projected
to be made during the four consecutive Fiscal Quarters immediately succeeding
the date Pro Forma Debt Service is calculated, all determined for such Fiscal
Quarter on a consolidated basis in accordance with GAAP.
PROHIBITED TRANSACTION: A "prohibited transaction" as defined
under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
PRO RATA: From or to each Lender in proportion to its
Commitment Percentage.
PURCHASING LENDER: A Lender which becomes a party to this
Agreement by executing an Assignment and Assumption Agreement.
QUALIFIED LENDER: Any Lender, or any other bank or trust
company organized under the laws of the United States of America or any state
thereof, having either (i) capital, surplus and undivided profits aggregating
at least $250,000,000 or (ii) total assets in excess of $500,000,000 and whose
long-term certificates of deposit are rated "AA" or better by Standard and
Poor's Rating Group, a division of McGraw-Hill, Inc. or "Aa" or better by
Moody's Investors Service, Inc.
REGISTER: This term shall have the meaning given it in
Section 10.5c.
REGULATIONS D, G, T, U AND X: Regulations D, G, T, U and X
promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 204 et seq., 12
-18-
<PAGE> 27
C.F.R. Part 207 et seq., 12 C.F.R. Part 220 et seq., 12 C.F.R. Part 221 et seq.
and 12 C.F.R. Part 224 et seq., respectively), as such regulations are now in
effect and as may hereafter be amended.
REPORTABLE EVENT: A "reportable event" described in Section
4043(b) of ERISA and in 29 C.F.R. Part 2615.
REQUIRED LENDERS: Prior to the termination of the Revolving
Credit Commitment, the Lenders whose Commitment Percentages aggregate at least
sixty-six and two-thirds percent (66 2/3%) of the aggregate Commitment
Percentages of all the Lenders, and after the termination of the Revolving
Credit Commitment, whether on the stated Maturity Date, by acceleration or
otherwise, the Lenders whose outstanding principal amounts of the Loans
aggregate at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
principal amount of the outstanding Loans.
REVOLVER AVAILABILITY: At any time, the positive difference,
if any, between (i) the maximum principal amount available under the Revolving
Credit Commitment as of any date which is within twelve (12) months prior to
the date of determination of Revolver Availability (after taking into account
scheduled reductions required to be made pursuant to Subsection 2.1c(i) prior
to the date so selected which is within twelve (12) months prior to the date of
determination of Revolver Availability), and (ii) the principal amount
outstanding under the Revolving Credit Commitment as of the first day of the
Fiscal Year most recently begun.
REVOLVING CREDIT COMMITMENT: The obligation of the Lenders to
make available to the Borrower a maximum aggregate principal amount not to
exceed $300,000,000 initially, as reduced pursuant to Subsection 2.1c(i).
REVOLVING CREDIT NOTE: Any promissory note of the Borrower
evidencing Indebtedness of the Borrower under the Revolving Credit Commitment
and in substantially the form of Exhibit "A", together with all extensions,
renewals, amendments, substitutions and replacements thereto and thereof.
RSA: Any "rural service area" as defined and modified by the
FCC for the purpose of licensing public cellular radio telecommunications
service systems.
RSA FCC LICENSE: Any FCC License granting the right to
operate a Cellular System within a RSA.
-19-
<PAGE> 28
SECURITY AGREEMENT: The Security Agreement substantially in
the form of Exhibit "C" hereto entered into by and between the Borrower and the
Collateral Agent pursuant to which the Borrower grants to the Collateral Agent,
for and on behalf of the holders of the Obligations, a lien and security
interest in all of the Borrower's personal property, whether tangible or
intangible, together with all extensions, renewals, amendments, substitutions
and replacements thereto and thereof.
SECURITY DOCUMENTS: Any and all of (i) the Pledge Agreement,
(ii) the Security Agreement, (iii) the Mortgages, (iv) the Assignments of
Leases and Rents, (v) the Subsidiary Security Documents, (vi) all additional
documents and instruments entered into from time to time for the purpose of
securing the Obligations, (vii) any and all ancillary documents and instruments
relating to any of the foregoing, such as Uniform Commercial Code financing
statements and amendments to and continuations of financing statements and
stock powers, and (viii) all extensions, renewals, amendments, substitutions
and replacements to and of any of the foregoing.
SECURITY INTEREST: All Encumbrances in favor of the
Collateral Agent, for the benefit of the holders of the Obligations, created
hereunder or under any of the Security Documents to secure the Obligations.
SENIOR INDEBTEDNESS: All Indebtedness of the Borrower, on a
consolidated basis, which is not Subordinated Indebtedness.
STRUCTURALLY SUBORDINATED INDEBTEDNESS: Indebtedness of
Wireless in the aggregate principal amount of $__________ issued pursuant to
the Structurally Subordinated Indebtedness Documents.
STRUCTURALLY SUBORDINATED INDEBTEDNESS DOCUMENTS: The
Indenture dated as of _______________, 1996 between Wireless and Fleet National
Bank as Trustee relating to the _____% Senior Notes due _______________, 2006
and the notes issued pursuant thereto substantially in the form of Exhibit A to
such indenture together with all extensions, renewals, amendments,
substitutions and replacements to and of any of the foregoing.
SUBORDINATED INDEBTEDNESS: Any Indebtedness of the Borrower
which is subordinated to the Obligations.
SUBSIDIARY: Either (i) any corporation more than 50% of the
outstanding voting securities of which shall at the time be owned or
Controlled, directly or indirectly, by the Borrower, or (ii) any other Person
which is so owned or which is Controlled by the Borrower or a Subsidiary.
-20-
<PAGE> 29
SUBSIDIARY GUARANTY AGREEMENT: Any guaranty and suretyship
agreement made by any Subsidiary of the Borrower for the benefit of the Lenders
pursuant to Section 3.4, together with all extensions, renewals, amendments,
substitutions and replacements to and of any such agreement.
SUBSIDIARY SECURITY DOCUMENTS: Any (i) pledge and security
agreement pursuant to which the Borrower pledges to the Collateral Agent, for
the benefit of the holders of the Obligations, the stock of any Subsidiaries of
the Borrower owned by it, (ii) security agreement, mortgage and/or assignment
of leases and rents pursuant to which any Subsidiary of the Borrower grants to
the Collateral Agent, for the benefit of the holders of the Obligations, a lien
and security interest in and to any of its real or personal property, as
required pursuant to Section 5.16, (iii) all additional documents and
instruments entered into from time to time for the purpose of securing the
Obligations, as required pursuant to Section 5.16, (iv) any and all ancillary
documents and instruments relating to any of the foregoing, such as Uniform
Commercial Code financing statements and stock powers, and (v) all extensions,
renewals, amendments, substitutions and replacements to and of any of the
foregoing.
TERMINATION EVENT: As to any Person (i) a Reportable Event
with respect to a Plan or an event described in Section 4062(e) of ERISA with
respect to a Plan, (ii) the withdrawal of such Person or any ERISA Affiliate
from a Plan during a plan year in which such Person or such ERISA Affiliate was
a "substantial employer", as such term is defined in Section 4001(a)(2) of
ERISA, (iii) the incurrence of liability by such Person or such ERISA Affiliate
under Section 4064 of ERISA upon the termination of a Plan, (iv) the
distribution of a notice of intent to terminate a Plan pursuant to Section
4041(c) of ERISA or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, (v) the institution of proceedings to terminate a Plan
by the PBGC under Section 4042 of ERISA, or (vi) any other event or condition
which might reasonably constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
TOTAL INDEBTEDNESS: For purposes of calculating the Total
Indebtedness to Adjusted Annualized Operating Cash Flow ratio set forth in
Subsection 6.4b, and as used in Section 5.9 (Interest Hedge Agreements), as of
the last day of a Fiscal Quarter, all of the Borrower's and Wireless'
Indebtedness, determined for such Fiscal Quarter on a consolidated basis in
accordance with GAAP. For all other purposes, as of the last day of a Fiscal
Quarter, all of the Borrower's Indebtedness, determined for such Fiscal Quarter
on a consolidated basis in accordance with GAAP.
-21-
<PAGE> 30
TOTAL INDEBTEDNESS TO ADJUSTED ANNUALIZED OPERATING CASH FLOW
RATIO: The ratio of the Borrower's Total Indebtedness to the Borrower's
Adjusted Annualized Operating Cash Flow required to be maintained pursuant to
Subsection 6.4b hereof, determined on a consolidated basis in accordance with
GAAP.
TRANSFER EFFECTIVE DATE: For each Assignment and Assumption
Agreement, the date upon which such Assignment and Assumption Agreement is
effective.
TRANSFEROR LENDER: The selling Lender pursuant to an
Assignment and Assumption Agreement.
UNFUNDED BENEFIT LIABILITIES: With respect to any Plan, the
amounts described in Section 4001(a)(18) of ERISA.
UNIFORM COMMERCIAL CODE: The Uniform Commercial Code as
enacted in the applicable jurisdiction, in effect on the Closing Date and as
amended from time to time.
WIRELESS: Sygnet Wireless, Inc., an Ohio corporation, and the
parent of the Borrower.
WITHDRAWAL LIABILITY: "Withdrawal liability" as defined by
the provisions of Part 1 of Subtitle E to Title IV of ERISA.
1.2 ACCOUNTING TERMS. Each accounting term not defined herein and
each accounting term partly defined herein, to the extent not defined, shall
have the meaning given it under GAAP.
1.3 RULES OF CONSTRUCTION. (i) Except as otherwise specified,
all references in any Loan Document (A) to any Person shall be deemed to
include such Person's successors and assigns, (B) to any applicable
Governmental Rule shall be deemed to include all amendments, supplements and
replacements thereto and thereof from time to time, and (C) to any Loan
Document or to any other agreement or instrument shall be deemed to include all
extensions, renewals, amendments, supplements, substitutions, replacements and
waivers thereto and thereof.
(ii) When used in any Loan Document the words "herein",
"hereof" and "hereunder" and words of similar import shall refer to such Loan
Document as a whole and not to any particular provision of such Loan Document,
and the words "Article", "Section", "Subsection", "Schedule", "Exhibit" and
"Annex" shall refer to Articles, Sections and
-22-
<PAGE> 31
Subsections of, and Schedules, Exhibits and Annexes to, such Loan Document,
unless otherwise specified.
(iii) Whenever the context so requires, in all Loan Documents
the use of or reference to any gender includes the masculine, feminine and
neuter genders, and all terms used in the singular shall have comparable
meanings when used in the plural and vice versa.
ARTICLE 2. THE REVOLVING CREDIT FACILITY
2.1 REVOLVING CREDIT COMMITMENT.
2.1a LOANS. The Lenders agree, subject to the terms and conditions
hereof and relying upon the representations and warranties herein set forth,
that the Borrower shall have the right to borrow, repay and reborrow, from the
date hereof until the Maturity Date, a principal amount not to exceed in the
aggregate the Revolving Credit Commitment at any one time outstanding.
2.1b COMMITMENTS OF THE LENDERS. Each Lender agrees, for itself
only, and subject to the terms and conditions of this Agreement, to make Loans
to the Borrower from time to time not to exceed an aggregate principal amount
at any time equal to such Lender's Commitment Percentage of the Revolving
Credit Commitment; provided, however, that in no event shall any Lender be
required to advance an amount in excess of its Commitment with respect to the
Loans; and provided, further, that if any Lender fails to advance to the
Borrower its Commitment Percentage of any Loan, the remaining Lenders shall not
be required to advance to the Borrower the defaulting Lender's share of such
Loan.
2.1c MANDATORY AND VOLUNTARY REDUCTIONS OF REVOLVING CREDIT
COMMITMENT; MANDATORY AND VOLUNTARY PRINCIPAL PAYMENTS.
(i) SCHEDULED REDUCTIONS. The Revolving Credit
Commitment shall be automatically and permanently reduced by the amounts and on
the dates set forth below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
COMMITMENT REDUCTION DATE AMOUNT OF REDUCTION REDUCED REVOLVING CREDIT
COMMITMENT AFTER
SCHEDULED REDUCTION
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
June 30, 1999 $ 6,000,000 $294,000,000
September 30, 1999 $ 6,000,000 $288,000,000
December 31, 1999 $ 6,000,000 $282,000,000
</TABLE>
-23-
<PAGE> 32
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
COMMITMENT REDUCTION DATE AMOUNT OF REDUCTION REDUCED REVOLVING CREDIT
COMMITMENT AFTER
SCHEDULED REDUCTION
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
March 31, 2000 $ 9,750,000 $272,250,000
June 30, 2000 $ 9,750,000 $262,500,000
September 30, 2000 $ 9,750,000 $252,750,000
December 31, 2000 $ 9,750,000 $243,000,000
--------------------------------------------------------------------------------------------------------------
March 31, 2001 $ 9,750,000 $233,250,000
June 30, 2001 $ 9,750,000 $223,500,000
September 30, 2001 $ 9,750,000 $213,750,000
December 31, 2001 $ 9,750,000 $204,000,000
--------------------------------------------------------------------------------------------------------------
March 31, 2002 $11,250,000 $192,750,000
June 30, 2002 $11,250,000 $181,500,000
September 30, 2002 $11,250,000 $170,250,000
December 31, 2002 $11,250,000 $159,000,000
--------------------------------------------------------------------------------------------------------------
March 31, 2003 $13,500,000 $145,500,000
June 30, 2003 $13,500,000 $132,000,000
September 30, 2003 $13,500,000 $118,500,000
December 31, 2003 $13,500,000 $105,000,000
--------------------------------------------------------------------------------------------------------------
March 31, 2004 $15,750,000 $ 89,250,000
June 30, 2004 $15,750,000 $ 73,500,000
September 30, 2004 $15,750,000 $ 57,750,000
December 31, 2004 $15,750,000 $ 42,000,000
--------------------------------------------------------------------------------------------------------------
March 31, 2005 $21,000,000 $21,000,000
June 30, 2005 $21,000,000 -0-
--------------------------------------------------------------------------------------------------------------
</TABLE>
(ii) VOLUNTARY REDUCTIONS. Upon two Business Days' written
notice to the Administrative Agent, the Borrower may from time to time
voluntarily permanently reduce the Revolving Credit Commitment. Each voluntary
reduction shall be in a minimum amount of $1,000,000 or, if greater than
$1,000,000, in integral multiples of $100,000.
(iii) REDUCTIONS AS A FUNCTION OF EXCESS CASH FLOW. On or
prior to March 31 of each year, beginning on March 31, 2000, the Revolving
Credit Commitment shall be automatically and permanently reduced by an amount
equal to 50% of the Borrower's Excess Cash Flow for the Fiscal Year ended on
the preceding December 31.
-24-
<PAGE> 33
(iv) REDUCTIONS AS A FUNCTION OF ASSET SALES.
Simultaneously with any sale of assets made by the Borrower, other than
Permitted Dispositions, the Revolving Credit Commitment shall be automatically
and permanently reduced by an amount equal to the Net Cash Proceeds of such
asset sale.
(v) EFFECT OF REDUCTIONS. The portion of the Revolving
Credit Commitment so terminated pursuant to the preceding items (i), (ii),
(iii) and (iv) shall no longer be available for borrowing and, as of the
effective date of any such reduction, the Commitment Fee shall no longer be
payable on the portion so terminated. Simultaneously with each mandatory or
voluntary permanent reduction, the Borrower shall make a payment of the
outstanding Loans equal to the excess, if any, of (A) the aggregate principal
amount of the outstanding Loans over (B) the Revolving Credit Commitment, as so
reduced. Notice of a reduction, once given, shall be irrevocable. All such
reductions shall be without penalty or premium (except for amounts owing
pursuant to Section 2.2, if any).
(vi) APPLICATION OF REDUCTIONS AND PREPAYMENTS. Any and all
Revolving Credit Commitment reductions or mandatory or voluntary prepayments
made pursuant to any particular item of this Section 2.1c shall be made in
addition to, and not in lieu of, any and all Revolving Credit Commitment
reductions and mandatory and voluntary prepayments to be made pursuant to any
other item of this Section 2.1c. All such mandatory and voluntary prepayments
shall be applied to repay Base Rate Loans or Euro-Rate Loans, at the Borrower's
option, provided that the Borrower shall deliver written notice of such
election prior to or simultaneously with such election. If no election is made
by the Borrower, then all such mandatory and voluntary prepayments shall be
applied by the Administrative Agent to first repay Base Rate Loans, and any
excess shall be applied to repay Euro-Rate Loans. All mandatory prepayments
and permanent commitment reductions which occur as a function of items (iii)
and (iv) above and any voluntary permanent commitment reductions and related
prepayments shall be applied to reduce scheduled commitment reductions required
pursuant to Subsection 2.1c(i) on a pro rata basis. All such mandatory and
voluntary prepayments shall be accompanied by all accrued and unpaid interest
thereon, all amounts due pursuant to Section 2.2(e)(iv), if any, and, in the
case of a permanent reduction of the Revolving Credit Commitment to zero, any
accrued and unpaid Commitment Fees and any other outstanding Obligations which
are then due and payable.
2.1d AMOUNT OF LOANS AND REPAYMENTS. Each Base Rate Loan shall be
in a minimum amount of $1,000,000, or if in excess of $1,000,000, in integral
multiples of $100,000. Each Euro-Rate Loan shall be in a minimum amount of
$1,000,000, or if in excess of $1,000,000, in integral multiples of $500,000.
Each repayment of a Loan (except for repayments relating to mandatory or
voluntary reductions of the Revolving Credit
-25-
<PAGE> 34
Commitment described in Section 2.1c, and repayments due on the Maturity Date),
shall be in a minimum amount of $1,000,000.
2.1e REPAYMENT ON MATURITY DATE. On the Maturity Date the entire
outstanding principal balance of the Loans, plus all accrued and unpaid
interest thereon, any unpaid Fees relating thereto and any other outstanding
Obligations shall be due and payable, in immediately available funds.
2.1f REVOLVING CREDIT NOTES. The obligations of the Borrower to
repay, on or before the Maturity Date, the aggregate unpaid principal amount of
the Loans shall be evidenced by Revolving Credit Notes, each substantially in
the form of Exhibit "A", (i) drawn by the Borrower to the order of a Lender in
the maximum amount of that Lender's Commitment Percentage of the Revolving
Credit Commitment, (ii) duly executed by the Borrower and (iii) delivered to
the Administrative Agent for redelivery to such Lender. The principal amount
actually due and owing each Lender under the Revolving Credit Note payable to
it shall be the aggregate unpaid principal amount of all Loans made by such
Lender, all as shown on the Loan Accounts established pursuant to Section 2.6.
2.2 INTEREST.
2.2a INTEREST RATES. During the term hereof the Borrower, in
accordance with the provisions of this Section 2.2, shall have the option of
electing from time to time one or more of the Interest Rate Options set forth
below to be applied by the Lenders to amounts outstanding hereunder:
(i) BASE RATE AND EURO-RATE OPTIONS. Interest (A) under the
Base Rate Option shall accrue at a rate per annum equal to the sum of (1) the
Base Rate plus (2) the Applicable Margin, as set forth below, and (B) under the
Euro-Rate Option shall accrue at a rate per annum equal to the sum of (1) the
Euro-Rate plus (2) the Applicable Margin, as set forth below. In all cases the
Applicable Margin shall fluctuate in accordance with the Total Indebtedness to
Adjusted Annualized Operating Cash Flow Ratio, as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
TOTAL INDEBTEDNESS TO ADJUSTED APPLICABLE MARGIN
ANNUALIZED OPERATING CASH FLOW RATIO
AS OF THE LAST DAY OF THE IMMEDIATELY -------------------------------------------------
PRECEDING FISCAL QUARTER BASE RATE EURO-RATE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than 10.00:1.00 1.750% 2.750%
</TABLE>
-26-
<PAGE> 35
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
TOTAL INDEBTEDNESS TO ADJUSTED APPLICABLE MARGIN
ANNUALIZED OPERATING CASH FLOW RATIO
AS OF THE LAST DAY OF THE IMMEDIATELY -------------------------------------------------
PRECEDING FISCAL QUARTER BASE RATE EURO-RATE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than or equal to 10.00:1.00 but 1.500% 2.500%
greater than 8.00:1.00
Less than or equal to 8.00:1.00 but 1.250% 2.250%
greater than 7.00:1.00
Less than or equal to 7.00:1.00 but 1.125% 2.125%
greater than 6.50:1.00
Less than or equal to 6.50:1.00 but 1.000% 2.000%
greater than 6.00:1.00
Less than or equal to 6.00:1.00 but 0.750% 1.750%
greater than 5.00:1.00
Less than or equal to 5.00:1.00 but 0.500% 1.500%
greater than 4.00:1.00
Less than or equal to 4.00:1.00 0.250% 1.250%
</TABLE>
2.2b ADJUSTMENTS TO INTEREST RATES.
(i) CHANGES IN TOTAL INDEBTEDNESS TO ADJUSTED ANNUALIZED
OPERATING CASH FLOW RATIO. Interest rate adjustments resulting from changes in
the Total Indebtedness to Adjusted Annualized Operating Cash Flow Ratio shall
be made without notice to the Borrower, based on such ratio as of the end of
the most recently completed Fiscal Quarter. All adjustments shall be
determined when the Borrower's quarterly financial statements and Compliance
Certificate indicating such adjustment to be warranted have been delivered to
the Administrative Agent pursuant to Section 5.2, and such adjustments will be
effective retroactively to the first day of the Fiscal Quarter for which such
statements and Compliance Certificate were delivered.
(ii) CHANGES IN BASE RATE. The Base Rate Option shall be
adjusted from time to time, without notice to the Borrower, as necessary to
reflect any changes in the Prime
-27-
<PAGE> 36
Rate or the Federal Funds Rate, which adjustments shall be automatically
effective on the day of any such change.
(iii) CHANGES IN EURO-RATE RESERVE PERCENTAGE. The
Euro-Rate Option shall be adjusted from time to time, without notice to the
Borrower, as necessary to reflect any changes in the Euro-Rate Reserve
Percentage, which adjustments shall be automatically effective on the day of
such change.
(iv) EVENT OF DEFAULT. Upon the occurrence of and during
the continuance of an Event of Default, the outstanding principal amount of the
Loans shall bear interest from the date of such occurrence at a rate per annum
which is equal to two percent (2%) in excess of the rate then in effect under
the Base Rate Option (i.e., the Base Rate plus the Applicable Margin plus 2%).
2.2c INTEREST RATE OPTION ELECTIONS, RENEWALS AND CONVERSIONS.
Subject to the remaining provisions of this Agreement, the Borrower shall have
the options to elect to have all or any Loans bear interest at either of the
Interest Rate Options, to renew elections of Interest Rate Options and to
convert Loans to other Interest Rate Options. Notice of each election, renewal
and conversion shall be made in accordance with Section 2.4. Elections of,
conversions to or renewals of the Base Rate Option shall continue in effect
until converted to the Euro-Rate Option. Elections of, conversions to or
renewals of the Euro-Rate Option shall expire as to each such Euro-Rate Option
at the expiration of the applicable Euro-Rate Interest Period. Any Loans
outstanding for which no election have been made shall bear interest under the
Base Rate Option.
2.2d LIMITATION ON ELECTION OF EURO-RATE OPTIONS. Each election of
the Euro-Rate Option or the prepayment of all or any Euro-Rate Loans shall be
in the minimum principal amount of $1,000,000 or, if in excess of $1,000,000,
in integral multiples of $500,000. At no time during the term hereof may there
be more than a total of five (5) separate Euro-Rate Interest Periods in effect.
Upon the occurrence and during the continuance of an Event of Default, the
Borrower's right to elect, renew or convert to Euro-Rate Loans shall be
suspended.
-28-
<PAGE> 37
2.2e SPECIAL PROVISIONS RELATING TO EURO-RATE OPTION.
(i) EURO-RATE UNASCERTAINABLE. In the event that on any
date on which a Euro-Rate would otherwise be set the Administrative Agent shall
have determined in good faith (which determination shall be final and
conclusive) that, by reason of circumstances affecting the London interbank
market, adequate and reasonable means do not exist for ascertaining the
Euro-Rate, the Administrative Agent shall give prompt notice of such
determination to the Borrower and the other Lenders, and until the
Administrative Agent notifies the Borrower that the circumstances giving rise
to such determination no longer exist, the right of the Borrower to borrow
under, renew or convert to the Euro-Rate Option shall be treated as a request
to borrow under, renew or convert to the Base Rate Option.
(ii) ILLEGALITY OF OFFERING EURO-RATE. If the
Administrative Agent shall determine in good faith, based on a notice from any
Lender, which determination shall be final and conclusive, that compliance by
the Administrative Agent or any Lender with any applicable Governmental Rule
(whether or not having the force of law), or the interpretation or application
thereof by any Governmental Authority has made it unlawful for such Lender to
make or maintain Euro-Rate Loans, the Administrative Agent shall give notice of
such determination to the Borrower and the Lenders. Notwithstanding any
provision of this Agreement to the contrary, unless and until the
Administrative Agent shall give notice to the Borrower that the circumstances
giving rise to such determination no longer apply:
(A) with respect to any Euro-Rate Interest
Periods thereafter commencing, interest on the corresponding Euro-Rate Loans
shall be computed and payable under the Base Rate Option; and
(B) on such date, if any, as shall be required by
law, any Euro-Rate Loans then outstanding shall be automatically renewed at the
Base Rate Option; and the Borrower shall pay to the Lenders the accrued and
unpaid interest on such Euro-Rate Loans to (but not including) such renewal
date.
The Borrower shall pay the Lenders any additional amounts reasonably necessary
to compensate the Lenders (on an after-tax basis) for any out-of-pocket costs
incurred by the Lenders as a result of any renewal pursuant to item (B) above
on a day other than the last day of the relevant Euro-Rate Interest Period,
including, but not limited to, any interest or fees payable by the Lenders to
lenders of funds obtained by them to loan or maintain the Loans so converted.
The Lenders shall furnish to the Borrower a certificate showing the calculation
of the amount necessary to compensate the Lenders (on an after-tax basis) for
such costs (which certificate, in the absence of manifest error, shall be
conclusive), and the Borrower shall pay
-29-
<PAGE> 38
such amount to the Lenders, as additional consideration hereunder, within 10
Business Days of the Borrower's receipt of such certificate.
(iii) INABILITY TO OFFER EURO-RATE. In the event that a
Lender shall determine, in its sole but reasonable discretion, that it is
unable to obtain deposits in the London interbank market in sufficient amounts
and with maturities related to the Euro-Rate Loans which would enable such
Lender to fund such Euro-Rate Loans, then such Lender shall immediately notify
the Administrative Agent. The Administrative Agent shall then notify the
Borrower that the right of the Borrower to borrow under, convert to or renew
the Euro-Rate Option shall be suspended. Following notification of the
suspension of the Euro-Rate Option, the Borrower and the affected Lender shall
negotiate in good faith and in a timely manner for a modified Euro-Rate which
will allow such Lender to realize its anticipated and bargained-for yield. In
the event that the Borrower and the affected Lender cannot agree on a modified
Euro-Rate, any notice of borrowing under, conversion to or renewal of the
Euro-Rate Option which was to become effective during the period of suspension
shall be treated as a request to borrow under, convert to or renew the Base
Rate Option with respect to the principal amount specified therein.
(iv) INDEMNITY. In addition to the other provisions of
this Section 2.2e, the Borrower hereby agrees to indemnify the Administrative
Agent and the Lenders against any loss or expense which the Administrative
Agent or any Lender may sustain or incur as a consequence of any default by the
Borrower in failing to make any borrowing, conversion or renewal hereunder to
bear interest at the Euro-Rate Option on the scheduled date, in failing to make
when due (whether by declaration, acceleration or otherwise) any payment of any
Euro-Rate Loan or in making any payment or prepayment of any Euro-Rate Loan or
any part thereof on any day other than the last day of the relevant Euro-Rate
Interest Period, including but not limited to any premium or penalty incurred
by the Administrative Agent or any Lender in respect of funds borrowed by it
for the purpose of making or maintaining any Euro-Rate Loan as determined in
good faith by the Administrative Agent or any Lender in the exercise of its
sole but reasonable discretion. The affected Lender shall furnish to the
Borrower a certificate showing the calculation of the amount of any such loss
or expense (which certificate, absent manifest error, shall be conclusive), and
the Borrower shall pay such amount to the affected Lender within ten (10)
Business Days of the Borrower's receipt of such certificate.
2.2f YIELD PROTECTION. If any Governmental Rule or the
interpretation or application thereof by any court, any Governmental Authority
charged with the administration thereof or the compliance with any guideline or
request from any central bank or other Governmental Authority, whether or not
having the force of law:
-30-
<PAGE> 39
(i) subjects the Administrative Agent or any Lender to
any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind
hereunder (other than any tax imposed or based upon the income of the
Administrative Agent or such Lender and payable to any Governmental Authority
or taxing authority of the United States of America or any state thereof) or
changes the basis of taxation of the Administrative Agent or any Lender with
respect to payments by the Borrower of principal, interest or other amounts due
from the Borrower hereunder (other than any change which affects, and to the
extent that it affects, the taxation by the United States of America or any
state thereof of the total net income of the Administrative Agent or such
Lender); or
(ii) imposes, modifies or deems applicable any reserve,
special deposit, special assessment or similar requirements against assets held
by, deposits with or for the account of or credit extended by the
Administrative Agent or any Lender (other than such requirements which are
included in the determination of the Euro-Rate hereunder);
and the result of any of the foregoing is to increase the cost to the
Administrative Agent or the affected Lender, reduce the income receivable by
the Administrative Agent or such Lender, reduce the rate of return on the
Administrative Agent's or such Lender's capital or impose any expense upon the
Administrative Agent or such Lender by an amount which the Administrative Agent
or such Lender in its sole but reasonable discretion deems to be material, the
Administrative Agent or the affected Lender shall from time to time notify the
Administrative Agent of the amount determined by such Lender (which
determination, absent manifest error, shall be conclusive) to be reasonably
necessary to compensate the Administrative Agent or such Lender (on an
after-tax basis) for such increase in cost, reduction in income, reduction in
rate of return or additional expense, and setting forth the calculations
therefor, and the Administrative Agent shall thereupon notify the Borrower.
The Borrower shall pay such amount to the Administrative Agent or the affected
Lender, as additional consideration hereunder, within ten (10) Business Days of
the Borrower's receipt of such notice from the Administrative Agent.
2.2g METHOD OF CALCULATION. In determining the amount due the
Administrative Agent and the Lenders hereunder by reason of the application of
this Section 2.2, the Administrative Agent and the Lenders may use any
reasonable averaging or attribution method; provided, however, that the
Administrative Agent and each Lender must use reasonable efforts to minimize
such losses and costs.
2.2h INTEREST PAYMENT DATES. Interest due on all outstanding Base
Rate Loans shall be payable quarterly in arrears on the last day of each
calendar quarter for the calendar quarter just ended. The first payment of
interest under the Base Rate Option shall be due on December 31, 1996 and shall
be for the actual number of days elapsed between the Closing
-31-
<PAGE> 40
Date and such date. Interest due on all outstanding Euro-Rate Loans shall be
payable on the last day of each Euro-Rate Interest Period and, for Euro-Rate
Interest Periods of six months or more, also quarterly in arrears on each
three-month anniversary date of the first day of such Euro-Rate Interest
Period. All accrued and unpaid interest on the Loans shall be due and payable
on the Maturity Date and, after any maturity of the Revolving Credit Notes or
the Obligations, whether by acceleration or otherwise, on demand until all
amounts due hereunder are paid in full.
2.2i CALCULATION OF INTEREST. Interest under the Base Rate Option
shall be calculated on the basis of the actual number of days elapsed, using a
year of 365 or 366 days, as the case may be. Interest under the Euro-Rate
Option shall be calculated on the basis of the actual number of days elapsed,
using a year of 360 days. Interest for any period shall be calculated from and
including the first day thereof to but not including the last day thereof.
2.3 CAPITAL ADEQUACY. If (i) any adoption of, change in or
interpretation of any Governmental Rule, or (ii) compliance with any guideline,
request or directive of any central bank or other Governmental Authority or
quasi-Governmental Authority exercising control over banks or financial
institutions generally, including but not limited to regulations set forth at
12 C.F.R. Part 3 (Appendix A), 12 C.F.R. Part 208 (Appendix A), 12 C.F.R. Part
225 (Appendix A) and 12 C.F.R. Part 325 (Appendix A) or any court requires that
the commitments of any Lender hereunder be treated as an asset or otherwise be
included for purposes of calculating the appropriate amount of capital to be
maintained by such Lender or any corporation controlling such Lender (a
"CAPITAL ADEQUACY EVENT"), the result of which is to reduce the rate of return
on such Lender's capital as a consequence of such commitments to a level below
that which such Lender could have achieved but for such Capital Adequacy Event,
taking into consideration such Lender's policies with respect to capital
adequacy, by an amount which such Lender deems to be material, such Lender
shall promptly deliver to the Administrative Agent and the Borrower a
certificate of the amount necessary to compensate such Lender for the reduction
in the rate of return on its capital attributable to such commitments (the
"CAPITAL COMPENSATION AMOUNT"), calculated in good faith, using reasonable
attribution and averaging methods, which certificate, absent manifest error,
shall be presumed to be correct. Such amount shall be due and payable by the
Borrower to the affected Lender ten (10) Business Days after such notice is
given.
2.4 REQUESTS FOR LOANS, INTEREST RATE OPTIONS AND CONVERSIONS.
Each request for a Loan and for the election, renewal or conversion to or of an
Interest Rate Option shall be made to the Administrative Agent orally or in
writing by an Authorized Officer no later than 12:00 noon. (Eastern time) (i)
at least one (1) Business Day prior thereto, with respect to Base Rate Loans
and (ii) at least three (3) Business Days prior thereto, with respect to
Euro-Rate Loans. Any oral request for a Loan shall be followed immediately by
the Borrower's written
-32-
<PAGE> 41
confirmation of such request, executed by an Authorized Officer, which
confirmation must set forth the amount and date of the Loan, the Interest Rate
Option selected and, if applicable, the Euro-Rate Interest Period being
selected. All written requests and confirmations shall be in the form of
Exhibit "B". A request from the Borrower pursuant to this Section 2.4 with
respect to a Euro-Rate Loan shall irrevocably commit the Borrower to accept
such Euro-Rate Loan on the date specified in such request. The Administrative
Agent shall notify the Lenders of each request for a Base Rate Loan or a
Euro-Rate Loan as soon as practicable, but not later than 12:00 noon (Eastern
time) on the date on which such Loan is to be made. Each Lender shall make its
Commitment Percentage of such Loan available to the Borrower in immediately
available funds at the principal office of the Administrative Agent prior to
1:00 p.m. (Eastern time) on the date such Loan is to be made.
2.5 METHOD OF DISBURSEMENTS AND PAYMENTS. All Loans shall be made
by the Administrative Agent funding the account of the Borrower maintained at
the Administrative Agent, if any, or by the Administrative Agent making a wire
transfer into an account of the Borrower designated by the Borrower or as
otherwise directed by the Borrower to the Administrative Agent in writing. All
payments of principal, interest, Fees, costs and other amounts due hereunder
and under the other Loan Documents shall be made by the Borrower to the
Administrative Agent at the Administrative Agent's principal office at 909
Fannin, Suite 1700, Houston, Texas 77010 not later than 2:00 p.m. (Eastern
time) on the due date. All such Loans and payments shall be immediately good
funds when either transferred by the Administrative Agent to the Borrower, or
when delivered by the Borrower to the Administrative Agent, as the case may be.
2.6 LOAN ACCOUNTS. Each Lender shall open and maintain on its
books a Loan Account in the Borrower's name with respect to Loans made,
repayments, prepayments, the computation and payment of interest and other
amounts due and sums paid to such Lender hereunder and under the other Loan
Documents. Except in the case of manifest error in computation, such records
shall be presumed correct as to the amount at any time due to such Lender from
the Borrower. The failure of any Lender to make an entry in its Loan Account
shall not abrogate the Borrower's duty to repay the Obligations owned to such
Lender.
2.7 FEES
2.7a COMMITMENT FEE. The Borrower shall pay to the Administrative
Agent, for the Pro Rata benefit of the Lenders, on the last day of each
calendar quarter during the term of the Revolving Credit Commitment for the
calendar quarter just ended and on the Maturity Date, a Commitment Fee
calculated on the basis of the actual number of days elapsed, using a year of
365 or 366 days, as the case may be, at the rate of .375% per annum on the
average daily (computed at the opening of business) unused amount of the
Revolving Credit
-33-
<PAGE> 42
Commitment. The first payment of the Commitment Fee shall be due on December
31, 1996 and shall be for the actual number of days elapsed between the Closing
Date and such date.
2.7b FEES PAYABLE UNDER FEE LETTERS. The Borrower shall pay to the
Agents such fees as are described in the Fee Letters, on or prior to the
payment dates described in the Fee Letters.
2.7c PAYMENT OF FEES. All Fees shall be deemed to be fully earned
when paid and shall be nonrefundable.
2.8 PAYMENT FROM ACCOUNTS MAINTAINED BY BORROWER. In the event
that any payment of principal, interest, Fees, other expenses or amounts due
the Lenders or any Agent under any of the Loan Documents is not paid when due,
the Administrative Agent is hereby authorized to effect such payment by
debiting any demand deposit account of the Borrower now or in the future
maintained with the Administrative Agent. This right of debiting accounts of
the Borrower is in addition to any right of setoff accorded the Lenders
hereunder or by operation of law. The Administrative Agent shall give the
Borrower written notice of any such debit within one (1) Business Day after it
occurs.
ARTICLE 3. SET-OFF, SECURITY INTERESTS AND GUARANTY
3.1 SET-OFF. To secure the repayment of the Obligations, the
Borrower hereby gives to each Lender and any Participant a lien and security
interest upon and in any of the Borrower's property, credits, securities or
money which may at any time be delivered to, or be in the possession of, or
owed by such Lender and any Participant in any capacity whatever, including the
balance of any deposit account maintained by the Borrower with such Lender or
the Participant, as the case may be. The Borrower hereby authorizes each
Lender and each Participant, at any time and from time to time upon the
occurrence and during the continuance of an Event of Default, at such Lender's
or the Participant's option, to apply, at the discretion of such Lender or
Participant, to the payment of the Obligations, any and all such property,
credits, securities or money now or hereafter in the hands of the Lender or the
Participant or belonging or owed to the Borrower. Each Lender and Participant
shall give the Borrower prompt written notice of any set-off after it occurs.
3.2 PERSONAL AND REAL PROPERTY.
3.2a PERSONAL PROPERTY INTERESTS. To secure the repayment of the
Obligations, the Borrower hereby grants and agrees to cause each Subsidiary to
grant to the Collateral Agent, for and on behalf of the Lenders, a first and
prior Encumbrance, junior only to Permitted
-34-
<PAGE> 43
Encumbrances, in all of their respective now owned or hereafter acquired
Accounts, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles,
Goods, Instruments and Inventory, all subject to and as more fully described in
the Security Documents. To further evidence the grant of such Liens, on or
prior to the Closing Date and from time to time thereafter as required to
insure compliance with this Section 3.2 and the Security Documents upon the
request of the Collateral Agent, the Borrower shall, and shall cause each
Subsidiary to, in accordance with the provisions of Section 5.16, execute and
deliver to the Collateral Agent (i) a Security Agreement substantially in the
form of Exhibit "C" and (ii) all Uniform Commercial Code financing statements
reasonably requested by the Collateral Agent, so that at all times until all
Obligations have been permanently paid in full the Borrower and each of its
Subsidiaries have granted to the Collateral Agent, for and on behalf of the
Lenders, a first and prior lien and security interests, subject to Permitted
Encumbrances, in and to all personal property owned by it.
3.2b REAL PROPERTY INTERESTS. To secure the repayment of the
Obligations, the Borrower hereby grants and agrees to cause each Subsidiary to
grant to the Collateral Agent, for and on behalf of the Lenders, a first and
prior lien, junior only to Permitted Encumbrances, in such of its now owned or
leased or hereafter acquired or leased interests in real property (including
without limitation Fixtures), as the Agents shall require from time to time, in
their reasonable discretion. To further evidence the grant of such liens, on
or prior to the Closing Date and from time to time thereafter as required to
insure compliance with this Section 3.2b and the Security Documents the
Borrower, upon the request of the Collateral Agent, shall, and shall cause each
Subsidiary to, in accordance with the provisions of Section 5.16, execute and
deliver to the Collateral Agent (i) Mortgages substantially in the form of
Exhibit "D" and (ii) Assignments of Leases and Rents substantially in the form
of Exhibit "E", so that at all times until all Obligations have been
permanently paid in full the Borrower and its Subsidiaries have granted to the
Collateral Agent, for and on behalf of the Lenders, a first and prior
Encumbrance, subject to Permitted Encumbrances, in and to all real property
interests owned or leased by it.
3.2c BORROWER'S OBLIGATION TO UPDATE PERSONAL AND REAL PROPERTY
INFORMATION. The provisions of Subsections 3.2a and 3.2b to the contrary
notwithstanding, the Borrower shall be required to deliver to the Collateral
Agent not more frequently than once each year an updated Perfection Certificate
so that the Collateral Agent can prepare additional Security Documents and
Subsidiary Security Documents for execution and delivery by the Borrower and/or
its Subsidiaries, if needed, to insure compliance with Subsections 3.2a and
3.2b.
3.3 PLEDGE OF BORROWER'S AND SUBSIDIARIES STOCK. To secure the
repayment of the Obligations, the Borrower agrees to (i) cause Wireless and any
other shareholders of the Borrower to grant to the Collateral Agent, for and on
behalf of the holders of the Obligations,
-35-
<PAGE> 44
from time to time, a first and prior lien and security interest in all of the
issued and outstanding capital stock of the Borrower and (ii) grant to the
Collateral Agent, for and on behalf of the Lenders, from time to time, a first
and prior lien and security interest in all of the issued and outstanding
capital stock of the Subsidiaries of the Borrower owned by the Borrower. To
evidence the grant of such liens, on or prior to the Closing Date and from time
to time thereafter as required to insure compliance with this Section 3.3 and
upon the request of the Collateral Agent, the Borrower shall and shall cause
each of its shareholders to execute and deliver to the Collateral Agent (i) a
Pledge Agreement substantially in the form of Exhibit "F", (ii) all
certificates evidencing ownership of such stock, and (iii) an executed, undated
blank stock power for each such stock certificate, so that at all times until
all Obligations have been permanently paid in full the shareholders of the
Borrower and its Subsidiaries have granted to the Collateral Agent, for and on
behalf of the holders of the Obligations, a first and prior lien in all of the
issued and outstanding capital stock of the Borrower and each of its
Subsidiaries.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this
Agreement and to make the Loans herein provided for, the Borrower makes the
following representations and warranties to the Agents and the Lenders, all of
which shall survive the execution and delivery of this Agreement and the making
of the Loans:
4.1 EXISTENCE AND ORGANIZATION. The Borrower and Wireless are
corporations duly organized, validly existing and in good standing under the
laws of the State of Ohio. Each Subsidiary of the Borrower is duly organized,
validly existing and in good standing under the laws of the state of its
formation. The Borrower and Wireless are duly qualified or licensed and in
good standing as foreign entities authorized to do business in each
jurisdiction where the failure to be so qualified or licensed would have a
Material Adverse Effect on the Borrower or Wireless, as the case may be.
4.2 CAPITALIZATION; OWNERSHIP; TITLE TO SHARES. The authorized
capital stock of Wireless and the Borrower is described on Schedule 4.2. All
of the issued and outstanding capital stock of the Borrower is owned by
Wireless, and all of the issued and outstanding capital stock of Wireless is
owned as described on Schedule 4.2. All of the issued and outstanding shares
of capital stock of the Borrower and Wireless are fully paid and nonassessable.
There are no options, warrants or other rights outstanding to purchase any
shares of the Borrower or Wireless, nor are any securities of the Borrower or
Wireless convertible into or exchangeable for its common stock, except as shown
on Schedule 4.2.
-36-
<PAGE> 45
4.3 SUBSIDIARIES AND OTHER INVESTMENTS. Except for the ownership
by Wireless of the issued and outstanding capital stock of the Borrower,
neither the Borrower nor Wireless has as of the Closing Date, any Subsidiaries
or any ownership interests in any other Person.
4.4 POWER AND AUTHORITY. The Borrower and its Subsidiaries have
the lawful power to own or lease their respective properties and to engage in
the businesses they now conduct or propose to conduct. The Borrower is duly
authorized to enter into, execute, deliver and perform all of the terms and
provisions of this Agreement and the other Loan Documents to which it is a
party, to incur the Obligations and to perform its obligations under the Loan
Documents to which it is a party. All necessary corporate action required to
authorize the execution, delivery and performance of this Agreement, the
Revolving Credit Notes and the other Loan Documents to which the Borrower is a
party has been properly taken by the Borrower.
4.5 VALIDITY AND BINDING EFFECT. This Agreement has been, and
each other Loan Document will be, duly executed and delivered by the Borrower
or the Subsidiary which is a party thereto. This Agreement and the other Loan
Documents, when delivered by the Borrower or such Subsidiary, will constitute
legal, valid and binding obligations of the Borrower or such Subsidiary,
enforceable against the Borrower or such Subsidiary in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
except as such enforceability may be limited by the availability of equitable
remedies.
4.6 NO CONFLICT. Neither the execution and delivery of this
Agreement and the other Loan Documents by the Borrower or the Subsidiary which
is a party thereto, nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
the Borrower or such Subsidiary (i) will materially conflict with, or will
constitute a material default under or result in any material breach of (A) the
terms and conditions of the Borrower's or such Subsidiary's articles or
certificate of incorporation, by-laws, regulations or other organizational
documents or (B) any Governmental Rule or any material agreement, instrument,
order, writ, judgment, injunction or decree, including but not limited to their
respective Governmental Approvals and FCC Licenses, to which the Borrower or
such Subsidiary is a party or by which it is bound or to which it is subject,
if such event described in this item (B) would have a Material Adverse Effect,
or (iii) will result in the creation or enforcement of any Encumbrance
whatsoever upon any property, whether now owned or hereafter acquired, of the
Borrower or such Subsidiary, except for Permitted Encumbrances.
-37-
<PAGE> 46
4.7 BUSINESS. The Borrower and its Subsidiaries are engaged only
in the business of owning, constructing, managing, operating and investing in
Cellular Systems, paging businesses, and other wireless communication and
related businesses.
4.8 CELLULAR SYSTEMS; GOVERNMENTAL APPROVALS. (i) All of the
Borrower's and its Subsidiaries' Cellular Systems are described on Schedule
4.8. The Borrower and each Subsidiary has all requisite power and authority
and has received all FCC Licenses required under the Communications Act of
1934, as amended, and the rules, regulations and orders promulgated or issued
by the FCC thereunder, and all other Governmental Approvals, required in
connection with the ownership, construction, erection, installation, operation
and maintenance by it of its Cellular Systems, and the conduct of the present
and proposed businesses of the Borrower and such Subsidiaries. All MSA and RSA
FCC Licenses and all state public utility commission licenses and approvals
have been validly issued and are in full force and effect, and all fees and
other amounts owed by the Borrower and such Subsidiaries with respect thereto
have been paid. All other Government Approvals which are material to the
operation of the Borrower's and its Subsidiaries' Cellular Systems and other
businesses have been validly issued and are in full force and effect, and all
fees and other amounts owed by the Borrower and such Subsidiaries with respect
thereto have been paid.
(ii) Set forth on Part I of Schedule 4.8 hereto is a complete list of
all MSA and RSA FCC Licenses and state public utility commission licenses and
approvals of the Borrower and its Subsidiaries. Except as set forth on Part II
of Schedule 4.8 (A) each Governmental Approval is validly issued and in full
force and effect, and constitutes in all material respects all of the
authorizations by the FCC and other Governmental Authorities necessary for the
operation of the Borrower's and its Subsidiaries' businesses including, without
limitation, the operation of the Cellular Systems in the same manner as they
are now presently conducted; (B) the Borrower and its Subsidiaries have
fulfilled and performed all of their respective obligations with respect to
their respective Governmental Approval, and complete and correct copies of all
presently existing MSA and RSA FCC Licenses and state public utility commission
licenses and approvals have been delivered to the Agents; (C) no event has
occurred that (1) results in, or after notice or lapse of time or both would
result in, revocation or termination of any MSA or RSA FCC License or any state
public utility commission license or approval, or (2) materially and adversely
affects or in the future may (so far as the Borrower can now reasonably
foresee) materially adversely affect any of the rights of the Borrower or any
Subsidiary under any other Governmental Approval; (D) all material filings of
reports, applications, documents, instruments and information required to be
made by the Borrower or any Subsidiary with any Governmental Authority pursuant
to applicable Governmental Rules or the activities of the Borrower or any of
its Subsidiaries with respect thereto including, without limitation, the
operation of the Cellular Systems, have been made; (E) except as set forth on
Part III of Schedule 4.8, there is no judgment, decree, order, action,
-38-
<PAGE> 47
inquiry, investigation or other proceeding of any kind which is outstanding,
pending or threatened in connection with the Borrower's or any Subsidiary's
Governmental Approvals, whether brought by the FCC or by another Governmental
Authority which, if adversely decided, would have a Material Adverse Effect;
(F) the Cellular Systems are being operated in substantial compliance with all
rules and regulations of the FCC and other Governmental Authorities applicable
to the Cellular Systems; and (G) the Borrower has no reason to believe that the
MSA and RSA FCC Licenses and state public utility commission licenses and
approvals listed and described on Part I of Schedule 4.8 will not be renewed in
the ordinary course.
4.9 FINANCIAL MATTERS.
4.9a HISTORICAL FINANCIAL STATEMENTS. The Borrower has delivered
to the Agents audited financial statements for the Fiscal Year ended December
31, 1995 and unaudited quarterly financial statements for the Fiscal Quarter
ended June 30, 1996 for [Sygnet entities]. Such financial statements are
complete and correct in all material respects, subject to year-end adjustments,
and fairly present the financial condition of the [Sygnet entities] in all
material respects and the results of its operations as of the dates and for the
periods referred to, and have been prepared in accordance with GAAP throughout
the periods involved. The Borrower has no material liabilities, whether direct
or indirect, fixed or contingent, and no liability for taxes, long-term leases
or unusual forward or long-term commitments as of the date of such financial
statements which are not reflected in such financial statements or in the notes
thereto. The Borrower has delivered to the Agents [describe financial
statements delivered for Horizon,] and to the best of the Borrower's knowledge
such financial statements are complete and correct in all material respects.
4.9b FINANCIAL PROJECTIONS. The Borrower has delivered to the
Administrative Agent financial projections of the Borrower for the nine-year
period beginning with the Fiscal Year ending December 31, 1996. Such
projections are based upon reasonable assumptions and set forth a reasonable
range of possible results in light of the history of the Borrower's business,
present and foreseeable conditions and the intentions of the Borrower's
management.
4.10 MATERIAL ADVERSE CHANGE. Since December 31, 1995, there has
been no Material Adverse Change and there have been no events or developments
that individually or in the aggregate have had a Material Adverse Effect.
4.11 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the Borrower's knowledge, threatened against the
Borrower, any of its Subsidiaries, Wireless or any of their respective
businesses, operations, properties, Cellular Systems, prospects, profits or
condition (financial or otherwise), at law or in equity, before any
-39-
<PAGE> 48
Governmental Authority which, individually or in the aggregate, if adversely
determined, could reasonably be expected to have a Material Adverse Effect, or
which purport to affect the rights and remedies of the Agents and the Lenders
pursuant to the Loan Documents or which purport to restrain or enjoin (either
temporarily, preliminarily or permanently) the performance by the Borrower or
Wireless of any action contemplated by any of the Loan Documents. All pending
and, to the Borrower's knowledge, threatened actions, suits, proceedings and
investigations affecting the Borrower, its Subsidiaries or Wireless in
existence on the Closing Date are set forth on Schedule 4.11.
4.12 COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries have
duly complied with, and their respective properties, Cellular Systems, business
operations and leaseholds are in compliance in all material respects with all
Governmental Rules (other than Governmental Rules of the FCC, which are
addressed in Section 4.8) applicable to the Borrower, its Subsidiaries, their
respective properties and the conduct of their respective businesses, except
where the failure to comply will not have a Material Adverse Effect.
4.13 MATERIAL CONTRACTS. Schedule 4.13 lists all Material
Contracts relating to the business operations of the Borrower and its
Subsidiaries. All such Material Contracts are valid, binding and enforceable
upon the Borrower or the Subsidiary which is a party thereto and, to the best
of the Borrower's knowledge, each of the other parties thereto in accordance
with their respective terms, except to the extent that such invalidity,
non-binding effect or unenforceability would not cause a Material Adverse
Change. Neither the Borrower nor any of its Subsidiaries is in default of any
material provision of any such Material Contract to which it is a party, and
there is no default thereunder, to the Borrower's knowledge, with respect to
parties other than the Borrower and its Subsidiaries, except to the extent that
such default would not cause a Material Adverse Change as to the Borrower and
its Subsidiaries.
4.14 LABOR MATTERS; PAYMENT OF WAGES. Neither the Borrower nor any
of its Subsidiaries is a party to any collective bargaining agreement, and
there are no strikes, work stoppages, material grievances, disputes or
controversies with any union or any other organization of the Borrower's or its
Subsidiaries' employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization, except
to the extent that such strikes, work stoppages, material grievances, disputes
or controversies would not cause a Material Adverse Change. The Borrower has
not, within the two-year period preceding the date hereof, taken any action
which would have constituted or resulted in a "plant closing" or "mass layoff"
within the meaning of the Federal Worker Adjustment and Retraining Notification
Act of 1988 or any similar applicable Federal, state or local law. The
procedures by which the Borrower and its Subsidiaries have hired or will hire
their respective employees complies and will comply in all respects with each
collective bargaining agreement to which the Borrower or such Subsidiary is a
party and all
-40-
<PAGE> 49
applicable Federal, state and local laws, except to the extent that such
failure to comply would not cause a Material Adverse Change. The Borrower and
its Subsidiaries are in compliance with the Fair Labor Standards Act, as
amended and have paid all minimum and overtime wages required by law to be paid
to their respective employees, except for violations which would not have a
Material Adverse Effect.
4.15 FISCAL YEAR. The Fiscal Year of the Borrower ends on December
31 of each year.
4.16 CONDITION OF AND TITLE TO ASSETS. The Borrower and its
Subsidiaries have good title to their respective properties and assets except
for defects in title which, taken as a whole, are not material to the Borrower
or such Subsidiary. As of the date hereof, none of the assets of the Borrower
or any Subsidiary is subject to any Encumbrances except for Permitted
Encumbrances in existence on the Closing Date. Except for financing statements
evidencing Permitted Encumbrances, no currently effective financing statement
under the Uniform Commercial Code is in effect in any jurisdiction and no other
filing which names the Borrower or any of its Subsidiaries as debtor or which
covers or purports to cover any of the assets of the Borrower or any of its
Subsidiaries is currently effective and on file in any state or other
jurisdiction, and neither the Borrower nor any of its Subsidiaries has signed
any such financing statement or filing or any security agreement authorizing
any secured party thereunder to file any such financing statement or filing.
All of the assets and properties of the Borrower and its Subsidiaries that are
necessary for the operation of their respective businesses are in good working
condition and are able to serve the functions for which they are currently
being used, except for ordinary wear and tear, and except as would not have a
Material Adverse Effect.
4.17 TAX RETURNS AND PAYMENTS. The Borrower and its Subsidiaries
have filed all Federal, state, local and other tax returns required by law to
be filed. The Borrower and its Subsidiaries have paid all taxes, assessments
and other governmental charges levied upon the Borrower, such Subsidiary or any
of its properties, assets, income or franchises which are due and payable,
other than (i) those presently payable without penalty or interest, (ii) those
which are being contested in good faith by appropriate proceedings and (iii)
those which, if not paid, would not, in the aggregate, have a Material Adverse
Effect; and as to each of items (i), (ii) and (iii) the Borrower or such
Subsidiary has set aside on its books reserves for such claim as are determined
to be adequate by application of GAAP. The charges, accruals, and reserves on
the books of the Borrower and its Subsidiaries in respect of Federal, state,
local and other taxes and assessments for all fiscal periods to date are
adequate, and the Borrower knows of no unpaid assessments for additional
Federal, state, local or other taxes for any such fiscal period or any basis
therefor.
-41-
<PAGE> 50
4.18 INTELLECTUAL PROPERTY. The Borrower and its Subsidiaries own
or license all the material patents, patent applications, trademarks, trademark
applications, permits, service marks, trade names, copyrights, copyright
applications, licenses, franchises, authorizations and other intellectual
property rights that are necessary for the operations of their respective
businesses, without infringement upon or conflict with the rights of any other
Person with respect thereto. To the best knowledge of the Borrower, no slogan
or other advertising, device, product, process, method, substance, part or
component or other material now employed, or now contemplated to be employed,
by the Borrower or any of its Subsidiaries infringes upon or conflicts with any
rights owned by any other Person, and no claim or litigation regarding any of
the foregoing is pending or, to the knowledge of the Borrower, threatened. No
patent, invention, device, application, and no statute, law, rule, regulation,
standard or code involving the Borrower's or any of its Subsidiaries'
intellectual property is pending or, to the knowledge of the Borrower,
proposed, except where the consequences in the aggregate have no Material
Adverse Effect. All of the Borrower's and its Subsidiaries' material patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and authorizations are listed on Schedule 4.18.
4.19 INSURANCE. The Borrower and its Subsidiaries currently
maintain insurance which meets or exceeds the requirements of Section 5.8
hereof and the applicable insurance requirements set forth in the other Loan
Documents, and such insurance is provided by insurers meeting the requirements
of Section 5.8 and is of such types and at least in such amounts as are
customarily carried by, and insures against such risks as are customarily
insured against by similar businesses similarly situated and owning, leasing
and operating similar properties to those owned, leased and operated by the
Borrower and its Subsidiaries. All of such insurance policies, which are
listed on Schedule 4.19, are valid and in full force and effect. No notice has
been given or claim made and no grounds exist to cancel or avoid any of such
policies or to reduce the coverage provided thereby.
4.20 CONSENTS AND APPROVALS. Except for (i) the filing of the
UCC-1 financing statements contemplated by Section 3.2, (ii) filing of the
appropriate Security Document with the United States Patent and Trademark
Office and (iii) approvals required by the FCC in order to enforce certain
provisions of the Security Documents, no order, authorization, consent,
license, validation or approval of, or notice to, filing, recording, or
registration with any Governmental Authority, or the exemption by any such
Governmental Authority, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any of the Loan Documents
or (ii) the legality, binding effect or enforceability of any such Loan
Document.
4.21 NO DEFAULTS OR MATERIAL ADVERSE CHANGES. No event has
occurred and is continuing and no condition exists or will exist after giving
effect to the Loans to be made on
-42-
<PAGE> 51
the Closing Date which constitutes a Default or an Event of Default. Neither
the Borrower nor any Subsidiary is in violation of (i) any term or provision of
its articles of incorporation, by-laws, regulations or other organizational
documents or (ii) any material agreement or instrument to which it is a party
or by which it or any of its properties may be bound or subject, which
violation would constitute a Material Adverse Change.
4.22 HORIZON ACQUISITION. The Horizon Acquisition has been
consummated in accordance with the terms of the Horizon Acquisition Documents,
all consideration required to be paid in connection therewith on or prior to
the Closing Date has been paid and all conditions precedent to the consummation
thereof have been satisfied or waived. All assets purchased by Wireless
pursuant to the Horizon Acquisition have been contributed to the Borrower or
title thereto has been assigned to the Borrower in each case as a capital
contribution.
4.23 STRUCTURALLY SUBORDINATED INDEBTEDNESS. Structurally
Subordinated Indebtedness in the principal amount of $___________ has been
issued by Wireless in accordance with the terms of the Structurally
Subordinated Indebtedness Documents and Wireless has received the net proceeds
of such issuance in the amount of $__________.
4.24 PRIORITY. Assuming the execution by the Collateral Agent of
the Security Documents and the filing by the Collateral Agent of the Security
Documents in all appropriate governmental filing offices, the Security Interest
(except for types of collateral possession of which is required for perfection
and as to which the Collateral Agent does not have possession) is a valid and
perfected first priority security interest in the Collateral in favor of the
Collateral Agent, for the benefit of the Lenders, securing, in accordance with
the terms of the Security Documents, the Obligations. The Collateral is
subject to no Encumbrances other than Permitted Encumbrances. The Security
Interests created by the Security Documents are enforceable as security for the
Obligations in accordance with their terms with respect to the Collateral
subject, as to enforcement of remedies, to the qualification that enforcement
may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws affecting enforcement of creditors'
rights generally (insofar as any such law relates to the bankruptcy, insolvency
or similar event of the Borrower or any of its Subsidiaries, as the case may
be).
4.25 SOLVENCY. As of the Closing Date and after giving effect to
the transactions contemplated by the Loan Documents (i) the property of the
Borrower, at a fair valuation, will exceed its debt; (ii) the capital of the
Borrower will not be unreasonably small to conduct its business; (iii) the
Borrower will not have incurred debts, or have intended to incur debts, beyond
its ability to pay such debts as they mature; and (iv) the present fair salable
value of the assets of the Borrower will be greater than the amount that will
be required to pay its
-43-
<PAGE> 52
probable liabilities (including debts) as they become absolute and matured.
For purposes of this Section, "debt" means any liability on a claim, and
"claim" means (i) the right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
undisputed, legal, equitable, secured or unsecured, or (ii) the right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, undisputed, secured or
unsecured.
4.26 PLANS AND BENEFIT ARRANGEMENTS. (i) All Plans and Benefit
Arrangements maintained by the Borrower or any ERISA Affiliate for employees
are set forth on Schedule 4.26. No Borrower and no ERISA Affiliate has made
any promises of retirement or other benefits to employees or former employees
(A) except as set forth in any Plan or Benefit Arrangement, (B) except for such
promises under unfunded plans maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees, which in the aggregate are not material in amount, and (C) except
for any other promises which in the aggregate are not material in amount.
(ii) Each Plan and Benefit Arrangement has been maintained
and administered in all material respects in compliance with ERISA and the
Internal Revenue Code and all rules, orders and regulations issued thereunder.
(iii) The Internal Revenue Service has determined that each
Plan and Benefit Arrangement which constitutes an employee pension benefit plan
as defined in Section 3(2) of ERISA and which is intended to qualify under
Section 401(a) of the Internal Revenue Code so qualifies under Section 401(a)
of the Internal Revenue Code, and that the trusts related thereto are exempt
from tax under the provisions of Section 501(a) of the Internal Revenue Code.
Nothing has occurred with respect to any such Plan or Benefit Arrangement or to
the related trusts since the date of the most recent favorable determination
letter issued by the Internal Revenue Service which has affected or may
reasonably be expected to affect adversely such qualification or exemption.
(iv) The Borrower and each ERISA Affiliate have complied
fully in all material respects with their respective obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect
to each Plan and Money Purchase Plan. No Borrower and no ERISA Affiliate has
sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code or has applied for an extension of any amortization
period under Section 412 of the Internal Revenue Code with respect to any Plan
or Money Purchase Plan. No Borrower and no ERISA Affiliate has failed to make
any contribution or payment to any Plan which has resulted or could reasonably
be expected to
-44-
<PAGE> 53
result in the imposition of a lien under ERISA or the Internal Revenue Code
against the property or rights to property of the Borrower or any ERISA
Affiliate.
(v) No Unfunded Benefit Liabilities exist with respect to
any Plans, and no Unfunded Benefit Liabilities would exist with respect to any
Plan if such Plan were terminated immediately.
(vi) No Reportable Event (other than a Reportable Event
described in Section 4043(b) of ERISA or in PBGC Regulation Section 2615.23)
has occurred with respect to any Plan.
(vii) No Termination Event has occurred or is reasonably
anticipated to occur with respect to any Plan which has resulted in or which
could result in the incurrence by the Borrower or any ERISA Affiliate of any
liability to the PBGC under Title IV of ERISA which has not been discharged or
satisfied. No such Termination Event is reasonably anticipated to occur which
could reasonably be expected to result in an Encumbrance in favor of the PBGC
against the property or rights to property of the Borrower or any ERISA
Affiliate.
(viii) Neither the Borrower nor any ERISA Affiliate which is
a "party in interest" (as that term is defined in Section 3(14) of ERISA) or a
"disqualified person" (as that term is defined in Section 4975 of the Internal
Revenue Code) with respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA), has engaged in a "prohibited transaction" (as defined
in Section 406 of ERISA or Section 4975 of the Internal Revenue Code) involving
any such employee benefit plan which would reasonably be expected to subject
the Borrower or such ERISA Affiliate to the tax or penalty imposed under
Section 502(i) of ERISA and Section 4975 of the Internal Revenue Code.
(ix) Neither the Borrower nor any ERISA Affiliate
currently contributes to, or is obligated to contribute to, or is a member of,
any Multiemployer Plan. No Borrower and no ERISA Affiliate has incurred, or is
reasonably expected to incur, any Withdrawal Liability to any Multiemployer
Plan.
(x) Neither the Borrower nor any ERISA Affiliate have
complied in all material respects with all requirements of Sections 10001 and
10002 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law
No. 99-272); Title I, Subtitle B, Part 6 of ERISA; and Section 4980B of the
Internal Revenue Code.
(xi) No Borrower and no ERISA Affiliate has entered into
any transaction described in Section 4069(a) of ERISA.
-45-
<PAGE> 54
(xii) No Benefit Arrangement provides post-retirement
welfare benefits of any type which would have a material adverse effect on the
financial condition of the Borrower and the ERISA Affiliates taken as a whole
and which would be required to be accounted for in the income statement,
balance sheet and footnotes of the financial report of the Borrower or any
ERISA Affiliate in the manner described in the Financial Accounting Standards
Board, Proposed Statement of Financial Accounting Standards, Employer's
Accounting for Post-retirement Benefits Other Than Pensions, if the same were
effective for the current Fiscal Year of the Borrower or any ERISA Affiliate.
4.27 ENVIRONMENTAL MATTERS. (i) To the best of the Borrower's
knowledge, except as set forth on Schedule 4.27:
(A) the Borrower and its Subsidiaries
are in material compliance with all applicable Environmental Laws;
(B) there has been no material
Contamination or material release of Hazardous Substances at, upon, under or
within any property owned or leased by the Borrower or any Subsidiary, and
there has been no Contamination or release of Hazardous Substances on any other
property that has migrated or threatens to migrate to any property owned or
leased by the Borrower or any Subsidiary;
(C) there are not now and, to the best
of the Borrower's knowledge never have been, underground or above-ground
storage tanks at any property owned or leased by the Borrower or any
Subsidiary;
(D) there are no transformers,
capacitors or other items of Equipment containing PCBs, violative of applicable
Environmental Law, at any property owned or leased by the Borrower or any
Subsidiary;
(E) other than materials used or
produced, held, transported and disposed of in accordance with all
Environmental Laws, the Borrower and its Subsidiaries have not used in their
respective operations, and the properties of the Borrower is not now and has
never been used by the Borrower or such Subsidiary (or, to the best knowledge
of the Borrower, by any predecessor in possession or other Person) for
treatment, generation, storage, recycling, or disposal of Hazardous Substances;
(F) no Hazardous Substances (except for
gasoline and other fuels stored in compliance with Environmental Laws) are
present at any property owned or leased by the Borrower or any Subsidiary, nor
will any Hazardous Substances be present upon any such property or in the
operation thereof by the Borrower or any Subsidiary, in quantities
-46-
<PAGE> 55
which constitute a hazard to the environment, except for Hazardous Substances
which are transported, used, stored, disposed of and otherwise handled in
accordance with all Environmental Laws, in proper storage containers; and
(G) All material permits and
authorizations required under Environmental Laws for all operations of the
Borrower and its Subsidiaries have been duly issued and are in full force and
effect, including but not limited to those for air emissions, water discharges
and treatment, storage tanks and the generation, treatment, storage and
disposal of Hazardous Substances.
(ii) Except as set forth in Schedule 4.27, there are no
past, pending or, to the best of the Borrower's knowledge, threatened
Environmental Claims against the Borrower, any of its Subsidiaries or any of
the property of the Borrower or any Subsidiary; and there is no condition or
occurrence on any property owned or leased by the Borrower or any Subsidiary
that could reasonably be anticipated (A) to form the basis of an Environmental
Claim against the Borrower, any Subsidiary or its properties or (B) to cause
any property owned or leased by the Borrower or any Subsidiary to be subject to
any restrictions on its ownership, occupancy or transferability under any
Environmental Law.
(iii) Except as set forth in Schedule 4.27, no notice
relating to Hazardous Substances is contained in any deed relating to any
property owned or leased by the Borrower or any Subsidiary, and there are no
facts or conditions on any such property that would require that such a notice
be placed in the deed to any such property.
(iv) Except as set forth in Schedule 4.27, no portion of
any property owned or leased by the Borrower or any Subsidiary contains
asbestos-containing material that is or threatens to become friable.
4.28 MARGIN STOCK. The Borrower is not engaged principally or as
one of its important activities in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (within the meaning of Regulation U). No Loan will be used,
immediately, incidentally or ultimately, to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying margin
stock, or for any other purpose which would violate or be inconsistent with any
of the regulations of the Board of Governors of the Federal Reserve System.
4.29 INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended from time to time, or a company under the "control" of
an "investment company", as
-47-
<PAGE> 56
those terms are defined in such Act, and shall not become such an "investment
company" or under such "control."
4.30 PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended from time to time.
4.31 FULL DISCLOSURE. Neither this Agreement nor any of the other
Loan Documents or any other document, certificate or statement furnished to the
Agents or the Lenders by or on behalf of the Borrower or its Subsidiaries
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Borrower which
materially and adversely affects the business, property, assets, financial
condition, results of operations or prospects of the Borrower or any of its
Subsidiaries which has not been set forth in this Agreement or in the other
documents, certificates and statements (financial or otherwise) furnished to
the Agents and the Lenders by or on behalf of the Borrower or any Subsidiary
prior to or on the date hereof in connection with the transactions contemplated
hereby.
ARTICLE 5. AFFIRMATIVE COVENANTS
From the date hereof and thereafter until the termination of
the Revolving Credit Commitment and until the Revolving Credit Notes and the
other Obligations of the Borrower hereunder are permanently paid in full, the
Borrower agrees, for the benefit of the Agents and the Lenders, that it will
comply with and cause its Subsidiaries to comply with each of the following
affirmative covenants:
5.1 USE OF PROCEEDS. The Loans shall be used by the Borrower only
for the following purposes:
(i) $_______________ shall be used to repay all
outstanding principal and all accrued and unpaid interest on Indebtedness owed
to the lenders under the Existing Credit Agreement;
(ii) To make Permitted Acquisitions, Permitted Payments
and Capital Expenditures;
-48-
<PAGE> 57
(iii) For the Borrower's and its Preferred Subsidiaries'
working capital and general corporate purposes;
(iv) To pay transaction costs in connection with the
Revolving Credit Commitment and the Loan Documents; and
(v) To pay directly, or to advance to Wireless to pay, a
portion of the purchase price and transaction costs relating to the Horizon
Acquisition.
5.2 DELIVERY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
During the term hereof, the Borrower shall deliver or cause to be delivered to
the Administrative Agent for redelivery to each Lender the following financial
statements and other information:
5.2a ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within 120 days after the end of each Fiscal Year of each of Wireless and
the Borrower, a balance sheet as of the end of such Fiscal Year and the related
statements of income, retained earnings and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year, all prepared on a consolidated basis and in accordance with GAAP
and presenting fairly the financial condition of Wireless and its Subsidiaries
and the Borrower and its Subsidiaries in such reasonable detail as the Agents
may request from time to time, all of the foregoing to be audited by and
accompanied by an unqualified statement of a recognized certified public
accounting firm reasonably acceptable to the Agents;
5.2b QUARTERLY FINANCIAL STATEMENTS. As soon as available and in
any event within 60 days after the end of each Fiscal Quarter of each of
Wireless and the Borrower, a balance sheet as of the end of such Fiscal Quarter
and the related statements of income and cash flows for such Fiscal Quarter and
for the year-to-date period ending on the last day of such Fiscal Quarter,
setting forth in each case the figures for such Fiscal Quarter and such
year-to-date period and, as to the Borrower, a comparison of such figures to
the Borrower's budget, all prepared on a consolidated basis and in accordance
with GAAP and presenting fairly the financial condition of Wireless and its
Subsidiaries and the Borrower and its Subsidiaries in such detail as the Agents
may reasonably request from time to time and certified as to fairness of
presentation, GAAP and consistency by the Chairman, President or Chief
Financial Officer of the Borrower or Wireless, as the case may be;
5.2c COMPLIANCE CERTIFICATE. Simultaneously with the delivery of
each set of annual and quarterly financial statements referred to in Sections
5.2a and 5.2b, an executed, completed Compliance Certificate substantially in
the form of Exhibit "H", executed by the Chief Executive Officer, the President
or the Chief Financial Officer of Wireless or the
-49-
<PAGE> 58
Borrower, as the case may be, and containing such additional information as the
Agents may reasonably request from time to time;
5.2d ANNUAL BUDGETS. As soon as available and in any event by
December 31 of each year, an annual budget for the Borrower and its
Subsidiaries for the upcoming Fiscal Year, containing such information and in a
form reasonably requested by the Agents from time to time.
5.2e SECURITIES INFORMATION. As soon as practicable after they
have become available, all regular and periodic reports filed by Wireless with
the Securities and Exchange Commission or any successor thereto, or with any
similar federal Governmental Authority, or with any state securities
commission.
5.2f OTHER REPORTS, INFORMATION AND NOTICES. Within the time
periods set forth below, the following other reports, information and notices:
(i) NOTICE OF DEFAULTS AND MATERIAL ADVERSE CHANGES.
Promptly after any Authorized Officer of the Borrower has learned of the
occurrence or existence of a Default or Event of Default or an event or set of
circumstances which has had or which may have a Material Adverse Effect or
which has caused or which may cause a Material Adverse Change, telephonic
notice thereof specifying the details thereof, the anticipated effect thereof
and the action which the Borrower has taken, is taking or proposes to take with
respect thereto, which notice shall be promptly confirmed in writing within
five Business Days by an Authorized Officer;
(ii) NOTICE OF BREACH, REVOCATION, ETC. OF MATERIAL CONTRACT.
Promptly after any Authorized Officer of the Borrower has learned of the
occurrence or existence of a material default by any party, including the
Borrower or any of its Subsidiaries, to any Material Contract to which the
Borrower or a Subsidiary is a party, or the actual or threatened termination,
revocation or non-renewal of any such Material Contract, telephonic notice
thereof specifying the details thereof, the anticipated effect thereof and the
action which the Borrower or such Subsidiary has taken, is taking or proposes
to take with respect thereto, which notice shall be promptly confirmed in
writing within five Business Days by an Authorized Officer;
(iii) NOTICES REGARDING FCC LICENSES AND OTHER GOVERNMENTAL
APPROVALS. Promptly after receipt thereof by the Borrower, (A) correspondence
or notices from any Governmental Authority that regulates the operations of the
Borrower or any Subsidiary (including without limitation the FCC) relating to
an actual or threatened change or development that would have a Material
Adverse Effect on the Borrower or such Subsidiary,
-50-
<PAGE> 59
and (B) all applications for renewals of any FCC License which is a cellular
license, and all applications for any new FCC License which is a cellular
license;
(iv) NOTICE OF LITIGATION. (A) Promptly after the receipt of
notice or service of the commencement of, or after the receipt of a written
threat thereof, written notice of any action, suit, proceeding or investigation
by, against or which is reasonably likely to have a Material Adverse Effect (B)
promptly after any Authorized Officer has notice thereof, written notice of any
decision, ruling, judgment, appeal, reversal or other significant action in
connection with any existing action, suit, proceeding or investigation before
any Governmental Authority which would have a Material Adverse Effect;
(v) ORDERS. Promptly after receipt thereof, a copy of any
order, judgment, decree or decision issued by any court, arbitrator or
Governmental Authority in any proceeding to which the Borrower or any
Subsidiary is a party which has a Material Adverse Effect;
(vi) STRUCTURALLY SUBORDINATED INDEBTEDNESS. Immediately
upon the Borrower's obtaining knowledge thereof, notice of any default or event
of default under the Structurally Subordinated Indebtedness Documents, or of
any enforcement or other action taken or to be taken under or in connection
therewith. [This section is subject to review of Structurally Subordinated
Indebtedness Documents.]
(vii) ERISA REPORTS.
(A) As soon as possible, and in any event not
later than the date notice is sent to the PBGC, notice of any Reportable Event
regarding any Plan and an explanation of any action which has been or which is
proposed to be taken with respect thereto;
(B) concurrent with the filing thereof, a copy of
any request to the United States Secretary of the Treasury for a waiver or
variance of the minimum funding standards of Section 302 of ERISA and Section
412 of the Internal Revenue Code with respect to any Plan or Money Purchase
Plan;
(C) as soon as possible, but in no event later
than 60 days after an officer of the Borrower becomes aware of unfunded
accumulated benefit obligations for any Plan, as determined in accordance with
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 87, Employer's Accounting for Pensions, (or any superseding
statement thereto), written notice of the occurrence of such event;
-51-
<PAGE> 60
(D) upon the request of any Lender, copies of
each annual report (Form 5500 Series) with accompanying schedules filed with
respect to each Plan or Money Purchase Plan;
(E) promptly after receipt thereof, a copy of any
notice which the Borrower or any ERISA Affiliate may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or Money Purchase
Plan, or to appoint a trustee to administer any Plan or Money Purchase Plan, or
to assert any liability under Title IV of ERISA against the Borrower or any
ERISA Affiliate;
(F) a copy of any notice of assessment of
Withdrawal Liability received by the Borrower or any ERISA Affiliate from any
Multiemployer Plan;
(G) as soon as possible, and in no event later
than the date notification is sent to the PBGC, notice of the failure by the
Borrower or any ERISA Affiliate to make a required installment or other payment
under Section 302 of ERISA and Section 412 of the Internal Revenue Code;
(H) concurrent with the filing thereof, a copy of
any Notice of Intent to Terminate any Plan filed under Section 4041(c) of
ERISA; and
(I) promptly after receipt thereof, but without
any obligation or responsibility to secure the same, copies of any calculations
of estimated Unfunded Benefit Liabilities (or, if applicable, the portions of
any estimated Unfunded Benefit Liabilities that would be allocated to the
Borrower or any ERISA Affiliate under Sections 4063 and 4064 or Section 4062(e)
of ERISA) for any Plans;
(viii) ENVIRONMENTAL CLAIMS. Promptly after receipt thereof,
a copy of any Environmental Claim that could have a Material Adverse Effect;
(ix) TAX RETURNS. Promptly upon the request of any Agent,
copies of all Federal, state, local and foreign tax returns and reports filed
by the Borrower or any of its Subsidiaries in respect of taxes measured by
income (excluding sales, use and like taxes);
(x) NOTICES OF TAX AUDITS. Promptly, and in any event within
ten (10) Business Days after receipt thereof by the Borrower, a copy of each
notice from any Governmental Authority received by the Borrower or any
Subsidiary of the Borrower of such Governmental Authority's intention to audit
any Federal, state, local or foreign tax return (except for notices of sales,
excise, use and property tax audits, which the Borrower shall provide to any
Agent upon request of such Agent) of the Borrower or such Subsidiary and a
-52-
<PAGE> 61
copy of each subsequent notice with respect thereto from any such Governmental
Authority; and
(xi) INSURANCE INFORMATION. Promptly, and in any event
within five (5) Business Days after receipt thereof by the Borrower or any
Subsidiary, a copy of any notice of any lapse, termination, non-renewal or
reduction in coverage of any insurance coverage required to be maintained by
the Borrower or any Subsidiary pursuant to any Loan Document.
5.2g ADDITIONAL INFORMATION; VISITATION. The Borrower shall
deliver to each Agent such additional financial statements, reports, financial
projections, and other information, whether or not financial in nature, as the
Agents may reasonably request from time to time. The Borrower will permit the
Agents, the Lenders and their respective designated employees and agents to
have access, at any time and from time to time, upon reasonable notice and
during normal business hours, to visit any of the properties of the Borrower
and its Subsidiaries, to examine and make copies of its books of record and
account and such reports and returns as the Borrower or any of its Subsidiaries
may file with any Governmental Authority and discuss the Borrower's and its
Subsidiaries' affairs and accounts with, and be advised about them by, any
Authorized Officer and the Borrower's and its Subsidiaries' certified public
accountants.
5.3 PRESERVATION OF EXISTENCE; QUALIFICATION. At the Borrower's
own cost and expense, the Borrower will do all things necessary to preserve and
keep in full force and effect its and its Subsidiaries' respective existences
and qualifications under the laws of the states of their formation and each
state where, due to the nature of their activities or the ownership of their
properties, qualification to do business is required and where the failure to
be so qualified would have a Material Adverse Effect.
5.4 COMPLIANCE WITH LAWS, CONTRACTS AND LICENSES. Except where
the failure to so comply would not have a Material Adverse Effect, the Borrower
shall and shall cause each of its Subsidiaries to comply with all applicable
Governmental Rules (including, but not limited to, the Communications Act of
1934, as amended, the regulations and orders promulgated by the FCC from time
to time, and all Environmental Laws). The Borrower shall and shall cause each
of its Subsidiaries to comply with all material provisions of each Material
Contract to which they are parties. Except where the failure to do so would
not have a Material Adverse Effect, the Borrower shall and shall cause each of
its Subsidiaries to maintain in full force and effect all FCC Licenses and all
other Governmental Approvals and other material agreements which are necessary
for the operation of the Cellular Systems as now conducted and in compliance
with all applicable Governmental Rules.
-53-
<PAGE> 62
5.5 CONTINUANCE OF BUSINESS. Subject to Sections 6.7 and 6.8, the
Borrower shall and shall cause each of its Subsidiaries to do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect their respective corporate existences and all permits, rights and
privileges necessary for the proper conduct of their respective business
including, without limitation, all of their cellular FCC Licenses, and continue
to engage in the business of owning, constructing, managing, operating and
investing in Cellular Systems and other wireless communication and related
businesses.
5.6 ACCOUNTING SYSTEM; BOOKS AND RECORDS. The Borrower shall and
shall cause each of its Subsidiaries to maintain a system of accounting
established and administered in accordance with GAAP and will set aside on
their books all such proper reserves as shall be required by GAAP. Further,
the Borrower shall and shall cause each of its Subsidiaries to maintain proper
books of record and account in accordance with GAAP in which full, true and
correct entries shall be made of all of their properties and assets and its
dealings and business affairs.
5.7 PAYMENT OF TAXES AND OTHER LIABILITIES. The Borrower shall
and shall cause each of its Subsidiaries to promptly pay and discharge all
obligations, accounts and liabilities which are owed by them, to which they are
subject or which are asserted against them, including but not limited to all
taxes, assessments and governmental charges and levies upon them or upon any of
their respective income, profits, or property prior to the date on which
penalties attach thereto. The preceding sentence notwithstanding, neither the
Borrower nor any of its Subsidiaries shall be required to pay any tax,
assessment, charge or levy (i) if the failure to make such payment would not
have a Material Adverse Effect or (ii) if (A) such payment is being contested
in good faith by appropriate and lawful proceedings diligently conducted and
(B) the Borrower or such Subsidiary has set aside on its books reserves for
such claim as are determined to be adequate by the application of GAAP. The
foregoing provisions of this Section 5.7 to the contrary notwithstanding, the
Borrower shall pay or cause such Subsidiary to pay any liability being
contested pursuant to the preceding item (ii) within ten (10) days upon the
commencement of proceedings to foreclose any Encumbrance which may have
attached as security therefor.
5.8 INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to:
(i) Maintain insurance including, but not limited to,
business interruption coverage and public liability coverage insurance, with
responsible insurance companies reasonably satisfactory to the Agents, in such
amounts and against such risks to the Borrower and each of its Subsidiaries as
is prudent for similarly situated companies engaged in the cellular telephone
and wireless communications industry and as is reasonably satisfactory to the
Agents.
-54-
<PAGE> 63
(ii) Keep their respective assets insured by insurers on
terms and in a manner reasonably acceptable to the Agents against loss or
damage by fire, theft, burglary, loss in transit, explosions and hazards
insured against by extended coverage, in amounts which are prudent for the
cellular telephone and wireless communications industry and reasonably
satisfactory to the Agents, all premiums thereon to be paid by the Borrower and
its Subsidiaries.
(iii) Require that each insurance policy provide for at
least thirty (30) days' prior written notice to the Collateral Agent of any
termination of or proposed cancellation or nonrenewal of such policy, and name
the Collateral Agent as additional named lender loss payee and, as appropriate,
additional insured and/or mortgagee, to the extent of the Obligations.
5.9 INTEREST HEDGE AGREEMENTS. (i) Within ninety (90) days
following the Closing Date, the Borrower shall purchase and enter into, and at
all times thereafter shall maintain, and pay and perform as and when due and
payable or required to be performed, all amounts and obligations in respect of,
Interest Hedge Agreements relating to the Borrower's Indebtedness which shall
hedge the interest cost to the Borrower with respect to an amount of not less
than fifty percent (50%) of the aggregate principal amount of the Total
Indebtedness (calculated as to Wireless and the Borrower) outstanding from time
to time. Such Interest Hedge Agreements (A) shall provide interest rate
protection initially for a weighted average term of at least twenty-four (24)
months from the date of such Interest Hedge Agreements or, if earlier, until
the Maturity Date, and thereafter, for a weighted average term of at least
twelve (12) months from the date of such Interest Hedge Agreements or, if
earlier, until the Maturity Date, (B) must provide that the protected rate is
not greater than two and one-half percent (2-1/2%) in excess of the sum of (1)
the three-month Euro-Rate in effect on the date of such Interest Hedge
Agreement plus (2) the Applicable Margin on the date of such Interest Hedge
Agreement, (C) must be reasonably satisfactory to the Agents in all respects,
including but not limited to with respect to intercreditor issues, (D) shall be
entered into with counterparties reasonably satisfactory to the Agents, (E)
must provide for the calculation of the counterparties' credit exposure in a
reasonable and customary manner and (F) shall conform to then current
International Swap Dealers Association standards.
(ii) The provisions of the preceding paragraph (i)
notwithstanding, the Borrower may elect not to maintain Interest Hedge
Agreements at any time and from time to time when all of the following
conditions have been met: (A) no Event of Default exists or would be caused by
not obtaining and maintaining Interest Hedge Agreements in accordance with the
preceding paragraph (i); and (B) the Total Indebtedness to Adjusted Annualized
-55-
<PAGE> 64
Operating Cash Flow Ratio is and has been less than 5.00 to 1.00 for the two
consecutive Fiscal Quarters immediately preceding such election.
(iii) If at any time subsequent to an election by the
Borrower to not maintain Interest Hedge Agreements pursuant to the preceding
paragraph (ii) the Total Indebtedness to Adjusted Annualized Operating Cash
Flow Ratio is equal to or greater than 5.00 to 1.00 for any two (2) consecutive
Fiscal Quarters, the Borrower shall be required to enter into Interest Hedge
Agreements in accordance with the requirements of the preceding paragraph (i),
within 30 days following receipt by the Agents of financial statements for the
Borrower and Wireless showing that the Total Indebtedness to Adjusted
Annualized Operating Cash Flow Ratio has been equal to or greater than 5.00 to
1.00 for two consecutive Fiscal Quarters; provided, however, that such Interest
Hedge Agreements shall provide interest rate protection for a weighted average
term of two (2) years from the date of such Interest Hedge Agreement or such
shorter period as may be agreed to by the Agents. Thereafter, from time to
time, the Borrower may elect to not maintain Interest Hedge Agreements, if all
of the conditions listed in the preceding paragraph (ii) are met, and the
Borrower may again be required to obtain and maintain Interest Hedge
Agreements, in accordance with this paragraph (iii).
(iv) All Obligations of the Borrower to any Lender
pursuant to any Interest Hedge Agreement and all Encumbrances granted to the
Collateral Agent to secure such Obligations shall rank pari passu with all
other Obligations and Encumbrances securing such other Obligations. Any such
Lender shall calculate the Obligations owed to it in connection with an
Interest Hedge Agreement in a reasonable and customary manner, as determined by
the Agents. No Encumbrances on any other property of the Borrower may be
granted to the Collateral Agent or any Lender to secure Obligations pursuant to
Interest Hedge Agreements, and any Interest Hedge Agreement entered into
between the Borrower and any Person other than a Lender shall be unsecured.
5.10 MAINTENANCE OF PROPERTIES. The Borrower shall and shall cause
its Subsidiaries to maintain, preserve, protect and keep their respective
properties in good repair, working order and condition (ordinary wear and tear
excepted), and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly and
advantageously conducted at all times.
5.11 MAINTENANCE OF LEASES. The Borrower shall and shall cause its
Subsidiaries to maintain in full force and effect all leases for their
respective real properties, and all other leases for personal property if the
failure to maintain such real or personal property lease would constitute a
Material Adverse Change.
-56-
<PAGE> 65
5.12 MAINTENANCE OF PATENTS, TRADEMARKS, PERMITS, ETC. Except
where the failure to do so would not have a Material Adverse Effect, the
Borrower shall and shall cause its Subsidiaries to maintain in full force and
effect all patents, trademarks, trade names, copyrights and other intellectual
property and all licenses, franchises, permits and other authorizations
necessary for the ownership and operation of their respective properties and
businesses.
5.13 PLANS AND BENEFIT ARRANGEMENTS. The Borrower shall, and shall
cause each ERISA Affiliate to, comply with ERISA, the Internal Revenue Code and
all other applicable laws which are applicable to Plans and Benefit
Arrangements, except where the failure to do so, alone or in conjunction with
any other failure, would not result in a Material Adverse Change.
5.14 ENVIRONMENTAL MATTERS AND INDEMNIFICATION.
(i) The Borrower shall and shall cause its Subsidiaries
to comply in all material respects with all applicable Environmental Laws.
(ii) The Borrower shall and shall cause its Subsidiaries
to, as often as deemed appropriate by the Borrower, inspect all property owned
or leased by them and audit operations thereon to maintain material compliance
with all Environmental Laws.
(iii) The Borrower shall and shall cause its Subsidiaries
to employ appropriate technology in order to maintain material compliance with
all applicable Environmental Laws, including without limitation the replacement
or updating, if required, of above-ground or underground storage tanks owned by
the Borrower or any Subsidiary.
(iv) The Borrower shall and shall cause its Subsidiaries
to investigate and remediate any material Contamination, using a reputable
environmental remediation firm, and shall, upon the request of any Agent,
inform the Agents in writing from time to time as to the status of any such
remediation.
(v) The Borrower shall and shall cause its Subsidiaries
to defend and indemnify the Agents and the Lenders and hold them harmless from
and against all loss, liability, damage, expense, claims, costs, fines,
penalties, assessments (including interest on any of the foregoing) and
reasonable attorneys' fees, suffered or incurred by the Agents and the Lenders
which arise, result from or in any way relate to a breach or violation by the
Borrower or any Subsidiary of any Environmental Law, either prior to or
subsequent to the date hereof, including the assertion or imposition of any
Encumbrance on the Borrower's or any Subsidiary's assets. The Borrower's and
its Subsidiaries' obligations hereunder are joint
-57-
<PAGE> 66
and several and shall arise upon the discovery of the presence of any Hazardous
Substance at any location owned, leased, operated and/or occupied by the
Borrower or any Subsidiary's, whether or not any Governmental Authority has
taken or has threatened any action in connection with the presence of Hazardous
Substances. The Borrower's and its Subsidiaries' joint and several obligations
pursuant to this item (v) shall survive the termination of this Agreement and
the repayment of the Obligations.
5.15 KEY MANAGEMENT. The Borrower shall employ individuals in the
key management positions of Chairman, President and Chief Financial Officer and
shall use its best efforts to cause such key managers to continue to serve in
their respective capacities. In the event of the voluntary or involuntary
termination of any key manager for any reason, the Borrower shall, as soon as
practicable, replace such individual with another qualified manager with
comparable management skills and experience in the Borrower's industries and
reasonably satisfactory to the Agents.
5.16 COVENANTS REGARDING FORMATION OF SUBSIDIARIES AND
ACQUISITIONS. At the time of (i) any Permitted Acquisition of a Subsidiary or
(ii) the formation of any new Subsidiary of the Borrower or any of its
Subsidiaries which is permitted under this Agreement, the Borrower will, and
will cause its Subsidiaries, as appropriate, to (A) provide to the Collateral
Agent executed Subsidiary Security Documents and an executed Subsidiary
Guaranty Agreement, (B) pledge to the Collateral Agent all of the stock or
partnership interests (or other instruments or securities evidencing ownership)
of such Subsidiary or Person which is acquired or formed, beneficially owned by
the Borrower or any of the Borrower's Subsidiaries, as the case may be, as
additional Collateral for the Obligations to be held by the Collateral Agent in
accordance with the terms of a Pledge Agreement substantially in the form of
Exhibit "F" attached hereto, and execute and deliver to the Collateral Agent
all such documentation for such pledge as, in the reasonable opinion of the
Agents, is appropriate; (C) if the purchase price of a Permitted Acquisition is
in excess of $5,000,000 provide revised financial projections for the remainder
of the Fiscal Year and for each subsequent year until the Maturity Date which
reflect such Permitted Acquisition, certified by the Chief Financial Officer of
the Borrower, (D) provide a statement of the Chief Financial Officer of the
Borrower that no Default or Event of Default exists or would be caused by the
Permitted Acquisition or formation; and (E) provide all other documentation,
including one or more opinions of counsel, reasonably satisfactory to the
Agents which in their reasonable opinion is appropriate with respect to such
Permitted Acquisition or the formation of such Subsidiary. Any document,
agreement or instrument executed or issued pursuant to this Section 5.16 shall
be a "Loan Document" for purposes of this Agreement.
5.17 PAYMENT OF WAGES. The Borrower shall and shall cause its
Subsidiaries to at all times comply with the requirements of the Fair Labor
Standards Act, as amended,
-58-
<PAGE> 67
including, without limitation, the provisions of such Act relating to the
payment of minimum and overtime wages as the same may become due from time to
time, except for noncompliances with such Act that would not have a Material
Adverse Effect.
5.18 FURTHER ASSURANCES; POWER OF ATTORNEY. At any time and from
time to time, upon the Collateral Agent's reasonable request, the Borrower
shall make, execute and deliver, and shall use their best efforts to cause any
of its Subsidiaries and any other Person to make, execute and deliver, to the
Collateral Agent, and where appropriate shall cause to be recorded or filed,
and from time to time thereafter to be re-recorded and refiled at such time and
in such offices and places as shall be deemed desirable by the Collateral Agent
(including but not limited to the FCC) any and all such further Security
Documents, certificates and other documents and instruments as the Collateral
Agent may reasonably consider necessary or desirable in order to effectuate,
complete, perfect, continue or preserve the obligations of the Borrower, its
Subsidiaries and Wireless under Article 3 hereof, the Security Documents and
the Encumbrances created thereby. The Borrower hereby appoints the Collateral
Agent, and any of its officers, directors, employees and authorized agents,
with full power of substitution, upon any failure by the Borrower, any
Subsidiary of the Borrower to take or cause to be taken any action described in
the preceding sentence, to make, execute, record, file, re-record or refile any
and each such Security Document, instrument, certificate and document for and
in the name of the Borrower, any Subsidiary of the Borrower, or Wireless, as
the case may be. The power of attorney granted pursuant to this Section 5.18
is coupled with an interest and shall be irrevocable until all of the
Obligations are paid in full and the Revolving Credit Commitment is terminated.
ARTICLE 6. NEGATIVE COVENANTS
From the date hereof and thereafter until the termination of
the Revolving Credit Commitment and until the Revolving Credit Notes and the
other Obligations of the Borrower hereunder are permanently paid in full, the
Borrower agrees, for the benefit of the Agents and the Lenders, that it will
comply with and cause each of its Subsidiaries to comply with each of the
following negative covenants:
6.1 INDEBTEDNESS. The Borrower shall not, and shall not permit
its Subsidiaries to, create, incur, assume or permit to exist or remain
outstanding any Indebtedness, except for:
(i) The Indebtedness and Obligations owed by the Borrower
to the Lenders hereunder; and
-59-
<PAGE> 68
(ii) Indebtedness in an aggregate principal amount
outstanding not to exceed $15,000,000 at any time, incurred by the Borrower for
the purpose of financing equipment purchases or leases or for other general
corporate or partnership purposes;
(iii) Indebtedness owed to Persons other than the Lenders
relating to Interest Hedge Agreements required pursuant to Section 5.9; and
(iv) Existing Indebtedness listed on Schedule 6.1 in
amounts not to exceed the amounts shown on such schedule as such Indebtedness
is repaid in accordance with its terms.
6.2 GUARANTEES. The Borrower shall not and shall not permit its
Subsidiaries to enter into any Guarantees, except for (i) Subsidiary Guaranty
Agreements and (ii) endorsements of negotiable instruments for deposit and
collection and similar transactions in the ordinary course of business.
6.3 ENCUMBRANCES; NEGATIVE PLEDGE. The Borrower shall not and
shall not permit its Subsidiaries to create, assume, incur or suffer to exist,
any Encumbrance upon any of their respective assets and properties, whether
tangible or intangible, whether now owned or in existence or hereafter acquired
or created and wherever located, nor acquire nor agree to acquire any assets or
properties subject to an Encumbrance, except for Permitted Encumbrances. The
Borrower shall not and shall not permit its Subsidiaries to make or enter into
any agreement not to grant Encumbrances for the benefit of any Person other
than (i) the Agents and the Lenders pursuant to the Loan Documents and (ii)
holders of Encumbrances securing Indebtedness permitted pursuant to item (ii)
of Section 6.1, but only if such negative pledge is limited to the properties
secured by such Permitted Encumbrance.
6.4 FINANCIAL COVENANTS.
6.4a SENIOR INDEBTEDNESS TO ADJUSTED ANNUALIZED OPERATING CASH FLOW
RATIO. For each Fiscal Quarter during the periods set forth below, the ratio
of the Borrower's Senior Indebtedness to its Adjusted Annualized Operating Cash
Flow shall not exceed the ratio set forth below opposite such period, as of the
last day of each such Fiscal Quarter:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
RATIO OF SENIOR INDEBTEDNESS TO ADJUSTED
LAST DAY OF FISCAL ANNUALIZED OPERATING CASH FLOW NOT TO
QUARTER DURING PERIOD EXCEED:
-----------------------------------------------------------------------------------------------------------
<S> <C>
Closing Date through March 31, 1997 8.50 : 1.00
-----------------------------------------------------------------------------------------------------------
April 1, 1997 through June 30, 1997 8.00 : 1.00
</TABLE>
-60-
<PAGE> 69
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
RATIO OF SENIOR INDEBTEDNESS TO ADJUSTED
LAST DAY OF FISCAL ANNUALIZED OPERATING CASH FLOW NOT TO
QUARTER DURING PERIOD EXCEED:
-----------------------------------------------------------------------------------------------------------
<S> <C>
July 1, 1997 through September 30, 1997 7.50 : 1.00
-----------------------------------------------------------------------------------------------------------
October 1, 1997 through December 31, 1997 7.00 : 1.00
-----------------------------------------------------------------------------------------------------------
January 1, 1998 through June 30, 1998 6.50 : 1.00
-----------------------------------------------------------------------------------------------------------
July 1, 1998 through December 31, 1998 6.00 : 1.00
-----------------------------------------------------------------------------------------------------------
January 1, 1999 through June 30, 1999 5.25 : 1.00
-----------------------------------------------------------------------------------------------------------
July 1, 1999 through December 31, 1999 4.50 : 1.00
-----------------------------------------------------------------------------------------------------------
January 1, 2000 and thereafter 4.00 : 1.00
-----------------------------------------------------------------------------------------------------------
</TABLE>
6.4b TOTAL INDEBTEDNESS TO ADJUSTED ANNUALIZED OPERATING CASH FLOW
RATIO. For each Fiscal Quarter during the periods set forth below, the ratio
of Total Indebtedness (calculated to include Wireless' and its Subsidiaries'
and the Borrower's and its Subsidiaries' Total Indebtedness) to its Adjusted
Annualized Operating Cash Flow shall not exceed the ratio set forth below
opposite such period, as of the last day of each such Fiscal Quarter:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
RATIO OF TOTAL INDEBTEDNESS TO ADJUSTED
LAST DAY OF FISCAL ANNUALIZED OPERATING CASH FLOW NOT TO
QUARTER DURING PERIOD EXCEED:
-----------------------------------------------------------------------------------------------------------
<S> <C>
Closing Date through March 31, 1997 12.00 : 1.00
-----------------------------------------------------------------------------------------------------------
April 1, 1997 through September 30, 1997 11.00 : 1.00
-----------------------------------------------------------------------------------------------------------
October 1, 1997 through December 31, 1997 10.00 : 1.00
-----------------------------------------------------------------------------------------------------------
January 1, 1998 through June 30, 1998 9.00 : 1.00
-----------------------------------------------------------------------------------------------------------
July 1, 1998 through December 31, 1998 8.00 : 1.00
-----------------------------------------------------------------------------------------------------------
January 1, 1999 through June 30, 1999 7.00 : 1.00
-----------------------------------------------------------------------------------------------------------
July 1, 1999 and thereafter 6.00 : 1.00
-----------------------------------------------------------------------------------------------------------
</TABLE>
-61-
<PAGE> 70
6.4c ANNUALIZED OPERATING CASH FLOW TO FIXED CHARGES RATIO. For
each Fiscal Quarter during the period beginning on the Closing Date and ending
on the Maturity Date, the ratio of the Borrower's Annualized Operating Cash
Flow to its Fixed Charges shall not be less than 1.00 to 1.00, as of the last
day of each such Fiscal Quarter. For purposes of this financial covenant only,
Annualized Operating Cash Flow shall include Revolver Availability.
6.4d ANNUALIZED OPERATING CASH FLOW TO PRO FORMA DEBT SERVICE
RATIO. For each Fiscal Quarter during the period beginning on April 1, 1997
and ending on the Maturity Date, the ratio of the Borrower's Annualized
Operating Cash Flow to its Pro Forma Debt Service shall not be less than 1.00
to 1.00 as of the last day of each such Fiscal Quarter.
6.4e OPERATING CASH FLOW TO INTEREST EXPENSE RATIO. For each
Fiscal Quarter during the period beginning on the Closing Date and ending on
December 31, 1998, the ratio of the Borrower's Operating Cash Flow for the most
recently completed twelve (12) consecutive months to its Interest Expense for
the most recently completed twelve (12) consecutive months shall not be less
than 1.10 to 1.00 as of the last day of each such Fiscal Quarter.
6.5 LIMITATION ON DIVIDENDS, DISTRIBUTIONS AND OTHER PAYMENTS.
The Borrower shall not declare or pay any dividends on, or make any
distributions relating to or returns of capital on, any of its capital stock,
or make any loans, advances or payments of any kind whatsoever, directly or
indirectly, to or for the benefit of the owners of its capital stock or pay any
obligations of the owners of its capital stock, except for the following
dividends and distributions (each of which shall be a "PERMITTED PAYMENT"):
(i) The Borrower may from time to time declare and pay
dividends to Wireless or make loans to Wireless which shall not at any time
exceed amounts required to make scheduled payments of interest on the
Structurally Subordinated Indebtedness; provided, however, that no Event of
Default or Material Default exists or would be caused by the declaration of or
the payment of such dividend or the making of such loan.
(ii) The provisions of the preceding item (i) of this
Section 6.5 to the contrary notwithstanding, the Borrower, if Events of Default
have occurred and are continuing, may declare and pay dividends to Wireless or
make loans to Wireless in an amount which shall not exceed (A) amounts then
required to make any past due payment of interest on the Structurally
Subordinated Indebtedness, which payment of interest is past due by reason of
item (i) above, and (B) the next scheduled payment of interest on the
Structurally Subordinated Indebtedness; provided:
-62-
<PAGE> 71
(1) such Event of Default or Events of Default
(from the date of notice of the existence of the earliest such Event of Default
if more than one Event of Default exists) has continued for 180 days and has
not been cured or waived;
(2) such Event of Default is not an Event of
Default set forth in Sections 8.1a, 8.1c or 8.1d hereof; or
(3) the Lenders have not demanded immediate
payment in full of all Obligations due and owing by the Borrower under this
Agreement and the other Loan Documents.
(iii) Payments by the Borrower to Wireless due to Wireless
pursuant to the terms of the Management Agreement. No such payment may be made
if an Event of Default has occurred and is continuing or would be caused by
such payment. The payment provisions of the Management Agreement may not be
amended without the prior written consent of the Required Lenders.
6.6 RESTRICTIONS ON SUBSIDIARY DIVIDENDS OR DISTRIBUTION. The
Borrower shall not permit any Subsidiary, directly or indirectly, to declare or
make any distribution, dividend, loan, advance or payment of any kind
whatsoever to any Person (including Wireless), except that the Borrower's
Preferred Subsidiaries may declare and make distributions, dividends, loans,
advances and payments to the Borrower or another Preferred Subsidiary.
6.7 LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS, ETC. The
Borrower shall not, nor shall it permit any Subsidiary to, dissolve, liquidate
or wind up its affairs, or become a party to any merger or consolidation, or
acquire by purchase, lease or otherwise all or substantially all of the assets,
or any capital stock or other equity or ownership interest of any other Person.
The foregoing provisions of this Section 6.7 to the contrary notwithstanding:
(i) the Borrower may contemporaneously with the Closing
Date, consummate the Horizon Acquisition;
(ii) the Borrower may acquire by purchase, lease or
otherwise all or substantially all of the assets of, or at least 85% of the
capital stock or other equity or ownership interests of any other Person;
provided that (A) such acquisition must be related to the Borrower's cellular
business, (B) the aggregate purchase price for all such acquisitions during the
term hereof shall not exceed $50,000,000, (C) no Default or Event of Default
shall exist or result from such acquisition, (D) the Borrower must demonstrate,
to the reasonable
-63-
<PAGE> 72
satisfaction of the Agents, that the Borrower will, on a pro forma basis, be in
compliance with all of the financial covenants set forth in Section 6.4, taking
into account such acquisition and (E) if the acquisition is the acquisition of
equity interests, all other provisions of this Agreement relating to the
acquisition of Subsidiaries must be complied with. Each acquisition permitted
pursuant to this item (ii) shall be deemed to be a "PERMITTED ACQUISITION"; and
(iii) the Borrower or any Preferred Subsidiary may acquire
all or substantially all of the assets or all of the capital stock or other
equity ownership interest in a Subsidiary.
6.8 DISPOSITIONS OF ASSETS. The Borrower shall not, nor shall it
permit any Subsidiary to, sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily, any of their respective
properties or assets, whether tangible or intangible, except for the following
(each of which shall be deemed to be a "PERMITTED DISPOSITION":
(i) any sale, transfer or lease in the ordinary course of
business of assets which are no longer necessary or required in the conduct of
the Borrower's or such Subsidiary's business;
(ii) any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets acquired or leased
by the selling Borrower or Subsidiary, which substitute assets are acquired
within one year before or after such sale;
(iii) any sale, transfer or lease of the assets of a
Subsidiary to a Preferred Subsidiary or the Borrower or any sale transfer or
lease of assets of the Borrower to a Preferred Subsidiary;
(iv) sales of assets relating to the Borrower's paging
business so long as no Default or Event of Default exists or would be caused by
any such sale;
(v) sales of assets by the Borrower or any of its
Subsidiaries in any one Fiscal Year, the aggregate Net Cash Proceeds of which
is not more than $1,000,000; provided that (A) at the time of such sale no
Default or Event of Default exists or would be caused thereby and (B) such
assets are replaced by substitute assets acquired by the Borrower or the
selling Subsidiary, which substitute assets are acquired within one (1) year
before or after such sale; and
(vi) sales of inventory in the ordinary course of
business.
-64-
<PAGE> 73
6.9 SUBSIDIARIES. The Borrower shall not form or acquire
Subsidiaries, unless (i) such Subsidiary, (ii) the provisions of Section 5.16
are complied with, (iii) no Default or Event of Default exists at the time of
or would be caused by such formation or acquisition, and (iv) if the Subsidiary
is not a wholly-owned Subsidiary or a Preferred Subsidiary the Required Lenders
have consented in writing to such formation or acquisition.
6.10 LOANS AND OTHER ADVANCES. The Borrower shall not nor shall it
permit any Subsidiary to make loans, payments or other advances of funds to any
Person, except for (i) Permitted Payments, (ii) loans in existence on the date
hereof and listed on Schedule 6.10 and (iii) advances for expenses made to the
Borrower's or such Subsidiary's employees in reasonable amounts and in the
ordinary course of business.
6.11 INVESTMENTS. The Borrower shall not nor shall it permit any
Subsidiary to at any time purchase, acquire or own any stock, bonds, notes, or
securities of, or any partnership interest (whether general or limited) in, or
any other interest in, or make any capital contribution to, any other Person,
or become a joint venture partner in any joint venture, or repurchase any of
their respective capital stock, or agree, become or remain liable to do any of
the foregoing, except for:
(i) investments in Subsidiaries, as permitted hereby;
(ii) debt securities having a maturity of not more than
one year issued or guaranteed by the United States government or by an agency
or instrumentality thereof;
(iii) certificates of deposit, bankers acceptances, time
deposits and demand deposit accounts, which in each case mature within one year
from the date of purchase thereof and which are issued or maintained by or with
a Qualified Lender;
(iv) commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Borrower either
(A) is accorded the A-2 or P-2 rating by Standard and Poor's Rating Group, a
division of McGraw-Hill, Inc. or Moody's Investors Service, Inc. respectively
or (B) is issued by a Qualified Lender;
(v) direct obligations of the United States of America or
any agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the United
States of America, in each case maturing in 12 months or less from the date of
acquisition; and
(vi) money market mutual funds made available by the
Administrative Agent or its affiliates.
-65-
<PAGE> 74
6.12 AFFILIATE TRANSACTIONS. The Borrower shall not, nor shall it
permit any Subsidiary to, enter into or carry out any transaction with an
Affiliate (including, without limitation, purchasing property or services from
or selling property or services to any Affiliate or other Person) unless such
transaction (i) is not otherwise prohibited by this Agreement, (ii) is entered
into in the ordinary course of business upon fair and reasonable arm's-length
terms and conditions and (iii) is in accordance with all applicable
Governmental Rules.
6.13 USE OF PROCEEDS. Should all or any part of the Loans be
deemed to be a "purpose loan" which is "directly or indirectly secured" (as
those terms are used in Regulation U) by "margin stock," as defined in
Regulation U, the Borrower shall not use proceeds of the Loans for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any such
margin stock which would cause the outstanding Loans to be in violation of
Regulations G, T, U or X. The Borrower shall not request or accept any Loan in
violation of Regulations G, T, U or X. The Borrower shall not use proceeds of
the Loans in a manner which violates any term or condition of any Loan Document
or which violates any applicable law.
6.14 CHANGE OF BUSINESS. The Borrower shall not nor shall it allow
any Subsidiary to engage in any business other than owning, constructing,
managing, operating and investing in Cellular Systems, paging businesses and
other wireless communication and related businesses. The Borrower shall not
permit any material change in such businesses.
6.15 CHANGE OF CONTROL. The Borrower shall not permit a Change of
Control.
6.16 CHANGE OF FISCAL YEAR. The Borrower shall not change its
Fiscal Years, which now end on December 31.
6.17 ERISA. The Borrower shall not:
(i) (A) With respect to any Plan or Money Purchase
Plan, incur any material liability for failure to make timely payment of any
contribution or installment required under Section 302 of ERISA and Section 412
of the Internal Revenue Code, whether or not waived, or otherwise materially
fail to comply with the funding provisions set forth therein, (B) with respect
to any Plan or Money Purchase Plan, suffer to exist any lien under Section
302(f) of ERISA or Section 412(n) of the Internal Revenue Code against the
property and rights to property of the Borrower or any ERISA Affiliate or (C)
terminate, or permit any ERISA Affiliate to terminate, any such Plan in a
manner which could reasonably be expected to result in the imposition of a lien
upon the property or rights to property of the Borrower or any ERISA Affiliate
pursuant to Section 4068 of ERISA;
-66-
<PAGE> 75
(ii) Engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with respect
to any "employee benefit plan" (as defined in Section 3(3) of ERISA) for which
a statutory or administrative exemption is not available under Section 408 of
ERISA or Section 4975 of the Internal Revenue Code; and
(iii) Partially or completely withdraw from any
Multiemployer Plan where such withdrawal could reasonably be expected to
subject the affected Borrower or any ERISA Affiliate to Withdrawal Liability.
ARTICLE 7. CONDITIONS TO MAKING LOANS
7.1 ALL LOANS. The obligation of the Lenders to make each Loan is
subject to the satisfaction of each of the following conditions precedent:
7.1a REQUEST FOR LOAN. Receipt by the Administrative Agent of a
request for a Loan satisfying the requirements of Section 2.4.
7.1b NO DEFAULT OR EVENT OF DEFAULT. The Borrower shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by it prior to any Loan being made or issued, at the
time such Loan is made or as a result of making such Loan, no Default or Event
of Default has occurred and is continuing or will be caused by the making of
such Loan, and at the time such Loan is made or as a result of making such
Loan, no default or event of default has occurred and is continuing or will be
caused by the making of such Loan under the Structurally Subordinated
Indebtedness Documents.
7.1c NO MATERIAL ADVERSE CHANGE. At the time of making such Loan,
no Material Adverse Change has occurred and is continuing.
7.1d REPRESENTATIONS CORRECT. The representations and warranties
contained in Article 4 hereof and otherwise made in writing by or on behalf of
the Borrower, any Subsidiary of the Borrower or Wireless in connection with the
transactions contemplated by this Agreement shall be (i) correct when made; and
(ii) correct in all material respects at the time of each Loan; provided that,
for purposes of this item (ii), if at the time of any request by the Borrower
for a Loan a misrepresentation has resulted from a change in the Borrower's,
any Subsidiary's or Wireless' ownership, operations or business, which change
is not
-67-
<PAGE> 76
prohibited under the Loan Documents, such misrepresentation alone shall not
preclude the making of such Loan.
Each request for a Loan, whether made orally or in writing, shall be deemed to
be, as of the time made, a representation and warranty by the Borrower as to
the accuracy of the matters set forth in Sections 7.1b, 7.1c and 7.1d.
7.2 INITIAL LOAN. The obligation of the Lenders to make the first
Loan hereunder is subject to the satisfaction of each of the following
conditions precedent, in addition to the applicable conditions precedent set
forth in Section 7.1:
7.2a CREDIT AGREEMENT. Receipt by the Administrative Agent of a
fully-executed copy of this Agreement.
7.2b SCHEDULES TO CREDIT AGREEMENT. Receipt by the Administrative
Agent of all schedules to this Agreement and the other Loan Documents prepared
by the Borrower, in form and substance satisfactory to the Lenders.
7.2c REVOLVING CREDIT NOTES. Receipt by the Administrative Agent
for redelivery to each Lender of a Revolving Credit Note executed by the
Borrower and payable to each Lender.
7.2d SECURITY AGREEMENT. Receipt by the Collateral Agent of the
Security Agreement executed by the Borrower.
7.2e MORTGAGES; ASSIGNMENTS OF LEASES AND RENTS. Receipt by the
Collateral Agent of all Mortgages and Assignments of Leases and Rents, executed
by the Borrower, which the Agents requested pursuant to Section 3.2b.
7.2f FINANCING STATEMENTS. Receipt by the Collateral Agent of all
Uniform Commercial Code financing statements requested by it, each signed by
the Borrower, and the filing of such financing statements by the Collateral
Agent in the appropriate filing offices.
7.2g LIEN SEARCHES. Receipt by the Collateral Agent of lien and
judgment searches with results satisfactory to the Agents and the Lenders.
7.2h TERMINATION STATEMENTS, ETC. Receipt by the Collateral Agent
of all Uniform Commercial Code termination statements, mortgage satisfactions
and other documents and instruments of termination and release necessary so
that the Security Interests granted to the
-68-
<PAGE> 77
Collateral Agent for the benefit of the Lenders pursuant to the Security
Documents are first and prior liens and security interests, subject only to
Permitted Encumbrances.
7.2i PERFECTION CERTIFICATE. Receipt by the Collateral Agent of
the Perfection Certificate in the form of Exhibit "I" hereto, duly completed
and executed by the Borrower.
7.2j MANAGEMENT AGREEMENT. Receipt by the Collateral Agent of a
copy of the Management Agreement, in form and substance satisfactory to the
Lenders.
7.2k PLEDGE OF BORROWER'S STOCK. Receipt by the Collateral Agent
of (i) the Pledge Agreement, duly executed by Wireless, (ii) all certificates
evidencing the stock of the Borrower pledged pursuant to such Pledge Agreement,
(iii) a signed, undated stock power for each such certificate, and (iv) if
requested by the Agents, a form U-1 executed by the Borrower.
7.2l HORIZON ACQUISITION. The Agents shall be satisfied that the
Horizon Acquisition has been consummated in accordance with its terms, that all
conditions precedent to the consummation thereof have been satisfied, waived or
otherwise provided for and that all consideration required to be paid on or
prior to the Closing Date in connection with the Horizon Acquisition has been
paid, and that title to the assets purchased pursuant thereto has been
transferred to the Borrower (except for certain Governmental Approvals
temporarily owned by Wireless), and receipt by the Administrative Agent of (i)
Wireless' certificate as to the foregoing, having attached thereto
fully-executed copies of the Horizon Acquisition Agreement and all agreements,
instruments, approvals and documents executed and delivered in connection
therewith, certified as true, correct and complete by Wireless, (ii) any other
evidence deemed reasonably necessary by and satisfactory to the Agents that the
Horizon Acquisition has been consummated, (iii) a copy, certified by the
Secretary of Wireless, of all action taken by Wireless to authorize the Horizon
Acquisition, and (iv) evidence satisfactory to the Agents that all Governmental
Approvals and all other consents, waivers and permits required to be obtained
in connection with the Horizon Acquisition have been obtained, are in effect
and unconditional [and have been properly and finally assigned to the
Borrower].
7.2m STRUCTURALLY SUBORDINATED INDEBTEDNESS. The Agents shall be
satisfied that the Structurally Subordinated Indebtedness in a minimum
principal amount of $80,000,000 has been issued by Wireless in accordance with
the Structurally Subordinated Indebtedness Documents, and that all conditions
precedent to the issuance thereof have been satisfied, waived or otherwise
provided for, and receipt by the Administrative Agent of (i) Wireless'
certificate as to the foregoing, having attached thereto fully-executed copies
of the Structurally Subordinated Indebtedness Document and all agreements,
instruments, approvals and documents executed and delivered in connection
therewith, certified as true, correct and
-69-
<PAGE> 78
complete by Wireless, (ii) any other evidence deemed reasonably necessary by
and satisfactory to the Agents that such issuance has occurred, (iii) a copy,
certified by the Secretary of Wireless, of all action taken by Wireless to
authorize such issuance, (iv) evidence satisfactory to the Agents that all
consents, waivers and permits required to be obtained in connection with such
issuance have been obtained and are in effect and unconditional and (v)
evidence satisfactory to the Agent that the Proceeds of the Structurally
Subordinated Indebtedness have been applied as a portion of the purchase price
of the Horizon Acquisition.
7.2n REORGANIZATION OF SYGNET COMPANIES. The Agents shall be
satisfied that the reorganization of the Sygnet companies has been consummated
on terms disclosed to the Lenders, with the result that (i) Wireless owns no
material assets other than all of the issued and outstanding capital stock of
the Borrower and [temporary ownership of Horizon FCC Licenses] and (ii) the
Borrower owns all of the assets of such companies, and receipt by the
Administrative Agent of (A) the Borrower's certificate as to the foregoing,
having attached thereto all documents and instruments relating to such
reorganization, along with evidence that such documents and instruments have,
where appropriate, been filed with the appropriate Governmental Authorities and
have become effective, all certified as true, correct and complete by the
Borrower, (ii) any other evidence deemed reasonably necessary by and
satisfactory to the Agents that such reorganization has occurred, (iii) a copy,
certified by the Secretary of the Borrower, of all action taken by the various
Sygnet entities to authorize such reorganization and (iv) evidence satisfactory
to the Agents that all consents, waivers and permits required to be obtained in
connection with such reorganization have been obtained and are in effect and
unconditional.
7.2o HAZARD AND LIABILITY INSURANCE. Receipt by the Collateral
Agent of (i) copies of the Borrower's insurance policies which comply with the
requirements of Section 5.8 and the insurance requirements set forth in the
other Loan Documents and (ii) current insurance certificates, with long-form
lender loss payable endorsements, as required pursuant to Section 5.8.
7.2p CORPORATE DOCUMENTS FOR BORROWER AND WIRELESS. Receipt by the
Administrative Agent of the following corporate documents for each of the
Borrower and Wireless:
(i) a copy of its articles and/or certificate of
incorporation, certified as true and correct by the Secretary of State of the
state of its incorporation not more than thirty (30) days prior to the date
hereof;
-70-
<PAGE> 79
(ii) good standing certificates issued by the Secretaries
of State of the state of its incorporation and each state where it is required
to be qualified to do business, each dated not more than thirty (30) days prior
to the date hereof;
(iii) resolutions of its board of directors authorizing the
execution and delivery of the Loan Documents to be executed by it and the
performance by it pursuant thereto, certified by its secretary or assistant
secretary as being true, correct, complete and in effect and in form and
substance satisfactory to the Administrative Agent;
(iv) a copy of its regulations or by-laws and all
amendments thereto, certified by its secretary or assistant secretary as being
true, correct, complete and in effect; and
(v) an incumbency certificate showing the names of its
officers, their respective titles and containing their true signatures.
7.2q GOVERNMENTAL APPROVALS. Receipt by the Administrative Agent
of copies of all of the Borrower's material Governmental Approvals.
7.2r CLOSING CERTIFICATE. Receipt by the Administrative Agent of a
certificate, dated as of the Closing Date and executed by an Authorized Officer
of the Borrower, stating that, as of the Closing Date and after giving effect
to the Loans made on such date, all of the representations and warranties made
by the Borrower herein and in the other Loan Documents are true and correct; no
Default or Event of Default exists; no Material Adverse Change has occurred and
no circumstances exist which would cause a Material Adverse Effect; and showing
compliance on a pro forma basis with all of the financial covenants set forth
in Section 6.4, and the Agents' satisfaction with the accuracy and completeness
of all of the foregoing.
7.2s TERMINATION OF EXISTING CREDIT AGREEMENT. The Existing Credit
Agreement and the right of the Borrowers which are parties thereto to borrow
thereunder shall have terminated and the Borrower and Wireless shall have
executed a letter agreement to this effect, satisfactory to PNC Bank, National
Association, and all outstanding principal, interest, fees and other amounts
due thereunder shall have been paid in full with the first Loan made hereunder.
7.2t PAYOFF LETTER FOR EXISTING CREDIT AGREEMENT. Receipt by the
Administrative Agent of a payoff letter from PNC Bank, National Association,
relating to the Existing Credit Agreement, in a form satisfactory to the
Administrative Agent.
-71-
<PAGE> 80
7.2u REQUEST FOR INITIAL LOANS. Receipt by the Administrative
Agent of written instructions addressed to the Administrative Agent and
executed by the Borrower, instructing the Administrative Agent as to the
disbursement of the Loans to be made on the Closing Date, and containing
complete wire transfer instructions, if applicable.
7.2v ADEQUACY OF LEGAL MATTERS. All legal matters incident to the
Loans and the Loan Documents shall be satisfactory to counsel for the Agents.
7.2w FEE LETTERS; FEES. Receipt by the Agents of the Fee Letter
signed by the Borrower, and all Fees described therein which are payable on or
prior to the Closing Date, in immediately available funds.
7.2x LEGAL FEES. Payment of the Agents' legal fees and costs.
7.2y OPINIONS OF COUNSEL. Receipt by the Administrative Agent of
(i) an opinion of counsel to the Borrower, Bryan Cave LLP and Harrington &
Mitchell, Ltd., [and (ii) the opinions of counsel for the sellers to be
delivered pursuant to the Horizon Acquisition Agreement, all addressed to the
Lenders and in all respects satisfactory to the Agents.]
ARTICLE 8. EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT. Each of the following events shall
constitute an Event of Default:
8.1a NONPAYMENT OF BORROWER'S OBLIGATIONS. The Borrower shall
default (i) in any payment of principal of the Loans when due, or (ii) in the
payment of interest on any Loans when due, or in the payment of any of the
Fees, expenses or other amounts due hereunder or under any of the other Loan
Documents when due, and such default in payment of interest, Fees, expenses or
other amounts shall have continued for a period of five (5) Business Days after
such due date.
8.1b VIOLATIONS UNDER OTHER INDEBTEDNESS. The Borrower, any
Subsidiary of the Borrower or Wireless shall (i) default in the payment of any
other Indebtedness, which Indebtedness has an aggregate principal outstanding
balance of $3,000,000 or more when such payment is due (whether by acceleration
or otherwise), or (ii) default in the performance of any term of any agreement
or instrument under which any such Indebtedness is created or by which it is
governed or evidenced, if the effect of any such default is to cause such
Indebtedness to become, or to permit the holder or holders of such Indebtedness
(or any
-72-
<PAGE> 81
Person on behalf of such holder) to declare such Indebtedness due prior to its
expressed maturity.
8.1c INSOLVENCY, ETC.
(i) INVOLUNTARY PROCEEDINGS. A proceeding shall have
been instituted in a court having jurisdiction seeking a decree or order for
relief in respect of the Borrower, any Subsidiary of the Borrower or Wireless
in an involuntary case under the Federal bankruptcy laws, or any other similar
applicable Federal or state law, now or hereafter in effect, or for the
appointment of a receiver, liquidator, trustee, sequestrator or similar
official for the Borrower or for a substantial part of their respective
property, or for the winding up or liquidation of their respective affairs, and
the same (A) is not controverted within a period of fifteen (15) days and (B)
shall remain undismissed or unstayed and in effect for a period of sixty (60)
days.
(ii) VOLUNTARY PROCEEDINGS. The Borrower, any Subsidiary
of the Borrower or Wireless shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization under the Federal bankruptcy laws, or any other similar
applicable Federal or state law now or hereafter in effect, or shall consent or
acquiesce to the filing of any such petition, or shall consent to or acquiesce
in the appointment of a receiver, liquidator, trustee, sequestrator or similar
official for the Borrower, any Subsidiary or Wireless or for a substantial part
of their respective property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally
as they become due, or action shall be taken by the Borrower, any Subsidiary or
Wireless in furtherance of any of the foregoing.
8.1d DISSOLUTION; CESSATION OF BUSINESS; ABANDONMENT OF CELLULAR
SYSTEM, ETC. The Borrower, any Subsidiary of the Borrower or Wireless shall
terminate its existence, cease to exist, permanently cease operations or
abandon the operation of any Cellular System; provided, however, the loss of
the Borrower's Interim Operating Authority of Pennsylvania RSA No. 2 by reason
of the FCC awarding a License to another Person shall not be deemed a cessation
or abandonment of the operation of a Cellular System for the purposes of this
Section 8.1d.
8.1e FCC LICENSES. The loss, revocation or failure to file for
renewal of any cellular FCC License; the commencement of proceedings to
suspend, revoke, terminate or substantially and adversely modify any cellular
FCC License, which proceedings are not dismissed or discharged within sixty
(60) days; or the designation of an application for renewal of any such
cellular FCC License for an evidentiary hearing, which cellular FCC License is
-73-
<PAGE> 82
now held or hereafter acquired by the Borrower or a Subsidiary of the Borrower
and is necessary for the continued operation of the Borrower's or such
Subsidiary's business in the same manner as is being conducted at the time of
such loss, revocation, failure to renew, commencement of proceedings or
designation of a hearing; provided, however, the loss of the Borrower's Interim
Operating Authority of Pennsylvania RSA No. 2 by reason of the FCC awarding a
License to another Person shall not be deemed a loss, termination, revocation
or failure to renew for the purposes of this Section 8.1e.
8.1f ERISA. (i) One or more of the following events occur:
(A) A Notice of Intent to Terminate any Plan
(including any Plan of an ERISA Affiliate) is filed under Section 4041(c) of
ERISA;
(B) Proceedings shall be instituted for the
appointment of a trustee by the appropriate United States court to administer
any Plan (including any Plan of an ERISA Affiliate);
(C) the PBGC shall institute proceedings to
terminate any Plan (including any Plan of an ERISA Affiliate) or to appoint a
trustee to administer any such Plan;
(D) A notice assessing Withdrawal Liability with
respect to any Multiemployer Plan (including any Multiemployer Plan of an ERISA
Affiliate) shall have been received by the Borrower or any ERISA Affiliate; or
(ii) Any applicable law, rule or regulation is adopted,
changed or interpreted by any Governmental Authority or agency or court with
respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements which, in the reasonable opinion of the Administrative
Agent, (A) could have a Material Adverse Effect on the priority of any lien or
security interest in favor of the Administrative Agent as established or
described in this Agreement or the other Loan Documents, or (B) result in the
existence of an Encumbrance on the Borrower's assets which is not a Permitted
Encumbrance.
8.1g CHANGE OF CONTROL. The occurrence of a Change of Control.
8.1h ADVERSE JUDGMENTS. The aggregate amount of final judgments
against the Borrower or any Subsidiary of the Borrower for which no further
appellate review exists shall, at any one time, exceed, by $3,000,000, the
aggregate amount of insurance proceeds available to pay such judgments.
-74-
<PAGE> 83
8.1i FAILURE TO TAKE CERTAIN ACTION. The Borrower shall fail to
take measures satisfactory to the Administrative Agent, within thirty (30) days
after notice to the Borrower by the Administrative Agent, with respect to any
action, suit, investigation, proceeding or Environmental Claim then pending or
threatened against the Borrower or any Subsidiary of the Borrower, the outcome
of which, in the reasonable judgment of the Administrative Agent, could
reasonably be expected to have a Material Adverse Effect.
8.1j FAILURE TO COMPLY WITH LOAN DOCUMENTS.
(i) FAILURE TO COMPLY WITH NEGATIVE COVENANTS. The
Borrower shall default in the due performance or observance of any negative
covenant contained in Article 6 of this Agreement.
(ii) FAILURE OF WIRELESS TO COMPLY WITH ITS AGREEMENT.
Wireless shall default in the due performance or observance of any covenant
contained in [Article] [Section] _____ of the Pledge Agreement.
(iii) FAILURE TO COMPLY WITH OTHER COVENANTS AND LOAN
DOCUMENTS. The Borrower shall default in the due performance or observance of
any covenant, condition or provision set forth in this Agreement or any of the
other Loan Documents which is not set forth elsewhere in this Section 8.1, or
the Borrower, any Subsidiary of the Borrower or Wireless shall default in the
due performance of any covenant, condition or provision set forth in any other
Loan Document to which the Borrower, such Subsidiary or Wireless is a party,
which default is not otherwise described in this Subsection 8.1j, and such
default described in this item (iii) shall not be remedied to the satisfaction
of the Administrative Agent for a period of thirty (30) days after the earlier
of (A) such default becoming known to any Authorized Officer or (B) notice of
such default being delivered by the Administrative Agent to the Borrower.
8.1k MISREPRESENTATION. Any material representation or warranty
made by the Borrower, any Subsidiary of the Borrower or Wireless in any Loan
Document to which it is a party is untrue in any material respect as of the
date made, or any schedule, statement, report, notice, certificate or other
writing furnished by the Borrower, any Subsidiary of the Borrower or Wireless
to the Administrative Agent, the Documentation Agent, the Collateral Agent or
any Lender is untrue in any material respect on the date as of which the facts
set forth therein are stated or certified.
8.1l INVALIDITY, ETC. OF LOAN DOCUMENTS. Any material provision of
this Agreement or any of the other Loan Documents shall at any time for any
reason cease to be valid and binding on the Borrower or on any other Person
which is a party thereto, or shall be
-75-
<PAGE> 84
declared to be null and void, or the validity or enforceability thereof shall
be contested by the Borrower or any other party thereto or any Governmental
Authority, or the Borrower or any other party thereto shall deny that it has
any or further liability or obligation under any Loan Document to which it is a
party.
8.1m MATERIAL ADVERSE CHANGE. The occurrence of any Material
Adverse Change.
8.2 REMEDIES.
8.2a EVENTS OF DEFAULT UNDER SECTIONS 8.1c AND 8.1d. Upon the
occurrence of an Event of Default set forth in Sections 8.1c and 8.1d, the
Revolving Credit Commitment shall automatically terminate and the Revolving
Credit Notes, interest accrued thereon, all other Obligations of the Borrower
and all obligations, if any, of any Subsidiary of the Borrower or Wireless
under any Loan Document to the Lenders and the Agents shall all become
immediately due and payable, without the necessity of demand, presentation,
protest, notice of dishonor or notice of default, all of which are hereby
expressly waived and deemed to be waived by the Borrower, any Subsidiary of the
Borrower or Wireless. Thereafter, the Lenders shall have no further obligation
to make any additional Loans hereunder. In addition, during any 60-day period
described in Section 8.1c(i), the Lenders shall not have any obligation to make
any additional Loans hereunder.
8.2b REMAINING EVENTS OF DEFAULT. Upon the occurrence and during
the continuance of any Event of Default set forth in Sections 8.1a, 8.1b, 8.1e,
8.1f, 8.1g, 8.1h, 8.1i, 8.1j, 8.1k, 8.1l or 8.1m, the Required Lenders may, at
their option, declare the Revolving Credit Commitment terminated and the
Revolving Credit Notes, interest accrued thereon, all other Obligations of the
Borrower and all obligations, if any, of any Subsidiary of the Borrower or
Wireless under any Loan Document to the Lenders and the Agents to be due and
payable, without the necessity of demand, presentation, protest, notice of
dishonor or notice of default, all of which are hereby expressly waived and
deemed to be waived by the Borrower, any Subsidiary of the Borrower or
Wireless. Thereafter, the Lenders shall have no further obligation to make any
additional Loans hereunder.
8.2c ADDITIONAL REMEDIES. In addition to the remedies set forth
above, upon the occurrence of any Event of Default, the Lenders and the Agents
shall have all of the rights and remedies granted to them under this Agreement
and the other Loan Documents and all other rights and remedies granted by law
to creditors.
8.2d EXERCISE OF REMEDIES; REMEDIES CUMULATIVE. No delay on the
part of the Agents or the Lenders or failure by the Agents and the Lenders to
exercise any power, right or remedy under this Agreement or any other Loan
Document shall operate as a waiver thereof,
-76-
<PAGE> 85
nor shall any single or partial exercise of any power, right or remedy or any
abandonment or discontinuance of steps to enforce such right, power or remedy
preclude other or further exercises thereof, or the exercise of any other
power, right or remedy. The rights and remedies in this Agreement and the
other Loan Documents are cumulative and not exclusive of any rights or remedies
(including, without limitation, the right of specific performance) which the
Lender would otherwise have.
ARTICLE 9. ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND COLLATERAL AGENT
9.1 APPOINTMENT AND GRANT OF AUTHORITY. The Lenders hereby
appoint Toronto Dominion (Texas), Inc. as Administrative Agent and Toronto
Dominion Texas, Inc. agrees to act as Administrative Agent under this Agreement
and the other Loan Documents. The Lenders hereby appoint PNC Bank, National
Association, and PNC Bank, National Association hereby agrees to act as
Documentation Agent and as Collateral Agent under this Agreement and the other
Loan Documents. The Agents shall have and may exercise such powers under this
Agreement as are specifically delegated to them by the terms hereof or of the
other Loan Documents, together with such other powers as are incidental
thereto. Without limiting the foregoing, the Agents or any of them as
appropriate, on behalf of the Lenders, are each authorized to execute all of
the Loan Documents (other than this Agreement) for and on behalf of the Lenders
and to accept all of the Loan Documents and all other agreements, documents or
instruments reasonably required to carry out the intent of the parties to this
Agreement.
9.2 NON-RELIANCE ON ADMINISTRATIVE AGENT. Each Lender agrees that
it has, independently and without reliance on the Agents, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agents, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. Except as otherwise provided herein, the Agents shall have no duty
to keep the Lenders informed as to the performance or observance by the
Borrower of this Agreement or any other Loan Document referred to or provided
for herein or to inspect the properties or books of the Borrower. The
Administrative Agent will make reasonable efforts to furnish to the Lenders
material information concerning the Borrower of which it has actual knowledge;
however, the Administrative Agent, in the absence of gross negligence or
willful misconduct, shall not be liable to any Lender for its failure to relay
or furnish to the Lenders any information.
-77-
<PAGE> 86
9.3 RESPONSIBILITY OF AGENTS AND OTHER MATTERS.
9.3a MINISTERIAL NATURE OF DUTIES. As between the Lenders and
themselves, the Agents shall not have any duties or responsibilities except
those expressly set forth in this Agreement or in the other Loan Documents, and
those duties and responsibilities shall be subject to the limitations and
qualifications set forth in this Article 9. The duties of the Agents shall be
ministerial and administrative in nature.
9.3b LIMITATION OF LIABILITY. As between the Lenders and
themselves, neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable, except for gross negligence or willful
misconduct, for any action taken or omitted under or in connection with this
Agreement, any other Loan Document, or any other instrument or document in
connection herewith. Without limiting the foregoing, neither the Agents nor
any of their respective directors, officers, employees or agents, shall be
responsible for, or have any duty to examine (i) the genuineness, execution,
validity, effectiveness, enforceability, value or sufficiency of this Agreement
or any of the other Loan Documents or any other document or instrument
furnished pursuant to or in connection with this Agreement; (ii) the
collectability of any amounts owed by the Borrower, any Subsidiary of the
Borrower or Wireless to the Lenders; (iii) the truthfulness of any recitals,
statements, representations or warranties made to the Agents or the Lenders in
connection with this Agreement, the other Loan Documents or any other document
or instrument furnished pursuant to or in connection with the Loan Documents,
(iv) any failure of any party to this Agreement to receive any communication
sent, including any telegram, telex, teletype, telecopy, bank wire, cable,
radiogram or telephone message or any writing, application, notice, report,
statement, certificate, resolution, request, order, consent letter or other
instrument, paper or communication entrusted to the mails or to a delivery
service, or (v) the assets, liabilities, financial condition, results of
operations, business, prospects or creditworthiness of the Borrower, any
Subsidiary of the Borrower or Wireless.
9.3c RELIANCE. The Agents shall be entitled to act, and shall be
fully protected in acting upon, any telegram, telex, teletype, telecopy, bank
wire, cable or radiogram or any writing, application, notice, report,
statement, certificate, resolution, request, order, consent, letter, other
instrument, paper or communication believed by the Agent receiving the same in
good faith to be genuine and correct and to have been signed or sent or made by
a proper Person. The Agents may consult counsel and shall be entitled to act,
and shall be fully protected in any action taken in good faith, in accordance
with advice given by counsel. The Agents may employ agents and
attorneys-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by the Agents with reasonable care.
The Agents shall not be bound to ascertain or inquire as to the performance or
obser-
-78-
<PAGE> 87
vance of any of the terms, provisions or conditions of this Agreement or any of
the other Loan Documents on the part of the Borrower, any Subsidiary of the
Borrower or Wireless.
9.3d DOCUMENTS. The Agents shall be under no duty to examine,
inquire into, or pass upon the validity, effectiveness or genuineness of this
Agreement, any Revolving Credit Note, any other Loan Document, or any
instrument, document or communication furnished pursuant hereto or in
connection herewith, and each Agent shall be entitled to assume that they are
valid, effective and genuine, have been signed or sent by the proper parties
and are what they purport to be.
9.3e RESPONSIBILITY DISCLAIMED. No Agent shall be under any
liability or responsibility whatsoever as an Agent:
(i) To the Borrower or any other Person as a consequence
of any failure or delay in performance by or any breach by, any Lender or
Lenders of any of its or their obligations under this Agreement;
(ii) To any Lender or Lenders, as a consequence of any
failure or delay in performance by, or any breach by, (i) the Borrower of any
of its obligations under this Agreement or the Notes or any other Loan
Document, or (ii) any Subsidiary of the Borrower, Wireless or any other obligor
under any other Loan Document;
(iii) To any Lender or Lenders, for any statements,
representations or warranties in this Agreement, or any other document
contemplated by this Agreement or any information provided pursuant to this
Agreement, any other Loan Document, or any other document contemplated by this
Agreement, or for the validity, effectiveness, enforceability or sufficiency of
this Agreement, the Notes, any other Loan Document, or any other document
contemplated by this Agreement; or
(iv) To any Person for any act or omission other than that
arising from gross negligence or willful misconduct of such Administrative
Agent, the Documentation Agent or the Collateral Agent, as the case may be, as
determined by a final, non-appealable judicial order of a court of competent
jurisdiction.
9.4 COLLATERAL AGENT. The Collateral Agent is hereby authorized
to act on behalf of the Lenders, in its own capacity and through other agents
and sub-agents appointed by it, under the Security Documents, provided that the
Collateral Agent shall not agree to the release of any Collateral except in
compliance with Section 10.1 hereof.
-79-
<PAGE> 88
9.5 ACTION ON INSTRUCTIONS. The Agents shall be entitled to act
or refrain from acting, and shall be fully protected in acting or refraining
from acting, under this Agreement, the other Loan Documents or any other
instrument or document in connection herewith or therewith, in accordance with
written instructions from the Required Lenders or, in the case of the matters
set forth in item (ii) of Section 10.1, from all of the Lenders. For purposes
of this Agreement and the other Loan Documents, unless the context clearly
indicates otherwise, all determinations by or requests by "Lenders" shall mean
the Required Lenders.
9.6 ACTION UPON OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT. If a
Default or Event of Default has occurred, all the Lenders shall immediately
consult with one another in an attempt to agree upon a mutually acceptable
course of conduct. In the absence of unanimous agreement upon a course of
conduct, if the Required Lenders wish to declare an Event of Default and/or
exercise their rights hereunder, the Agents will exercise the rights of the
Lenders hereunder as directed by the Required Lenders.
9.7 INDEMNIFICATION. To the extent the Borrower does not
reimburse and save harmless the Agents according to the terms hereof for and
from all costs, expenses and disbursements in connection herewith, such costs,
expenses and disbursements shall be borne by the Lenders ratably in accordance
with their respective Commitments. Each Lender hereby agrees on such basis (i)
to reimburse the Agents for such Lender's Pro Rata share of all such reasonable
costs, expenses and disbursements on request and (ii) to the extent of each
such Lender's Pro Rata share, to indemnify and save harmless the Agents against
and from any and all losses, obligations, penalties, actions, judgments and
suits and other costs, expenses and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agents,
other than as a consequence of gross negligence or willful misconduct on the
part of the Agents, arising out of or in connection with this Agreement, the
other Loan Documents or any other agreement, instrument or document in
connection herewith or therewith, or any request of the Required Lenders,
including without limitation the reasonable costs, expenses and disbursements
in connection with defending itself against any claim or liability related to
the exercise or performance of any of its powers or duties under this
Agreement, the other Loan Documents, or any of the other agreements,
instruments or documents delivered in connection herewith or the taking of any
action under or in connection with any of the foregoing.
9.8 AGENTS' RIGHTS AS A LENDER. With respect to the Commitments
of each Agent as a Lender hereunder, and any Loans of the Agents or their
respective Affiliates under this Agreement, the other Loan Documents and any
other agreements, instruments and documents delivered pursuant hereto, the
Agents and their respective Affiliates shall have the same rights, powers,
duties and obligations under this Agreement, the other Loan Documents or other
agreements, instruments or documents as any Lender, and may exercise such
rights and
-80-
<PAGE> 89
powers and shall perform such duties and fulfill such obligations as though it
were not an Agent or an Affiliate of an Agent. The Agents or their respective
Affiliates may accept deposits from, lend money to, and generally engage, and
continue to engage, in any kind of business with the Borrower as if it were not
an Agent or an Affiliate of an Agent.
9.9 LOAN ADVANCES BY ADMINISTRATIVE AGENT. Unless the officers of
the Administrative Agent responsible for administering this Agreement shall
have been notified in writing by a Lender prior to the date of any Loan that
such Lender will not make the amount which would constitute its Pro Rata share
of such Loan available to the Administrative Agent on or prior to the date of
such Loan, the Administrative Agent may (but shall not be required to) assume
that such Lender has made such amount available to the Administrative Agent on
the date of such Loan and the Administrative Agent or its Affiliate may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such Pro Rata share is made available to the Administrative Agent
by a Lender on a date after the date of such Loan, such Lender shall pay to the
Administrative Agent on demand an amount equal to the product of (i) the
average, computed for the period referred to in clause (iii) below, of the
Federal Funds Rate during each day included in such period, times (ii) the
amount of such Lender's Pro Rata share of such Loan, times (iii) a fraction,
the numerator of which is the number of days that elapsed from and including
the date of such Loan, to the date on which such Pro Rata share of such Loan
became immediately available to the Administrative Agent, and the denominator
of which is 365. A statement of the Administrative Agent submitted to any
Lender with respect to any amounts owing under this Section 9.9 shall be prima
facie evidence as to the amount owed by that Lender to the Administrative
Agent. If such Lender's Pro Rata share is not in fact made available to the
Administrative Agent by such Lender within three (3) Business Days of the date
of any Loan, the Administrative Agent shall be entitled to recover such amount
with interest thereon at the rate per annum then applicable under the Base Rate
Option during such period, on demand, from such Lender.
9.10 PAYMENT TO LENDERS. Promptly after receipt from the Borrower
of any principal repayment of the Loans, interest due on the Loans, and any
Fees or other amounts due under any of the Loan Documents, the Administrative
Agent shall distribute to each Lender that Lender's Commitment Percentage of
the funds so received. Such delivery shall be accomplished in such a manner as
to allow each Lender to receive its share of such payment in immediately
available funds on the same day that the funds representing payment due from
the Borrower is collected funds in the possession of the Administrative Agent.
9.11 PRO RATA SHARING. Any sums obtained from the Borrower by any
Lender by reason of the exercise of its rights of setoff or banker's lien shall
be shared Pro Rata among the Lenders. Nothing in this Section 9.11 shall be
deemed to require the sharing among the Lenders of collections specifically
relating to, or of the proceeds of collateral which is not
-81-
<PAGE> 90
subject to the Security Documents specifically securing, any other Indebtedness
of the Borrower to any Lender.
9.12 NOTICE OF EVENT OF DEFAULT. Each Lender shall use its best
efforts to notify the Administrative Agent immediately in writing of any
Default or Event of Default of which it becomes aware. Upon receipt of any
such notice, the Administrative Agent shall use its best efforts to notify the
Lenders immediately in writing of such Default or Event of Default. The
Administrative Agent shall notify each Lender of any Default or Event of
Default as soon as practicable after obtaining actual knowledge thereof.
9.13 DELEGATION OF DUTIES. Each Agent may execute any of its
duties under the Loan Documents by or through agents or attorneys selected by
it using reasonable care, and shall be entitled to advice of counsel concerning
all matters pertaining to such duties.
9.14 SUCCESSOR AGENTS. The Administrative Agent may resign as
Administrative Agent, the Documentation Agent may resign as Documentation Agent
and the Collateral Agent may resign as Collateral Agent each upon giving ninety
(90) days' notice to the Lenders and the Borrower. If any such notice shall be
given, the Lenders shall appoint from among the Lenders a successor
administrative agent, documentation agent or collateral agent, as appropriate,
for the Lenders, during such ninety (90)-day period, which successor agent
shall be reasonably satisfactory to the Borrower, to serve as such agent
hereunder and under the several documents, the forms of which are attached
hereto as exhibits, or which are referred to herein. If at the end of such
ninety (90)-day period the Lenders have not appointed such a successor, the
resigning Agent shall procure a successor reasonably satisfactory to the
Lenders and the Borrower, to serve in place of the resigning Agent as an agent
for the Lenders hereunder and under the other Loan Documents. Any such
successor agent shall succeed to the rights, powers and duties of the resigning
Agent. Upon the appointment of such successor agent or upon the expiration of
such ninety (90)-day period (or any longer period to which the resigning Agent
has agreed), the former Agent's rights, powers and duties as Administrative
Agent, Documentation Agent or Collateral Agent, as applicable, shall be
terminated, without any other or further act or deed on the part of such
resigning Agent or any of the parties to this Agreement. After any resigning
Agent's resignation hereunder as an Agent, the provisions of this Article 9
shall inure to the benefit of such retiring Agent as to any actions taken or
omitted to be taken by it while it was an Agent under this Agreement.
-82-
<PAGE> 91
ARTICLE 10. GENERAL PROVISIONS
10.1 AMENDMENTS AND WAIVERS. (i) Subject to the remaining
provisions of this Section 10.1, the Required Lenders, or the Agents with the
consent of the Required Lenders, and the Borrower may from time to time enter
into amendments, extensions, supplements and replacements to and of this
Agreement and the other Loan Documents to which they are parties, and the
Required Lenders may from time to time waive compliance with a provision of any
of the Loan Documents. Subject to the remaining provisions of this Section
10.1, no amendment, extension, supplement, replacement or waiver shall be
effective unless it is in writing and is signed by the Required Lenders and the
Borrower. Each waiver shall be effective only for the specific instance and
for the specific purpose for which it is given.
(ii) The foregoing notwithstanding, no such amendment,
extension, supplement, replacement or waiver shall, without the consent of all
the Lenders:
(A) Increase the Revolving Credit
Commitment or the maximum principal amount of the Loans which may be
outstanding hereunder;
(B) Reduce any of the Interest Rate
Options hereunder or any of the Fees due hereunder or under any of the other
Loan Documents;
(C) Postpone any scheduled payment date
of principal (including any scheduled date for a mandatory reduction of the
Revolving Credit Commitment or a mandatory or voluntary principal prepayment),
interest or Fees hereunder or under any of the other Loan Documents;
(D) Release all or any part of the
Security Interest in any of the Collateral;
(E) Change the definitions of "Pro Rata"
or "Required Lenders";
(F) Release or discharge, or consent to
any release or discharge of, the Borrower as a borrower under the Loan
Documents, or permit the Borrower, any Subsidiary of the Borrower or Wireless
to assign to another Person any of its obligations under the Loan Documents; or
(G) amend this Section 10.1.
-83-
<PAGE> 92
10.2 TAXES. The Borrower shall pay any and all stamp, document,
transfer and recording taxes, filing fees and similar impositions payable or
hereafter reasonably determined by the Administrative Agent or the Collateral
Agent to be payable in connection with this Agreement, the other Loan Documents
and any other documents, instruments and transactions pursuant to or in
connection with any of the Loan Documents. The Borrower agrees to save the
Administrative Agent, the Collateral Agent and the Lenders harmless from and
against any and all present and future claims or liabilities with respect to,
or resulting from, any delay in paying or failure to pay any such taxes or
similar impositions. The obligations of the Borrower pursuant to this Section
10.2 shall survive the termination of this Agreement and the repayment of the
Obligations.
10.3 EXPENSES. The Borrower shall pay:
(i) All (A) out-of-pocket costs and expenses incurred by
the Agents in connection with the preparation, execution and delivery of this
Agreement, the other Loan Documents, and any and all other documents and
instruments prepared in connection herewith, including the Agents' legal fees
and expenses in connection therewith, and (B) all reasonable costs and expenses
of the Agents (including but not limited to reasonable fees and expenses of the
Agents' counsel) in connection with all amendments, waivers, consents and other
documents and instruments prepared or entered into from time to time in
connection with this Agreement and the other Loan Documents, after the Closing
Date; and
(ii) All reasonable costs and expenses of the Agents
(including without limitation the reasonable fees and disbursements of the
Agents' counsel) in connection with (A) the enforcement of this Agreement and
the other Loan Documents arising pursuant to a breach by the Borrower, any
Subsidiary of the Borrower or Wireless of any of the terms, conditions,
representations, warranties or covenants of any Loan Document to which it is a
party; (B) the sale or other action taken with respect to the Collateral; and
(C) defending or prosecuting any actions, suits or proceedings relating to any
of the Loan Documents.
All of such costs and expenses shall be payable by the Borrower to the Agent
incurring the same upon demand or as otherwise agreed upon by such Agent and
the Borrower, and shall constitute Obligations under this Agreement. The
Borrower's obligations to pay such costs and expenses shall survive the
termination of this Agreement and the repayment of the Obligations.
10.4 NOTICES.
10.4a NOTICE TO THE BORROWER. All notices required to be delivered
to the Borrower pursuant to this Agreement shall be in writing and shall be
sent to the following address, by
-84-
<PAGE> 93
United States Postal Service, first class mail postage prepaid, hand delivery,
recognized national overnight courier service, telex, telegram, telecopier or
other means of electronic data communication:
If by U.S. Mail: If by other means:
- ---------------- ------------------
Sygnet Communications, Inc. Sygnet Communications, Inc.
6550-B Seville Drive 6550-B Seville Drive
Canfield, OH 44406 Canfield, OH 44406
Attention: Craig T. Sheetz Attention: Craig T. Sheetz
Fax: 330-565-9557
With a copy to: With a copy to:
- -------------- --------------
Samuel G. Rubenstein, Esq. Samuel G. Rubenstein, Esq.
Bryan Cave Bryan Cave
700 Thirteenth Street, N.W. 700 Thirteenth Street, N.W.
Washington, DC 20005-3960 Washington, DC 20005-3960
Fax: 202-508-6200
10.4b NOTICE TO THE ADMINISTRATIVE AGENT. All notices required to
be delivered to the Administrative Agent pursuant to this Agreement shall be in
writing and shall be sent to the following address, by United States Postal
Service, first class mail postage prepaid, hand delivery, recognized national
overnight courier service, telex, telegram, telecopier or other means of
electronic data communication:
If by U.S. Mail: If by other means:
- ---------------- ------------------
Toronto Dominion (Texas), Inc. Toronto Dominion (Texas), Inc.
909 Fannin 909 Fannin
Suite 1700 Suite 1700
Houston, TX 77010 Houston, TX 77010
Attention: Agency Department Attention: Agency Department
Fax: 713-951-9921
-85-
<PAGE> 94
With a copy to: With a copy to:
- -------------- --------------
Tucker Arensberg, P.C. Tucker Arensberg, P.C.
1500 One PPG Place 1500 One PPG Place
Pittsburgh, PA 15222 Pittsburgh, PA 15222
Attention: Linda A. Acheson, Esq. Attention: Linda A. Acheson, Esq.
Fax: 412-594-5619
10.4c NOTICE TO THE DOCUMENTATION AGENT OR THE COLLATERAL AGENT.
All notices required to be delivered to the Documentation Agent or the
Collateral Agent, as appropriate, pursuant to this Agreement shall be in
writing and shall be sent to the following address, United States Postal
Service, first class mail postage prepaid, hand delivery, recognized national
overnight courier service, telex, telegram, telecopier or other means of
electronic data communication:
If by U.S. mail: If by other means:
- ---------------- ------------------
PNC Bank, National Association PNC Bank, National Association
Broad & Chestnut Streets Broad & Chestnut Streets
P.O. Box 7648 P.O. Box 7648
Philadelphia, PA 19101 Philadelphia, PA 19101
Attention: Daniel E. Hopkins Attention: Daniel E. Hopkins
Fax: 215-585-6680
With a copy to: With a copy to:
- --------------- ---------------
Tucker Arensberg, P.C. Tucker Arensberg, P.C.
1500 One PPG Place 1500 One PPG Place
Pittsburgh, PA 15222 Pittsburgh, PA 15222
Attention: Linda A. Acheson, Esq. Attention: Linda A. Acheson, Esq.
Fax: 412-594-5619
10.4d NOTICE TO THE LENDERS. All notices required to be delivered
to the Lenders pursuant to this Agreement shall be in writing and shall be sent
to the address set forth underneath the Lender's signature to this Agreement or
to the Assignment and Assumption Agreement to which such Lender is a party, by
United States Postal Service, first class mail postage prepaid, hand delivery,
recognized national overnight courier service, telex, telegram, telecopier or
other means of electronic data communication.
-86-
<PAGE> 95
10.4e GENERAL NOTICE PROVISIONS. All such notices shall be
effective three Business Days after mailing, the date of telecopy transmission
or when received, whichever is earlier. The parties hereto may each change the
address for service of notice upon it by a notice in writing to the other party
hereto. Copies of notices shall be provided to Persons other than parties
hereto only in the case of notices under Article 8 hereof and the failure to
provide such copies shall not affect the validity of the notice given to the
primary recipient.
10.5 ASSIGNMENTS.
10.5a ASSIGNMENTS. (i) Subject to the remaining provisions of this
Subsection 10.5a, any Lender may at any time, in the ordinary course of its
commercial banking business, in accordance with applicable law, sell to one or
more Purchasing Lenders (which Purchasing Lenders may be Affiliates of the
Transferor Lender), a portion of its rights and obligations under this
Agreement and the Revolving Credit Notes then held by it, pursuant to an
Assignment and Assumption Agreement substantially in the form of Exhibit "J"
and satisfactory to the Administrative Agent, executed by the Transferor
Lender, such Purchasing Lender, the Administrative Agent and the Borrower;
subject, however to the following requirements:
(A) The Borrower and the Agents must give their prior
consent to any such assignment, which consents shall not be unreasonably
withheld;
(B) Each such assignment must be in a minimum amount of
$5,000,000; and
(C) Each Transferor Lender (other than an Agent
designated as a Managing Agent) shall pay to the Administrative Agent a $3,500
service fee in connection with each assignment made by it;
provided, however, that after the occurrence of and during the continuance of
an Event of Default (x) the restrictions set forth in item (C) above shall not
be applicable and (y) the consents or agreements of the Borrower contemplated
in items (A) and (B) above shall not be required.
(ii) Upon the execution, delivery, acceptance and
recording of any such Assignment and Assumption Agreement, from and after the
Transfer Effective Date determined pursuant to such Assignment and Assumption
Agreement, (A) the Purchasing Lender thereunder shall be a party hereto as a
Lender and, to the extent provided in such Assignment and Assumption Agreement,
shall have the rights and obligations of a Lender hereunder with a Commitment
as set forth therein, and (B) the Transferor Lender thereunder shall, to the
extent provided in such Assignment and Assumption Agreement, be released from
-87-
<PAGE> 96
its obligations under this Agreement as a Lender. Such Assignment and
Assumption Agreement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Lender
as a Lender and the resulting adjustments of Commitment Percentages arising
from the purchase by such Purchasing Lender of all or a portion of the rights
and obligations of such Transferor Lender under this Agreement and the
Revolving Credit Notes. On or prior to the Transfer Effective Date, the
Borrower shall execute and deliver to the Administrative Agent, in exchange for
the surrendered Revolving Credit Notes held by the Transferor Lender, new
Revolving Credit Notes to the order of such Purchasing Lender in an amount
equal to the Commitment or the Loans assumed by it and purchased by it pursuant
to such Assignment and Assumption Agreement, and new Revolving Credit Notes to
the order of the Transferor Lender in an amount equal to the Commitment or the
Loans retained by it hereunder.
10.5b ASSIGNMENTS TO FEDERAL RESERVE BANK. In addition to the
assignments permitted above, any Lender may assign and pledge all or any
portion of its Loans and Revolving Credit Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from its
obligations and duties hereunder or under the other Loan Documents.
10.5c ASSIGNMENT REGISTER. The Administrative Agent shall maintain
at its address referred to in Section 10.4 a copy of each Assignment and
Assumption Agreement delivered to it and a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders and the amount of the
Loans owing to each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent, and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for all
purposes of this Agreement. The Register shall be available at the office of
the Administrative Agent set forth in Section 10.4 for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
-88-
<PAGE> 97
10.6 PARTICIPATIONS.
10.6a SALE OF PARTICIPATIONS. The Lenders may, in the ordinary
course of their commercial banking business and in accordance with applicable
law, and after first obtaining the consent of the Borrower and the Agents,
which consents shall not be unreasonably withheld, at any time sell to one or
more Participants (which Participants may be Affiliates of a Lender)
Participations in the Revolving Credit Commitment, the Loans, the Revolving
Credit Notes and the other interests of the Lenders hereunder. In the event of
any such sale of a Participation, the selling Lender's obligations under this
Agreement to the Borrower shall remain unchanged, such Lender shall remain
solely responsible for its performance under this Agreement, such Lender shall
remain the holder of the Revolving Credit Note made payable to it for all
purposes under this Agreement, the Borrower shall continue to deal solely and
directly with the selling Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, and Participants
shall be permitted to have voting rights only with respect to the matters
described in items (A), (B), (C), and (D) of item (ii) of Section 10.1.
10.6b RIGHT OF SETOFF. The Borrower agrees that if amounts
outstanding under this Agreement and the Revolving Credit Notes are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to
have, to the extent permitted by applicable law, the right of setoff in respect
of its Participation in amounts owing under this Agreement and the Revolving
Credit Notes to the same extent as if the amount of its Participation were
owing directly to it as a lender under this Agreement or the Revolving Credit
Notes.
10.7 WITHHOLDING OF INCOME TAXES. At least five (5) Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, Participant or Purchasing Lender, each Lender,
Participant and Purchasing Lender that is not incorporated under the laws of
the United States or a state thereof shall deliver to the Borrower and the
Administrative Agent two (2) duly completed copies of United States Internal
Revenue Service Form W-9, 4224 or 1001 or other applicable form prescribed by
the Internal Revenue Service. Such form shall certify that such Lender,
Participant or Purchasing Lender is entitled to receive payments under this
Agreement and the Revolving Credit Notes without deduction or withholding of
any United States Federal income taxes, or is subject to such tax at a reduced
rate under an applicable tax treaty or under United States Internal Revenue
Service Form W-8, or another applicable form or a certificate of such Lender,
Participant or Purchasing Lender indicating that no such exemption or reduced
rate is allowable with respect to such payments. Each Lender, Participant and
Purchasing Lender which delivers a Form W-8, W-9, 4224 or 1001 further
undertakes to deliver to the Borrower and the Administrative Agent two
additional copies of such form (or a successor form) on or
-89-
<PAGE> 98
before the date that such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably required by the Borrower or the Administrative Agent, either
certifying that such Lender, Participant or Purchasing Lender is entitled to
receive payments under this Agreement and the Revolving Credit Notes without
deduction or withholding of any United States Federal income taxes or is
subject to such tax at a reduced rate under an applicable tax treaty or stating
that no such exemption or reduced rate is allowable. The Administrative Agent
shall be entitled to withhold United States Federal income taxes at the full
withholding rate, unless the Lender, Participant or Purchasing Lender
establishes an exemption, or at the applicable reduced rate, as established
pursuant to the provisions of this Section 10.7.
10.8 INDEMNITY. The Borrower hereby agrees to indemnify the
Administrative Agent, the Documentation Agent, the Collateral Agent, the
Lenders and each of their respective directors, officers, employees, attorneys,
agents and Affiliates against, and hold each of them harmless from, any loss,
liabilities, damages, claims, and reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) suffered or incurred by any of
them arising out of, resulting from or in any manner connected with, the
execution, delivery and performance of each of the Loan Documents, the Loans
and any and all transactions related to or consummated in connection with the
Loans, including, without limitation, losses, liabilities, damages, claims,
costs and expenses suffered or incurred by the Administrative Agent, the
Documentation Agent, the Collateral Agent, any Lender or any of their
respective directors, officers, employees, attorneys, agents or Affiliates
arising out of or related to investigating, preparing for, defending against,
or providing evidence, producing documents or taking any other action in
respect of any commenced or threatened litigation, administrative proceeding or
investigation under any Federal securities law or any other Governmental Rule
of any jurisdiction, or at common law or otherwise, that is alleged to arise
out of or is based on (i) any untrue statement or alleged untrue statement of
any material fact of the Borrower or any Affiliate of the Borrower in any
document or schedule filed with the Securities and Exchange Commission or any
other Governmental Authority; (ii) any omission or alleged omission to state
any material fact required to be stated in such document or schedule, or
necessary to make the statements made therein, in light of the circumstances
under which made, not misleading; (iii) any actual or alleged acts, practices
or omissions of the Borrower or their respective directors, officers, partners,
employees, attorneys, agents or Affiliates related to the making of any
acquisition, purchase of shares or assets pursuant thereto, financing of such
purchases or the consummation of any other transactions contemplated by any
such acquisitions that are alleged to be in violation of any Federal securities
law or of any other statute, regulation or other law of any jurisdiction
applicable to the making of any such acquisition, the purchase of shares or
assets pursuant thereto, the financing of such purchases or the consummation of
the other transactions contemplated by
-90-
<PAGE> 99
any such acquisition; or (iv) any withdrawals, termination or cancellation of
any such proposed acquisition for any reason whatsoever. The indemnity set
forth in this Section 10.8 shall be in addition to any other obligations or
liabilities of the Borrower to the Agents or the Lenders, or at common law or
otherwise. The provisions of this Section 10.8 shall survive the payment of
the Obligations and the termination of this Agreement. The foregoing
provisions of this Section 10.8 to the contrary notwithstanding, the Borrower
shall not be obligated to indemnify the Administrative Agent, the Documentation
Agent, the Collateral Agent or any Lender pursuant to this Section 10.8 for any
losses, liabilities, damages, claims, or costs which arise directly from the
Administrative Agent's, the Documentation Agent's or the Collateral Agent's or
such Lender's gross negligence or willful misconduct. All amounts owed
pursuant to this Section 10.8 shall be part of the Obligations.
10.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Borrower, the Administrative Agent, the Documentation Agent, the Collateral
Agent and the Lenders and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Administrative Agent, the
Documentation Agent, the Collateral Agent and the Lenders and their respective
successors and assigns; provided, however, that the Borrower shall not assign
its rights or duties hereunder or under any of the other Loan Documents without
the prior written consent of all of the Lenders.
10.10 FCC AND OTHER GOVERNMENTAL AUTHORITY MATTERS. Notwithstanding
anything to the contrary contained in this Agreement or any of the other Loan
Documents, but without limiting or waiving the Borrower's obligations, the
Administrative Agent's, the Documentation Agent's, the Collateral Agent's and
the Lenders' rights and the exercise of the Administrative Agent's, the
Documentation Agent's, the Collateral Agent's and the Lenders' remedies under
this Agreement and the other Loan Documents are subject to all applicable rules
and regulations of the FCC and all other applicable Governmental Authorities.
The Borrower agrees to take any action and to cause its Subsidiaries to take
any action which any Agent or the Lenders may reasonably request from time to
time in order to obtain and enjoy the full rights and benefits granted to the
Agents and the Lenders under the Loan Documents. Such actions shall include
specifically, but shall not be limited to, the use of the Borrower's and its
Subsidiaries' best efforts to assist in (i) obtaining approval of the FCC or
any other Governmental Authority for any action or transaction contemplated by
the Loan Documents or any of the transactions contemplated thereby which
approval is then required by law and (ii) upon request, and if an Event of
Default shall have occurred and is continuing, obtaining the approval of the
FCC or any other Governmental Authority to any application or applications for
consent to the assignment or any FCC License or other license or transfer of
control required to be signed by the Borrower and the Borrower's Subsidiaries
in connection with their respective FCC Licenses or other Governmental
Approvals. All actions taken by the Borrower or its Subsidiaries under this
Section 10.10 shall be at the Borrower's sole cost and
-91-
<PAGE> 100
expense; any costs and expenses advanced by any Agent or any Lender in
furtherance of the provisions of this Section 10.10 shall become part of the
Obligations for which the Borrower is responsible hereunder.
10.11 CONFIDENTIALITY. The Agents and the Lenders shall keep
confidential and not disclose to any Person, other than to their respective
directors, officers, employees, Affiliates and agents, and to actual and
potential Purchasing Lenders and Participants, all non-public information
concerning the Borrower, the Borrower's Affiliates and Subsidiaries and
Wireless and its Affiliates and Subsidiaries which comes into any Agent's and
any Lender's possession during the term hereof; provided, however, that any
such information delivered to a potential Purchasing Lender or Participant
shall be delivered subject to a written confidentiality agreement satisfactory
to the Administrative Agent and signed by such Purchasing Lender or
Participant. Notwithstanding the foregoing, the Agents and the Lenders may
disclose information concerning the Borrower, its Subsidiaries and Affiliates,
and Wireless and its Subsidiaries and Affiliates (i) in accordance with normal
banking practices and such Agent's or such Lender's policies concerning
disclosure of such information, (ii) pursuant to what such Agent or such Lender
believes to be the lawful requirements or request of any Governmental Authority
regulating banks or banking, (iii) as required by Governmental Rule, judicial
process or subpoena and (iv) to their respective attorneys, accountants and
auditors.
10.12 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or enforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.13 SURVIVAL. All representations, warranties, covenants and
agreements of the Borrower contained herein or in the other Loan Documents or
made in writing in connection herewith shall survive the issuance of the
Revolving Credit Notes and shall continue in full force and effect so long as
the Borrower may borrow hereunder and so long thereafter until payment in full
of the Revolving Credit Notes and the Obligations is made.
10.14 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, EXCEPTING APPLICABLE FEDERAL LAW AND EXCEPT ONLY TO
THE EXTENT PRECLUDED BY THE MANDATORY APPLICATION OF THE LAW OF ANOTHER
JURISDICTION.
-92-
<PAGE> 101
10.15 FORUM. THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS TO
WHICH THE BORROWER IS A PARTY MAY BE COMMENCED IN THE COURT OF COMMON PLEAS OF
PHILADELPHIA COUNTY, PENNSYLVANIA OR IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND THE PARTIES HERETO AGREE THAT A
SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN EITHER OF SUCH
COURTS SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED PERSONALLY OR BY CERTIFIED MAIL TO THE PARTIES AT THEIR ADDRESSES SET
FORTH IN SECTION 10.4, OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. FURTHER, THE PARTIES HERETO HEREBY SPECIFICALLY
CONSENT TO THE PERSONAL JURISDICTION OF THE COURT OF COMMON PLEAS OF
PHILADELPHIA COUNTY, PENNSYLVANIA AND THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF PENNSYLVANIA AND WAIVE AND HEREBY ACKNOWLEDGE THAT
THEY ARE ESTOPPED FROM RAISING ANY OBJECTION BASED ON FORUM NON CONVENIENS, ANY
CLAIM THAT EITHER SUCH COURT LACKS PROPER VENUE OR ANY OBJECTION THAT EITHER
SUCH COURT LACKS PERSONAL JURISDICTION OVER THEM SO AS TO PROHIBIT EITHER SUCH
COURT FROM ADJUDICATING ANY ISSUES RAISED IN A COMPLAINT FILED WITH EITHER SUCH
COURT AGAINST ANY PARTY HERETO CONCERNING THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS. THE PARTIES HERETO HEREBY ACKNOWLEDGE AND AGREE THAT THE CHOICE OF
FORUM CONTAINED IN THIS SECTION 10.15 SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY FORUM OR THE TAKING OF ANY ACTION
UNDER THE LOAN DOCUMENTS TO ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.
10.16 WAIVER OF JURY TRIAL. IN ORDER TO EXPEDITE THE RESOLUTION OF
ANY DISPUTES WHICH MAY ARISE UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND IN LIGHT OF THE COMPLEXITY OF THE TRANSACTIONS CONTEMPLATED
UNDER THE LOAN DOCUMENTS, THE PARTIES HERETO WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT TO WHICH THEY
MAY BE PARTIES, WHETHER ARISING OUT OF, UNDER, OR BY REASON OF THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER TRANSACTION AMONG THEM OF ANY
KIND OR NATURE, AND THE PARTIES ACKNOWLEDGE THAT SUCH WAIVER HAS BEEN
-93-
<PAGE> 102
SPECIFICALLY NEGOTIATED AS PART OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.17 NON-BUSINESS DAYS. Whenever any payment hereunder or under
the Revolving Credit Notes is due and payable on a day which is not a Business
Day, except as otherwise provided in this Agreement such payment may be made on
the next succeeding Business Day, and such extension of time shall in each such
case be included in computing interest in connection with such payment.
10.18 INTEGRATION. This Agreement is the entire agreement among the
parties relating to this financing transaction and it supersedes all prior
understandings and agreements, whether written or oral, between the parties
hereto relating to the transactions provided for herein.
10.19 HEADINGS. Article, Section, Subsection and other headings
used in this Agreement are intended for convenience only and shall not affect
the meaning or construction of this Agreement.
10.20 COUNTERPARTS. This Agreement and any amendment hereto may be
executed in several counterparts and by each party on a separate counterpart,
each of which, when so executed and delivered, shall be an original, but all of
which together shall constitute but one and the same instrument. In proving
this Agreement, it shall not be necessary to produce or account for more than
one such counterpart signed by the other party against whom enforcement is
sought.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-94-
<PAGE> 103
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Credit Agreement to be executed by their
respective duly authorized officers as of the date first written above.
ATTEST: SYGNET COMMUNICATIONS, INC., an
Ohio corporation
By: (SEAL)
- ------------------------------ ----------------------------------
Name: Name:
Title: Title:
TORONTO DOMINION (TEXAS), INC.,
in its capacity as Administrative Agent
By: (SEAL)
----------------------------------
Name:
Title:
PNC BANK, NATIONAL
ASSOCIATION, in its capacity as
Documentation Agent and Collateral Agent
By: (SEAL)
----------------------------------
Name:
Title:
<PAGE> 104
(LENDER SIGNATURE PAGE)
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Lender has caused this Credit Agreement dated as of
_______________, 1996 by and among Sygnet Communications, Inc. and the Lenders
and the Agents which are parties thereto to be executed by its duly authorized
officer as of the date first above written.
[LENDER]
By: (SEAL)
-----------------------------
Name:
Title:
Commitment: $
-----------------
Commitment Percentage: %
-----------
Address for notice purposes:
If by United States Mail: If by other means:
Attention: Attention:
--------------------- --------------------
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
Telephone:
--------------------
Telecopier:
--------------------
Telex:
--------------------
Address for Euro-Rate Loan funding if different from above:
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
Telephone:
---------------------
Telecopier:
---------------------
Telex:
---------------------
<PAGE> 105
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Lender has caused this Credit Agreement dated as of
_______________, 1996 by and among Sygnet Communications, Inc. and the Lenders
and the Agents which are parties thereto to be executed by its duly authorized
officer as of the date first above written.
PNC BANK, NATIONAL ASSOCIATION
By: (SEAL)
-------------------------
Name:
Title:
Commitment: $
---------------------
Commitment Percentage: %
--------------
Address for notice purposes:
If by United States Mail: If by other means:
PNC Bank, National Association PNC Bank, National Association
Broad & Chestnut Streets Broad & Chestnut Streets
P.O. Box 7648 P.O. Box 7648
Philadelphia, PA 19101 Philadelphia, PA 19101
Attention: Daniel E. Hopkins Attention: Daniel E. Hopkins
Telephone: 215-585-7468
Telecopier: 215-585-6680
Address for Euro-Rate Loan funding if different from above:
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
Telephone:
---------------------
Telecopier:
---------------------
Telex:
---------------------
<PAGE> 106
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Lender has caused this Credit Agreement dated as of
_______________, 1996 by and among Sygnet Communications, Inc. and the Lenders
and the Agents which are parties thereto to be executed by its duly authorized
officer as of the date first above written.
THE TORONTO-DOMINION BANK
By: (SEAL)
------------------------
Name:
Title:
Commitment: $
--------------------
Commitment Percentage: %
-------------
Address for notice purposes:
If by United States Mail: If by other means:
Attention: Attention:
---------------------- ---------------
Telephone:
---------------
Telecopier:
---------------
Telex:
---------------
Address for Euro-Rate Loan funding if different from above:
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
Telephone:
---------------------
Telecopier:
---------------------
Telex:
---------------------
<PAGE> 1
EXHIBIT 10.23
CELLULAR ONE(R) LICENSE AGREEMENT
between
Cellular One Group
and
Erie Cellular Telephone Company
<PAGE> 2
CELLULAR ONE LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
NO.
<S> <C> <C>
I. GRANT 2
II. TERM AND RENEWAL 3
III. DUTIES OF LICENSOR 4
IV. DUTIES OF LICENSEE 6
V. FEES AND REPORTING 8
VI. MARKS 9
VII. CONFIDENTIAL INFORMATION 12
VIII. ADVERTISING 14
IX. INSURANCE 17
X. TRANSFER OF INTEREST 18
XI. DEFAULT AND TERMINATION 20
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION 24
XIII. INDEPENDENT STATUS AND INDEMNIFICATION 25
XIV. APPROVALS AND WAIVERS 26
XV. NOTICES 27
XVI. ENTIRE AGREEMENT 27
XVII. SEVERABILITY AND CONSTRUCTION 28
XVIII. APPLICABLE LAW 28
XIX. ACKNOWLEDGEMENTS 29
</TABLE>
Cellular One Group
License Agreement
-i-
<PAGE> 3
CELLULAR ONE(R) LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a Delaware
general partnership ("Licensor"), and Erie Cellular Telephone Company, a
partnership organized under the laws of Pennsylvania ("Licensee").
PREAMBLE
Licensor is a general partnership (the "Partnership") of Cellular One
Marketing, Inc. ("COMI"), a subsidiary of Southwestern Bell Mobile Systems,
Inc. ("SMBS"), and Cellular One Development, Inc., a subsidiary of McCaw
Cellular Communications, Inc. ("McCaw"). Additional partners may be admitted to
the Partnership from time to time. (The Partnership partners as they may exist
from time to time are referred to as the "Partnership Partners").
SBMS previously owned and licensed the service mark "Cellular One" and
certain related trademarks, service marks and designs, which marks SBMS
assigned to the Partnership following formation of the Partnership. Licensee
already may be using one or more versions of the Cellular One mark pursuant to
a previous license agreement with SBMS, which agreement was assigned to
Licensor as of December 31, 1990.
Licensor intends to use and license these marks, the earlier/other versions
thereof, the marks designed on Exhibit A hereto and such other marks as it may
hereafter designate in writing (collectively referred to as the "Marks") for
use in connection with the business of providing public cellular radio
telecommunications service ("Cellular Telephone Service") and equipment
("Cellular Telephone Equipment"). Licensor's goal is to build nationwide
recognition of the Marks as synonymous with dependable, high quality Cellular
Telephone Service through the licensing of independent Cellular Telephone
Service providers on the Block A or non-wireline frequencies ("Providers") who
meet the qualifications established by Licensor. Licensees will operate in the
various markets ("market(s)") recognized and defined by the Federal
Communications Commission ("FCC").
Toward this end, Licensor desires to grant licenses to use the Marks to
Providers who agree to conduct their businesses in full accordance with FCC
directives, interconnection guidelines, protocols, and other technical industry
standards issued from time to time by the Telecommunications Industries
Association, the Electronics Industries Association and comparable industry
groups, as well as other standards of service, quality and customer
Cellular One
License Agreement
-1-
<PAGE> 4
satisfaction specified from time to time by Licensor (collectively referred to
as "Service Standards").
Licensee currently provides or, prior to the acceptance of this License
Agreement by Licensor, will provide Cellular Telephone Service as a Provider
pursuant to an FCC license for the market(s) described in Exhibit B (the
"Licensed Territory").
Licensee desires to receive a license from Licensor to use the Marks to
identify and promote its Cellular Telephone Service in the Licensed Territory
and is willing to provide such service in accordance with the Service
Standards, pursuant to the provisions of this License Agreement.
The parties therefore agree as follows:
I. GRANT
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the right, license and privilege to use the Marks only in the
Licensed Territory and only to identify and promote its Cellular Telephone
Service, which shall include ancillary support services such as voice mail on
the telephone switch, extended service and warranty provisions for cellular
telephones and the like. This License Agreement does not give Licensee any right
to use the Marks in connection with Cellular Telephone Equipment or any rights
to use the trademark (as opposed to the service mark) Cellular One. As long as
this License Agreement is in effect, Licensee agrees to use the Marks in
connection with the provision of Cellular Telephone Service in the Licensed
Territory. If this License Agreement grants a license to Licensee with respect
to multiple markets, then in the event that Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement, this License Agreement
and specifically the term "Licensed Territory" shall thereafter be deemed to
apply only to the remaining market(s) as to which Licensee's rights under this
License Agreement continue. During the term of this License Agreement or any
renewal term, Licensor agrees that it will not license any other Provider or
other mobile communications service to use the Marks in the Licensed Territory,
provided Licensee is actively using the Marks to identify itself as a Cellular
One Provider in the Licensed Territory. Subject to the foregoing grant to
Licensee of the right to use the Cellular One service mark for Cellular
Telephone Service in the Licensed Territory, Licensee acknowledges that Licensor
has the right to use and license the Marks in other territories anywhere in the
world and to use the license the Marks and Cellular One trademark
Cellular One
License Agreement
-2-
<PAGE> 5
or any other trademarks or service marks within or outside of the Licensed
Territory.
II. TERM AND RENEWAL
A. Except as otherwise provided in this License Agreement, the term of this
License Agreement is (5) years, beginning on the date on which Licensor signs
this License Agreement (the "Effective Date").
B. Licensee may, at its option, renew the license granted by this License
Agreement for three (3) additional terms of five (5) years each provided that:
1. Licensee gives Licensor written notice of its election to renew not less
than six (6) months nor more than twelve (12) months before the end of the
expiring term;
2. Licensee continues to hold its FCC license(s) to provide Cellular
Telephone Service in the market(s) with respect to which a renewal is being
requested;
3. No later than ninety (90) days before the end of the expiring term,
Licensee executes Licensor's then-current form of license renewal agreement,
which agreement will supersede this License Agreement in all respects, provided
that such license renewal agreement shall not contain any terms, provisions or
conditions which differ materially from the terms, provisions or conditions of
this License Agreement, except terms, provisions and conditions (i) which in the
good faith judgment of Licensor are not materially adverse to Licensee, (ii)
which are appropriate, in the good faith judgment of Licensor, to accommodate
any material economic or market changes occurring during the prior five (5) year
term, (iii) which Licensor determines in good faith are necessary to protect the
Marks, or (iv) which relate to charges and fees (including increases) which
Licensor believes in good faith are necessary to provide adequate support for
the Cellular One license program generally;
4. The most recent customer satisfaction survey with respect to Licensee's
Cellular Telephone Service ( as described in Section III.C. of this License
Agreement) conducted before the end of the expiring term indicates a rating of
at least 65%, and, if such survey produces a rating below 85% (or such increased
level as may be required pursuant to the provisions of Section IV.A. below),
then Licensee shall have agreed in writing to use its best efforts to improve
its customer satisfaction rating to at least 85% (or such increased level as may
be required pursuant to the provisions of Section IV.A. below) by a certain
Cellular One
License Agreement
-3-
<PAGE> 6
time as reasonably established by Licensor (if the time prescribed by Licensor
for such improvement extends beyond the expiring term of this License
Agreement, such timely improvement will become a condition of effective
renewal); and
5. At the end of the expiring term, Licensee has satisfied all monetary
obligations owed by Licensee to Licensor, and has timely met such obligations
throughout the term of this License Agreement, and shall not be in default
under this License Agreement.
III. DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee, and no
other party is entitled to rely on, enforce or obtain relief for breach of any
such obligation, either directly or by subrogation. Licensor shall undertake the
following duties:
A. Marks Usage Guidelines
Licensor will provide Licensee with written and graphic guidelines for the
correct reproduction, application and presentation of the Marks, which may
include Mark specimens, samples of advertisements and clip art indicating
color, proportion, and format.
B. Technical Guidelines
Licensor will provide Licensee with a Guide to Quality Operations
containing suggestions for providing customers with high quality Cellular
Telephone Service, and other materials as Licensor deems appropriate.
C. Customer Satisfaction Surveys
Licensor will, at its own expense, commission an independent survey company
("Survey Company") to conduct a customer satisfaction survey of Licensee's
customers on a yearly basis for purposes of assessing the quality of Licensee's
Cellular Telephone Service. The methodology of the survey will be determined by
the Survey Company and Licensor. An outline of current survey methodology, which
may change from time to time, is attached as Exhibit C. The results of all
surveys of Licensee's customers will be shared with Licensee to assist Licensee
in improving its business. The first of these surveys, which will be conducted
in Licensee's first year of operation as a licensee hereunder, is for advisory
purposes only; the results of subsequent surveys will be used to evaluate the
general level of customer satisfaction and to assist Licensor in determining
Cellular One
License Agreement
-4-
<PAGE> 7
whether or not Licensee is meeting the Service Standards. Licensor will
instruct the Survey Company to obtain all required survey information directly
from the Licensee and not through or in conjunction with Licensor. The Survey
Company will be required to execute an appropriate confidentiality agreement
for the benefit of Licensee and the other Cellular One licensees which shall
provide that the Survey Company will not disclose any Confidential Information
of Licensee to Licensor, the Partnership Partners or affiliates, or their
employees or to any other party (except that the results of the survey for each
market and other survey information which is applicable generally to all
licensees may be disclosed to Licensor).
D. Licensee Advisory Council
On or before June 30, 1992, Licensor will establish, and will thereafter
maintain, during the term of this License Agreement, an elected council of
licensees ("Advisory Council") comprised of non-partner licensees from a broad
cross-section of markets, MSA's and RSA's, throughout the United States to
advise and consult with Licensor regarding material Cellular One license
matters such as advertising, marketing and customer service standards and to
act as a liaison organization between the Licensor and the Cellular One
licensees. The procedure for selecting Advisory Council members and the charter
of responsibility for the Advisory Council will be established by Licensor in
time to meet the June 30, 1992 anticipated effective date and will be
communicated in writing by Licensor to Licensee as soon as practicable. Such
procedures and responsibilities will be subject to change, from time to time,
as may be appropriate in the judgment of Licensor to provide the most effective
organization for performing the contemplated functions of the Advisory Council.
The charter of responsibility shall provide that all members of the Advisory
Council will be informed of applicable antitrust laws and shall abide by any
decisions of Licensor's antitrust counsel in such regard.
E. National and Regional Advertising
Licensor will establish and maintain, whenever Licensor shall determine
that to do so would be in the best interests of its licensees generally, the
Cellular One Promotional Fund, as described in Section VIII.C. of this License
Agreement. Licensor plans to administer such Fund with the goal of enhancing
the image of the Marks.
F. National/Regional Account Programs
Licensor may, in its discretion, offer a national and/or one or more
regional account programs under which, through the
Cellular One
License Agreement
-5-
<PAGE> 8
voluntary cooperation of its licensees in various markets, client companies with
multiple market operations could enter into a single contract arrangement for
Cellular Telephone Service for their employees located in such markets. Licensor
or its designee shall administer any such national or regional accounts
program(s).
IV. DUTIES OF LICENSEE
Licensee understands and acknowledges that the high quality operation of
its Cellular Telephone Service business under the Marks is important to
Licensee, Licensor and other licensees of the Marks in order to maintain high
operating standards and to protect the reputation of, and goodwill associated
with, the Marks. Toward that end, Licensee acknowledges and accepts the
following duties:
A. Quality of Service
Licensee agrees to provide high quality Cellular Telephone Service to its
customers by complying with the Service Standards. Furthermore, Licensee shall
attain and maintain an overall customer satisfaction rating of at least 85%, or
such increased level as may be required pursuant to the provisions of this
Section IV.A. Licensor reserves the right to increase the minimum acceptable
customer satisfaction rating to a percentage greater than 85% if Licensor, in
its reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the Cellular Telephone Service industry at such
time; provided, however, that the Advisory Council must approve any such
increase in the minimum acceptable customer satisfaction rating, and such
increase shall not be effective until the beginning of the next calendar year
following the Advisory Council's approval. In the event that a customer
satisfaction survey conducted by Licensor pursuant to Section III.C. of this
License Agreement results in an overall customer satisfaction rating below 85%
(or below any higher percentage established by Licensor as described above) in
any market in the Licensed Territory, then Licensee will be assigned probation
status under Section XI.E. of this License Agreement and surveys will be
commissioned every six (6) months in that market until Licensee has achieved an
overall customer satisfaction rating of at least 85% (or any higher percentage
established by Licensor as described above) and the probation status is removed,
or until this License Agreement is terminated, as herein provided, whichever
shall first occur. Licensee agrees to pay the reasonable direct costs of
conducting such additional customer satisfaction survey(s).
Cellular One
License Agreement
-6-
<PAGE> 9
B. Legal Compliance
Licensee agrees to comply, at its own expense with all applicable laws,
ordinances and regulations of federal, state, county or municipal authorities.
Licensee will also obtain and maintain, at its own expense, all governmental
licenses, permits and approvals, including without limitation, an FCC
construction permit and an FCC license to provide Cellular Telephone Service in
each market in the Licensed Territory. In the event that Licensee's FCC
construction permit or FCC license to provide Cellular Telephone Service is one
or more of the market(s) in the Licensed Territory is scheduled to expire during
the term of this License Agreement, including any renewal term, Licensee agrees
to comply with all requirements for extension of said license(s) and permit(s)
and to use its best efforts to obtain the extension(s) for the maximum possible
period(s). Licensee shall furnish to Licensor, promptly following Licensee's
receipt thereof, a copy of any FCC notice regarding an actual or threatened
termination or revocation of Licensee's FCC license or FCC construction permit
for any market in the Licensed Territory. Licensee agrees to notify Licensor in
writing within five (5) days after Licensee shall become aware of the
commencement of any action, suit or proceeding, and of the issuance of any
order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which could have a material adverse effect on the
operation or financial condition of Licensee's Cellular Telephone Service
business.
C. Business Practices
Licensee shall maintain a competent, conscientious trained staff. Neither
Licensor nor Licensee shall engage in any trade practice or other activity
which is harmful to the goodwill or reflects unfavorably on the Marks or on the
reputation of Licensee or Licensor or Licensee's Cellular Telephone Service
business, or which constitutes deceptive or unfair competition, consumer fraud
or misrepresentation.
D. Information to Licensor
Upon Licensor's request, subject to the confidentiality requirements
described in Section III.C above, Licensee must promptly furnish to a Survey
Company designated by Licensor a complete and accurate customer list of its
Cellular Telephone Service subscribers in a format reasonably prescribed by the
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey Company shall require in connection with the
performance of its duties. Licensee hereby gives the Survey Company permission
to contact any and all of its subscribers in conducting a customer survey to
ascertain the
Cellular One
License Agreement
-7-
<PAGE> 10
quality level of Licensee's Cellular Telephone Service and related market
research data in accordance with the methodology set forth in Exhibit C, or as
Licensor may reasonably deem appropriate. Licensee shall provide Licensor with
additional information reasonably requested by Licensor regarding matters such
as Licensee's legal status (for example, change in control, affiliated
companies, etc.), Licensee's use of the Marks, and other matters which Licensor
may reasonably determine are relevant to Licensee's performance under this
License Agreement.
V. FEES AND REPORTING
A. Application Fee
Upon execution of this License Agreement, Licensee shall pay to Licensor a
nonrefundable application fee of Five Hundred Dollars ($500.00). If Licensee
has been using one or more of the Marks in connection with its Cellular
Telephone Service business pursuant to a valid license with SBMS/Licensor and
previously paid an initial license fee of $2,250, then the entire amount of
$2,250 shall be credited to Licensee's account, to be applied first towards the
$500 application fee and the balance towards the initial annual license fee
described in Section V.B. below.
B. Annual License Fee
Licensee agrees to pay to Licensor an annual license fee equal to two
cents ($0.02) per person in the Licensed Territory based on the total
population of each of the market(s) in the Licensed Territory as determined by
the most recent population estimates produced by Donnelly Marketing Company or
another independent company selected in good faith by Licensor, with a minimum
annual license fee of three thousand dollars ($3,000.00) per market in the
Licensed Territory for the initial year of the license. The annual license fee
shall be paid on or before January 31 of each year, for that full calendar
year. The first annual license fee shall be paid upon execution of this License
Agreement for a full year; the second annual fee shall be paid on or before the
next following January 31 and the license fee equal to two cents ($0.02) per
person in the Licensed Territory will be pro rated to reflect the portion of
that calendar year covered by the first payment, if any. The annual license fee
will not be refunded in whole or in part under any circumstances; provided,
however, that upon expiration of this License Agreement at the end of the
initial term or any renewal term, Licensor agrees to refund a pro rated portion
of the annual license fee reflecting that portion of that year's calendar year
remaining after the date of expiration, less any set off for any other fees
owing to Licensor. All annual license fees shall be payable in good funds at
Cellular One
License Agreement
-8-
<PAGE> 11
Licensor's address specified herein, or at such other address as Licensor shall
from time to time designate in writing.
C. Advertising Fees
Upon Licensor's establishment of the Cellular One Promotional Fund
described in Section VIII.C. of this License Agreement, Licensee agrees to pay
to Licensor an annual advertising fee not to exceed 5.0 cents ($0.05) per person
in the Licensed Territory, based upon the population estimates described in
Section V.B. above. The annual advertising fee shall be payable in approximately
equal, twice yearly, payments, with the first such payment being due on February
15 and the second such payment being due on July 31 in each year during the term
of this License Agreement, including any renewal term, in which Licensor shall
determine that such advertising fees shall be payable to establish or maintain
the Promotional Fund, as contemplated by Section VIII.C. Advertising fees shall
not be refundable under any circumstances. Notwithstanding the foregoing, if
Licensee can demonstrate to the satisfaction of Licensor that Licensee has less
than three hundred thousand (300,000) billable minutes of air time per month in
any market in the Licensed Territory, Licensee shall not be obligated to pay any
advertising fee with respect to such market until the calendar year following
the year in which Licensee shall first obtain, in any single calendar month,
three hundred thousand (300,000) billable minutes of air time in such market.
For purposes of this Section V.C., Licensor agrees to accept the bona fide
report of Licensee's independent auditing firm as appropriate confirmation that
Licensee has less than three hundred thousand (300,000) billable minutes of air
time per month in any market in the Licensed Territory.
D. Interest on Late Payments
If any payment of the annual license fee or the payment of any advertising
fee is overdue, Licensee shall pay Licensor, in addition to the overdue amount,
interest on such overdue amount from the date it was due until paid at the rate
which is two (2) points above the prime rate published by the Wall Street
Journal on the date payment was due, or the maximum rate permitted by applicable
law, whichever is less. Entitlement to such interest shall be in addition to any
other remedies Licensor may have.
VI. MARKS
A. Licensor is the owner of all right, title and interest in and to the
Marks.
Cellular One
License Agreement
-9-
<PAGE> 12
B. With respect to Licensee's use of the Marks pursuant to this License
Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor and shall use
them only in the manner authorized and permitted by Licensor, and only in
accordance with the written and graphic guidelines provided for the correct
reproduction, application, and presentation of the Marks. If Licensee is
currently using earlier or modified versions of the Marks pursuant to a valid
license agreement with Licensor, then the following additional provisions shall
be applicable:
(i) all advertising and promotional materials utilized by Licensee for the
first time on or after July 1, 1992 shall use only the Marks designated by
Licensor;
(ii) by July 1, 1992, Licensee shall cease all use of tag lines, logos and
bugs in connection with the Marks in all outdoor or public media (including,
without limitation, vehicles, building signs, billboards and shopping mall
displays), all print media (including, without limitation, newspaper
advertisements, magazine advertisements and listings in yellow pages and other
telephone directories), and all broadcast media (including, without limitation,
radio and television advertising); provided, however, that Licensee may continue
to use previously approved tag lines, logos and bugs in connection with the
Marks on business cards, stationery, customer contracts and invoices used for
customer purposes (and other purposes expressly authorized by Licensor from time
to time in the written graphic guidelines referred to in Section VI.B.1. above)
and may permit any authorized agent or similar dealer designations which may be
approved from time to time by Licensor; and
(iii) by January 31, 1994, Licensee shall cease all use of earlier or
modified versions of the Marks, and shall use only the Marks designated for use
by Licensor, except for the limited use permitted by Section VI.B.1. (ii) above.
2. Licensee shall use the Marks only in connection with providing Cellular
Telephone Service in the Licensed Territory.
3. Licensee shall identify the Licensor as the registered owner of the
Marks in conjunction with the operation of Licensee's Cellular Telephone Service
business, including but not limited to the identification of Licensor as such
on Licensee's invoices, order forms, receipts and contracts.
Cellular One
License Agreement
-10-
<PAGE> 13
4. Except as provided in Section X.C. below, Licensee shall have
no right to sublicense the Marks to any other person or entity; except that
Licensee may permit authorized dealers or agents of Licensee who market the
services provided by Licensee in the conduct of its Cellular Telephone Service
business to have limited use of the Marks. Such use by a dealer or agent shall
be consistent with Licensee's rights and responsibilities hereunder with
respect to the use of the Marks and, in no event, shall any such permitted use
exceed or extend beyond Licensee's rights hereunder to use the Marks. Licensee
agrees to monitor and be responsible for the use of the Marks by its agents and
dealers and to provide or cause to be provided to Licensor, from time to time,
such reasonable information concerning the use of the Marks by such dealers and
agents to permit Licensor to ascertain Licensee's compliance hereunder.
5. Licensee's right to use the Marks is limited to the uses
authorized under this License Agreement.
6. Licensee shall not use the Marks as part of its corporate or
other legal name. Licensee shall file and maintain trade name or fictitious
name registrations in the appropriate jurisdictions within the Licensed
Territory, and shall execute any documents deemed necessary or desirable by
Licensor or its counsel to obtain protection for or registration of Licensor's
ownership of the Marks or to maintain or defend Licensor's title thereto or
their continued validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should the Licensee become aware. Licensor agrees, at its sole cost and
expense, to institute or otherwise defend proceedings as may be appropriate to
protect the Marks, including, to the extent necessary, defense of such
proceedings following the termination of this License Agreement. In connection
with any such proceedings, Licensee agrees to execute any and all documents and
to do whatever reasonable acts and things as may, in the opinion of counsel for
Licensor, be necessary or advisable to assist Licensor in carrying out the
prosecution or defense, and Licensor agrees to reimburse Licensee for all
direct costs incurred by Licensee in doing these acts and things, except that
Licensee shall bear the salary costs of its employees. Notwithstanding the
foregoing, and whether or not Licensor undertakes the prosecution or defense of
a legal proceeding relating to one or more of the Marks, Licensor's liability
for damages to Licensee for any loss of the use of one or more of the Marks
(including any loss resulting from Licensor's loss of title or ownership of the
Marks or the rights thereto)
Cellular One -11-
License Agreement
<PAGE> 14
shall be limited to the amount of the application fee plus the annual license
fee paid by Licensee under this License Agreement for the year during which
such liability is determined in the Licensed Territory.
8. The Marks are valid and serve to identify the Cellular Telephone
Service provided by those who are authorized to operate under the Marks.
Licensee shall not directly or indirectly contest the validity, registration or
Licensor's ownership of the Marks.
9. Licensee's use of the Marks pursuant to this License Agreement does
not give Licensee any ownership interest or other interest in or to the Marks,
except the license granted in this License Agreement. Any and all goodwill
arising from Licensee's use of the Marks shall inure solely and exclusively to
the benefit of Licensor, and upon expiration or termination of this License
Agreement and the license granted by it, no monetary amount shall be assigned
as attributable to any goodwill associated with Licensee's use of the Marks.
10. Licensor has and retains the following rights, among others:
(a) To Use the Marks itself, in connection with regional and
national advertising, and, subject to the provisions of Section I hereof, with
selling products and services both within and outside the Licensed Territory;
(b) To grant licenses for use of the Marks in addition to those
licenses already granted to existing licensees of the Marks; and
(c) To use the Marks in any manner reserved for Licensor
pursuant to Section I.
11. In the event that any of the Marks, including any trademarks,
service marks and design logos adopted after execution of this License
Agreement which become Marks, can no longer be used, Licensor reserves the
right to provide a substitute mark or design.
VII. CONFIDENTIAL INFORMATION
A. Definition
Any and all information, knowledge, know-how, and techniques which
Licensor or Licensee designates as confidential
Cellular One -12-
License Agreement
<PAGE> 15
shall be deemed Confidential Information for purposes of this License
Agreement, except:
1. Information which either party can demonstrate was known to it
prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by one
party to the other, had become or later becomes a part of the public domain,
through publication or communication by others through no fault of the party
receiving the information.
B. Prohibitions
Licensor and Licensee each agrees that it will use its best efforts,
during the term of this License Agreement and for one year following expiration
or termination of this License Agreement, to prevent the communication or
divulgence, to any other person, partnership, association, corporation or
business enterprise of any Confidential Information which may be communicated
to it or of which it may be apprised pursuant to this License Agreement.
Licensor shall be deemed to have used its best efforts to prevent such
communication or divulgence if it has distributed guidelines to its employees
in an effort to maintain an information separation between Licensor and the
Partnership Partners and their affiliates, and, specifically, it has instructed
its employees not to divulge any Confidential Information, including customer
information, to the Partnership Partners or their affiliates, and shall have
obtained the executed confidentiality agreements referred to in Section VII.C.
from those persons designated in such Section. In circumstances where Licensee
is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
Cellular Telephone Service business in that market should be disclosed to that
Partnership Partner or its affiliates. The parties agree that statistical
performance information regarding all licensees of the Marks which does not
identify individual markets may be reported to the Partnership Partners and
their affiliates and shall not be considered Confidential Information.
Notwithstanding the foregoing, either party to this License Agreement and the
Partnership Partners and their affiliates may disclose any Confidential
Information which any such party may be legally required to disclose to a
government agency or in the context of litigation or arbitration.
C. Licensor Confidentiality Agreements
Licensor will execute, and will cause its employees, agents and
representatives, who are reasonably expected to have
Cellular One -13-
License Agreement
<PAGE> 16
access to Confidential Information of Licensee to execute, an appropriate
confidentiality agreement, which shall provide that any Confidential
Information of Licensee made available to Licensor, Licensor's employees,
agents or representatives, pursuant to this License Agreement, will be kept
confidential by all such persons.
D. Consequences of Breach
Licensor and Licensee each acknowledges that any failure to comply
with this Section VII will cause the other party irreparable injury, and each
party agrees to pay all court costs and reasonable attorneys' fees incurred by
the other party in obtaining specific performance of, or an injunction against
violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
A. Licensee's Advertising
All advertising and promotion by Licensee in any manner or medium must
be conducted in a dignified manner and must conform to the written and graphic
guidelines specified by Licensor. Licensee shall display the Marks in the
manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's Cellular Telephone
Service business. If requested by Licensor, Licensee at its own expense shall
promptly provide to Licensor photocopies of all print advertisements and
promotional materials and audio/video cassettes of radio/television advertising
using the Marks which Licensee has used at any time during the six months
preceding Licensor's request.
B. Material Provided by Licensor
Licensor may provide from time to time, in its sole discretion,
advertising and promotional plans and materials, including without limitation,
newspaper mats, television and radio tapes, promotional brochures and sales
aids. Licensee may use all or any of these materials in its sole discretion.
Cellular One -14-
License Agreement
<PAGE> 17
C. Cellular One Promotional Fund
License agrees that Licensor shall have the right, in its sole
discretion, to establish a fund for national and/or regional advertising and
promotional programs and activities (the "Cellular One Promotional Fund" or the
"Fund") for licensees of the Marks and to determine, subject to the maximum
limits provided in Section V.C., the amount of contributions to be made by
Licensee with respect thereto for any year or years during the term hereof,
including any renewal term, commencing on or after January 1, 1993. Upon
establishment of the Cellular One Promotional Fund, Licensee agrees to make
contributions as required hereunder and under Section V.C. hereof, and agrees
that the Fund is to be maintained and administered by Licensor or its designee
as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts, materials,
and media used in such programs and the placement and allocation thereof.
Licensee agrees and acknowledges that the Cellular One Promotional Fund is
intended to maximize general public recognition, acceptance, and use of the
Marks for the benefit of all licensees of the Marks, and that Licensor or its
designee are not obligated, in administering the Fund, to undertake expenditures
for Licensee which are equivalent or proportionate to Licensee's contribution,
or to ensure that any particular licensee benefits directly or pro rata from
expenditures by the Fund. Notwithstanding the foregoing, Licensor agrees that
approximately twenty percent (20%) of the advertising fees paid by Licensee with
respect to any market in the Licensed Territory which receives a customer survey
satisfaction rating (determined pursuant to Section III.C. hereof) of more than
90% for two (2) consecutive annual survey periods shall be spent in such market
solely to promote the Marks, utilizing, in each case, the advertising materials
developed by Licensor. The special allocation of advertising fees contemplated
by this paragraph shall be based upon the amount of fees paid for the year in
which the second consecutive required customer survey rating is achieved, but
will generally be expended or allocated during the following year. Any
advertising fees which are to be specially allocated pursuant to the provisions
of this Section VIII.C.1. and which are not expended during the year following
the year in which such fees become subject to the special allocation provisions
of this Section VIII.C.1. shall not be used or otherwise made available for any
special allocation in the future.
2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising
Cellular One -15-
License Agreement
<PAGE> 18
and/or promotional activities including the cost of preparing and conducting
television, radio, magazine, and newspaper advertising campaigns; direct mail
and outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional
brochures and other marketing materials for licensees of the Marks; and
indirect costs associated with the implementation of advertising programs, such
as equipment costs and similar costs relating to special national or regional
programs or other similar programs contemplated by Section III.F. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Each of Licensor's company-owned Cellular Telephone Service
businesses operating under the Marks, if any, and each Cellular Telephone
Service business operating under the Marks owned by a Partnership Partner or
its affiliate, if any, will be required to make contributions to the Cellular
One Promotional Fund on the same basis as assessments required of other
licensees of the Marks.
4. Licensee shall contribute to the Cellular One Promotional
Fund by separate check made payable to the Fund. All sums paid by licensees of
the Marks to the Fund shall be maintained in an account separate from the other
monies of Licensor and shall not be used to defray any of Licensor's
administrative expenses, except for such reasonable administrative costs and
overhead as Licensor may incur in activities reasonably related to the
administration or direction of the Fund and advertising programs for licensees
of the Marks. Except as set forth in this Section VIII.C., the Fund and any
incidental earnings shall not otherwise inure to the benefit of Licensor.
Licensor or its designee shall maintain separate bookkeeping accounts for the
Fund.
5. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts remain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current
year, and finally from contributions.
6. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the
Fund as shown on the books of the Fund shall
Cellular One -16-
License Agreement
<PAGE> 19
be prepared annually by an independent certified public accountant selected by
Licensor and shall be made available to Licensee upon written request.
7. Although the Fund is intended to be of perpetual duration,
Licensor maintains the right to terminate the Fund. The Fund shall not be
terminated, however, until all monies in the Fund have been expended for
advertising and/or promotional purposes or returned to contributors on the
basis of their respective contributions.
D. Price Discretion
Licensee shall have the right to sell its products and offer services
at any price Licensee may determine, and shall in no way be bound by any price
which may be recommended or suggested by Licensor.
IX. INSURANCE
A. Requirement
Licensee shall promptly procure, and shall maintain in full force and
effect at all times during the term of this License Agreement, at Licensee's
expense, an insurance policy or policies protecting Licensee, Licensor, and the
Partnership Partners, and their respective affiliates, officers, directors,
shareholders, and employees, against any demand or claim with respect to
personal injury, death, or property damage, or any loss, liability, or expense
whatsoever arising or occurring upon or in connection with Licensee's Cellular
Telephone Service business. Licensor and the Partnership Partners, and their
respective officers, directors, shareholders, and employees, shall be named
additional insureds in each such policy.
B. Minimum Coverage
The policy or policies shall be written by an insurance company with an
Alfred M. Best rating of A or A+, or such other insurance company as Licensor
may reasonably approve, and shall include, at a minimum, such coverages and
policy limits as may reasonably be specified by Licensor from time to time,
which coverages may include, without limitation, comprehensive general
liability insurance, including personal injury, as well as comprehensive
automobile liability coverage for both owned and non-owned vehicles, and
property damage liability coverage, naming Licensor and the Partnership
Partners, and their respective officers, directors, shareholders and employees,
as additional insureds in each such policy or policies. Until such time as
Cellular One -17-
License Agreement
<PAGE> 20
Licensor shall in good faith determine that economic or other circumstances
affecting the Cellular One license program require increased insurance
coverage, the following minimum insurance requirements shall be applicable.
1. General liability: $1,000,000 per occurrence or $2,000,000
in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
4. Automobile liability: $1,000,000 per occurrence for owned
and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. Certificates of Insurance
Within 30 days after this License Agreement is executed, and thereafter
at least 30 days prior to the expiration of any such policy, Licensee shall
deliver to Licensor Certificates of Insurance evidencing the proper coverage
with limits not less than those required hereunder. All Certificates shall
expressly provide that not less than 30 days' prior written notice shall be
given Licensor in the event of material alteration to, or cancellation of, the
coverages evidenced by such Certificates.
X. TRANSFER OF INTEREST
A. Transfer by Licensor
Licensor shall have the right to transfer or assign all or any part of
its rights or obligations herein to any person or legal entity. If Licensor's
assignee assumes all of the obligations of Licensor under this License
Agreement and sends written notice of the assignment so attesting, Licensee
shall promptly execute a general release of Licensor, and any subsidiaries,
partners and affiliates of Licensor, from claims against or liabilities of
Licensor or such subsidiaries, partners or affiliates of Licensor arising under
this License Agreement.
Cellular One -18-
License Agreement
<PAGE> 21
B. Transfer and Pledge by Licensee
Except as hereinafter provided, Licensee may not assign or transfer any
of its rights under this License Agreement. Licensee may transfer its rights
under this License Agreement in connection with a transfer of its Cellular
Telephone Service business for one or more of the market(s) in the Licensed
Territory to an affiliate transferee in a pro forma assignment as recognized by
FCC regulations currently at 47 CFR Section 22.39. If Licensee desires in the
Licensed Territory (i) to sell its Cellular Telephone Service business for one
or more markets and assign its rights under this License Agreement with respect
to such market(s) other than in connection with such a pro forma assignment, or
(ii) to pledge or assign its rights under this License Agreement to a financial
institution or other party in connection with a financing transaction involving
Licensee, Licensee shall notify Licensor in writing, and Licensee shall be
entitled to transfer, assign, or pledge its rights under this License
Agreement, as the case may be, provided:
1. Licensee shall not be in default under this License Agreement.
2. The transferee shall enter into a written assignment, in a form
satisfactory to Licensor, assuming and agreeing to comply with this License
Agreement (except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or
collateral assignment need only be made subject to all of the terms and
conditions of this License Agreement).
3. Licensee shall remain liable for all of the obligations to
Licensor under this License Agreement prior to the effective date of transfer
and shall execute any and all instruments reasonably requested by Licensor to
evidence such liability.
4. Where Licensee provides Cellular Telephone Service in more than
one market and the transfer involves market(s) comprising less than all of the
markets in the Licensed Territory, the transferee shall enter into Licensor's
then current form of license agreement for the market(s) being transferred.
This License Agreement shall remain in full force and effect with respect to
Licensee's remaining market(s), if any, following the transfer.
5. The transferee shall pay Licensor any transfer fees or charges
then being charged generally by Licensor to transferees of licenses to use the
Marks.
Cellular One -19-
License Agreement
<PAGE> 22
C. Right to Add Affiliate as Party
If Licensee desires, in the Licensed Territory, to authorize an
affiliate (which for purposes hereof shall be an entity controlled by, under
common control with or controlling the Licensee) to use the Marks in
connection with the separation of Licensee's wholesale and retail operations or
to take advantage of tariff differentials affecting Licensee and its
affiliates, Licensee shall notify Licensor and Licensee shall be entitled to
add its affiliate as a party to this Agreement, provided:
1. Licensee shall not be in default under this Licensee
Agreement.
2. Licensee's affiliate enters into a written amendment to
this License Agreement in which the affiliate agrees to be bound by all of the
terms and conditions of the License Agreement and to be subject to all of the
rights and obligations of the Licensee under the License Agreement, arising on
or after the date of the amendment.
XI. DEFAULT AND TERMINATION
A. Termination by Licensee
Licensee shall have the right to terminate this License Agreement
without cause at any time upon at least one hundred twenty (120) days advance
written notice to Licensor.
B. Termination by Licensor -- Without Notice
Licensee shall be deemed to be in default under this License Agreement,
and all rights granted herein shall automatically terminate without notice to
Licensee, if Licensee becomes insolvent or makes a general assignment for the
benefit of creditors; or if a petition in bankruptcy is filed by Licensee or
against Licensee and not opposed by Licensee; or if Licensee is adjudicated as
bankrupt or insolvent; or if a bill in equity or other proceeding for the
appointment of a receiver of Licensee or other custodian for Licensee's
business or assets is filed and consented to by Licensee; or if a receiver or
other permanent or temporary custodian of Licensee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under any state or federal law
should be instituted by Licensee or against Licensee and not actively opposed
by Licensee; or if a final judgment remains unsatisfied or of record for
thirty (30) days or longer (unless supersedeas bond is filed); or if Licensee
is dissolved except where the Licensee is a limited partnership and promptly
Cellular One -20-
License Agreement
<PAGE> 23
following dissolution, such limited partnership is reconstituted with the same
general partners; or if a suit to foreclose any lien or mortgage against real
or personal property used in the operation of Licensee's Cellular Telephone
Service business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Cellular Telephone
Service business or property; or if any material real or personal property of
Licensee used in its Cellular Telephone Service business shall be sold after
levy thereupon by any sheriff, marshal, or constable; or if Licensee at any
time ceases to operate or otherwise abandons its Cellular Telephone Service
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; of if Licensee loses its FCC license or
FCC construction permit for one or more market(s) or otherwise forfeits the
right to do or transact business in one or more market(s), in which event
Licensee's rights under this License Agreement with respect to such market(s)
shall automatically terminate and this License Agreement shall continue with
respect to the remaining market(s) for which Licensee continues to hold FCC
license(s).
C. Termination by Licensor -- Upon Notice
Upon the occurrence of any of the following events, Licensee shall be
deemed to be in default and Licensor may, at its option, terminate this License
Agreement and all rights granted hereunder without affording Licensee any
opportunity to cure the default. Said termination shall be effective
immediately upon receipt of notice by Licensee;
1. If Licensee has been advised of its probation status pursuant
to Section XI.E. and Licensee does not make a good faith effort to formulate
and implement a Licensor-approved plan during the term of probation, or, at the
end of the term of probation, Licensee fails to meet the 85% customer
satisfaction rating (or the higher percentage established by Licensor under
Section IV.A.) required by the Service Standards;
2. If Licensee fails to any customer satisfaction survey
conducted pursuant to Section III.C. (except for the initial advisory survey)
to attain an overall satisfaction rating of at least 65%, regardless of the
terms of any probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
Cellular One -21-
License Agreement
<PAGE> 24
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Cellular Telephone Service business;
5. If Licensee purports to transfer any rights or obligations
under this License Agreement to any third party, contrary to the terms of
Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by
Licensor;
7. If Licensee knowingly submits any false reports or
information to Licensor or any entity conducting a customer satisfaction survey
either during the application process or subsequent to the execution of this
License Agreement;
8. If Licensee contests in any court or proceeding the
validity or registration of, or Licensor's ownership of, any of the Marks or
other rights licensed hereunder.
D. Termination by Licensor --
After Notice and Opportunity to Cure
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days,
to initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If any such default is
not cured within that time (or, if appropriate, substantial and continuing
acting to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of
the thirty (30) day period or such longer period as applicable law may require.
Licensee shall be in default hereunder for any failure to comply substantially
with any of the requirements imposed by this License Agreement or to carry out
the terms of this License Agreement in good faith. Such defaults shall include,
without limitation, the occurrence of any of the following events:
1. If Licensee fails, refuses or neglects promptly to pay when
due any monies owing to Licensor or to the Cellular One Promotional Fund; or
fails, refuses or neglects promptly to submit information as required under
this License Agreement, or makes any false statements in connection therewith;
Cellular One -22-
License Agreement
<PAGE> 25
2. If Licensee fails to comply, in any material respect, with the
Service Standards;
3. If Licensee misuses or makes any unauthorized use of the Marks
or otherwise materially impairs the goodwill associated therewith or Licensor's
rights therein;
4. If Licensee engages in any business or markets any service or
product under a name or mark which, in Licensor's opinion, is confusingly
similar to the Marks; or
5. If Licensee, by act or omission, permits a continued violation
in connection with the operation of its Cellular Telephone Service business of
any law, ordinance, rule or regulation of a governmental agency, in the absence
of a good faith dispute over its application or legality and without promptly
resorting to an appropriate administrative or judicial forum for relief
therefrom.
E. Probation
In the event that a customer satisfaction survey, conducted pursuant to
Section III.C., reveals an overall customer satisfaction rating of less than
85% (or such higher percentage established by Licensor under Section IV.A.),
but more than 65%, Licensor shall advise Licensee of an imposition of probation
status for a stated period of time, typically one year. Promptly on receipt of
this written notice, Licensee agrees to formulate and implement a plan,
acceptable to Licensor, to improve the quality of Licensee's Cellular Telephone
Service so that a subsequent customer satisfaction survey indicates compliance
with the provisions of this License Agreement. The technical guidelines
contained in the Guide to Quality Operations provided to Licensee by Licensor
are designed to assist Licensee in improving its customer satisfaction rating.
If Licensor determines, in its sole discretion, that Licensee is not making a
good faith effort to formulate and implement such a plan, or after a reasonable
probation period the goals of the plan are not achieved, then Licensor may
elect to extend the term of the probation or terminate this License Agreement
effective upon written notice to Licensee, pursuant to Section XI.C.
F. Force Majeure
Neither Licensor nor Licensee shall be liable or deemed to be in
default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God
Cellular One -23-
License Agreement
<PAGE> 26
or the public enemy. Any delay resulting from any such cause shall extend
performance accordingly or excuse performance, in whole or in part, as may be
reasonable; provided however, that (i) said causes shall not excuse payment of
any amounts due or owed at the time of such occurrence or payment of license
fees, advertising fees or other amounts due thereafter, (ii) the party
asserting any such cause shall promptly commence and diligently pursue action
to remedy its inability or failure to perform hereunder, and (iii) in no event
shall said causes extend or excuse performance for more than one hundred twenty
(120) days from the time of performance set forth in this License Agreement. The
party asserting this Section XI.F. shall promptly notify the other party of the
occurrence and nature of any such cause and shall thereafter regularly inform
the other party of the progress of actions to remedy the inability or failure to
perform hereunder.
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. Deidentification
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated
Market(s).
2. Licensee shall immediately and permanently cease to use in the
Terminated Market(s), in any manner whatsoever, any of the Marks; and all other
Marks and distinctive forms, slogans, signs, symbols, monograms and devices
associated with the Marks; in particular, Licensee shall cease to use, without
limitation, all signs, advertising materials, displays, stationery, forms, and
any other articles or clothing which display the Marks.
3. Licensee shall take such action as may be necessary to cancel
in the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
Cellular One -24-
License Agreement
<PAGE> 27
4. Licensee agrees, in the event it continues to
operate a Cellular Telephone Service business in the Terminated Market(s), not
to use any reproduction, counterfeit, copy, or colorable imitation of the
Marks, either in connection with such other business or the promotion thereof,
which is likely to cause confusion, mistake, or deception, or which is likely
to dilute Licensor's rights in and to the Marks. Further, Licensee agrees not
to utilize any designation of origin or description or representation which
falsely suggests or represents an association or connection with Licensor or
any of the Marks in the Terminated Market(s).
B. Payment of Monies Due
1. Licensee shall promptly pay all sums owing to
Licensor and the Cellular One Promotional Fund. If and when this License
Agreement is terminated as a result of any default of Licensee, such sums shall
include all damages, costs and expenses, including reasonable attorney's fees,
incurred by Licensor as a result of the default.
2. Licensee shall pay to Licensor all damages,
costs and expenses, including reasonable attorney's fees, incurred by Licensor
subsequent to the termination or expiration of this License Agreement in
obtaining injunctive or other relief for the enforcement of any provisions of
this Section XII.
C. Return of Certain Confidential Documents
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other all documents which contain
Confidential Information of the other as defined in Section VII. hereof.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto
that this License Agreement does not create a fiduciary relationship between
them; that Licensee shall remain an independent business; and that nothing in
this License Agreement is intended to constitute either party as an agent,
legal representative, subsidiary, joint venturer, partner, employee or servant
of the other for any purpose whatsoever.
B. During the term of this License Agreement and any
renewal hereof, Licensee shall hold itself out to the public as an
Cellular One -25-
License Agreement
<PAGE> 28
independent business using the Marks pursuant to a license from Licensor.
Licensee agrees to take such action as may be necessary to so notify the
public.
C. It is understood and agreed that nothing in this
License Agreement authorizes Licensee to make any contract, agreement, warranty
or representation on Licensor's behalf, or to incur any debt or other
obligation in Licensor's name. Licensor shall in no event assume liability
for, or be deemed liable hereunder as a result of, any such action; nor shall
Licensor be liable by reason of any act or omission of Licensee in its conduct
of its Cellular Telephone Service business or for any claim or judgment arising
therefrom against Licensee or Licensor. Licensee shall indemnify and hold
Licensor, Licensor's employees, the Partnership Partners and their affiliates,
and their respective officers, directors, employees and stockholders, harmless
from and against any and all claims arising directly or indirectly from, as a
result of, or in connection with, Licensee's operation of its Cellular
Telephone Service business, as well as the costs, including attorney's fees, of
defending against them.
XIV. APPROVALS AND WAIVERS
A. Whenever this License Agreement requires the prior
approval or consent of Licensor, Licensee shall make a timely written request
to Licensor therefor, and such approval or consent shall be obtained in
writing. Licensor will process all requests for approvals and consents in a
reasonable and timely manner.
B. Licensor makes no warranties or guarantees upon which
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval, consent or suggestion to Licensee in connection
with this License Agreement, or by reason of any neglect, delay or denial of
any request therefor.
C. No failure of Licensor or Licensee to exercise any
power reserved to it in this License Agreement, or to insist upon compliance by
the other with any obligation or condition in this Agreement, and no custom or
practice of the parties at variance with the terms hereof, shall constitute a
waiver of either party's rights to demand exact compliance with any of the
terms of this License Agreement. Waiver by Licensor or Licensee of any
particular default on the part of the other shall not affect or impair the
non-defaulting party's right with respect to any subsequent default of the same
or of a different nature; nor shall any delay, forbearance or omission by
Licensor or Licensee to exercise any power or right arising out of any breach
or default by the other of any of the terms, provisions or covenants of this
License Agreement affect or impair such party's rights; nor shall
Cellular One -26-
License Agreement
<PAGE> 29
such constitute a waiver by Licensor or Licensee, as the case may be, of any
rights hereunder or rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due
to it shall not be deemed to be a waiver by Licensor of any preceding breach by
Licensee of any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered or mailed by certified or
registered mail, return receipt requested, to the respective parties at the
following addresses unless and until a different address has been designated by
written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: Executive Director
cc: Johnson, Bromberg & Leeds
2600 Lincoln Plaza
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the
signature page hereof.
Any notice by certified or registered mail shall be deemed to have
been given at the date and time of receipt.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this
License Agreement shall be deemed to amend and restate in its entirety and to
supersede, for all purposes, any prior license agreement between the parties
hereto which contemplates or has as its primary purpose the grant of a license
to use any of the Marks. Except for those permitted to be made unilaterally by
Licensor
Cellular One -27-
License Agreement
<PAGE> 30
hereunder, no amendment, change or variance from this License Agreement shall
be binding on either party unless mutually agreed to by the parties and
executed by their authorized officers or agents in writing.
XVII. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein,
each portion, section, part, term and/or provision of this License Agreement
shall be considered severable; and if, for any reason, a portion, section,
part, term and/or provision herein is determined to be invalid and contrary to,
or in conflict with, any existing or future law or regulation by a court or
agency having valid jurisdiction, such shall not impair the operation of, or
have any other effect upon, such other portions, sections, parts, terms and/or
provisions of this License Agreement as may remain otherwise intelligible; and
the latter shall continue to be given full force and effect and bind the
parties hereof; and said invalid portions, sections, parts and/or provisions
shall be deemed not to be a part of this License Agreement.
B. Nothing in this License Agreement is intended, nor
shall be deemed, to confer any rights or remedies upon any person or legal
entity other than Licensor or Licensee, and their respective successors and
assigns as permitted by this License Agreement.
C. In the event a court in a final decision rules that
any provision of this License Agreement or portion thereof is unenforceable,
Licensee agrees to be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended
solely for the convenience of the parties, and none shall be deemed to affect
the meaning or construction of any provision hereof.
E. All references herein to the masculine, neuter or
singular shall be construed to include the masculine, feminine, neuter or
plural, where applicable.
F. This License Agreement may be executed in several
parts, and each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS
ACCEPTANCE AND EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND
Cellular One -28-
License Agreement
<PAGE> 31
SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED UNDER THE LAWS THEREOF,
WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY CONFLICT OF LAW; PROVIDED,
HOWEVER, THAT IF ANY OF THE PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE
ENFORCEABLE UNDER THE LAWS OF THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE
GOVERNED BY, AND INTERPRETED AND CONSTRUED UNDER THE LAWS OF THE STATE IN WHICH
THE LICENSED TERRITORY IS LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS
OF MORE THAN ONE STATE OR THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW
SHALL BE THAT OF THE STATE IN WHICH THE LARGEST PORTION OF THE LICENSED
TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to
Licensor or Licensee by this License Agreement is intended to be, nor shall be
deemed, exclusive of any other right or remedy herein or by law or equity
provided or permitted, but each shall be cumulative of every other right or
remedy.
C. Nothing herein contained shall bar Licensor's right
to apply for injunctive relief against threatened conduct that will cause it
loss or damages, under applicable equity rules, including the applicable rules
for obtaining restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in
the Cellular Telephone Service business and that such business involves
substantial investment and risks and that its success is largely dependent upon
the ability of Licensee's management and technical personnel. Licensor
expressly disclaims the making of, and Licensee acknowledges that it has not
received, any warranty or guarantee, express or implied, as to the potential
volume, profits, or success resulting from the utilization of the Marks by
Licensee in its Cellular Telephone Service business.
B. Licensee acknowledges that it received a copy of the
complete Cellular One License Agreement and the attachments thereto at least
five (5) business days prior to the date on which this License Agreement is
signed by Licensee. Licensee further acknowledges that it received the
disclosure document required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, at least ten (10) business days
prior to the date an which this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood
this License Agreement and the attachments hereto, and that Licensor has
accorded Licensee ample time and opportunity to
Cellular One -29-
License Agreement
<PAGE> 32
consult with advisors of Licensee's own choosing about the potential benefits
and risks of entering into this License Agreement on the effective date set
forth below.
IN WITNESS WHEREOF, the parties hereto have duly executed this License
Agreement on the day and year first above written.
ATTEST: CELLULAR ONE GROUP
/s/ [signature illegible] By: /s/ [signature illegible]
- --------------------------- ---------------------------------
Title: Executive Director
------------------------------
Effective Date: December 1, 1991
--------------------
Primary Contact in Ordinary
Course of Business:
Executive Director
Cellular One -30-
License Agreement
<PAGE> 33
ATTEST: LICENSEE: Erie Cellular
Telephone Company
/s/ [signature illegible] By: McCaw Communications of
- --------------------------- Erie, Inc.
By /s/ SCOTT I. ANDERSON
---------------------------
Scott I. Anderson
Senior Vice President
Date: February 28, 1992
Primary Contact in Ordinary
Course of Business:
General Manager
Erie Cellular Telephone
Company
c/o Cellular One
4823 Peach Street
Erie, Pennsylvania 16509
(814) 868-2355
Address for Notice Purposes:
Jennifer Marsh, Esq.
McCaw Cellular Communications,
Inc.
5400 Carillon Point
Kirkland, WA 98033
(206) 827-4500
Cellular One -31-
License Agreement
J1030A01.M
<PAGE> 34
EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Mark(s) currently designated by the Licensor for use hereunder are
as follows:
<TABLE>
<CAPTION>
Registration or
Mark Serial Number
---- -------------
<S> <C>
Cellular One (shown below) 74/223493
</TABLE>
[CELLULARONE LOGO]
Cellular One -32-
License Agreement
<PAGE> 35
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
Licensed Territory
The Market(s) covered by the License Agreement is/are the following:
<TABLE>
<CAPTION>
Market Name MSA/RSA FCC Market No. Recent Population
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Cellular One -33-
License Agreement
<PAGE> 36
EXHIBIT C
Cellular One License Agreement
Survey Methodology
The methodology currently being employed by the Licensor and its
designated Survey Company will be a telephone survey conducted from random
probability samples of cellular customers provided by the Licensee.
Survey samples will be provided to the Survey Company in magnetic tape
or disk medium in a common format as specified by the Partnership. (If the
Licensee is unable to comply, a half-size, high income probability sample will
be ordered at the Licensee's expense).
A random probability sample will be required of the Licensee,
sufficient in number for economic completion of the satisfaction survey. The
size of the completed samples will be between approximately 50 and 200
depending on the size of the market being surveyed.
Cellular One -34-
License Agreement
<PAGE> 1
EXHIBIT 12.1
<TABLE>
SYGNET Communications, Inc. and Wilcom Corporation
Computation of Ratio of Earnings to Fixed Charges
<CAPTION>
Historical Pro Forma
-------------------------------------------------------- --------------------
Pro
Forma
Pro Six
Six Months Forma Months
(Dollars in Thousands) Year Ended December 31, Ended June 30, Year Ended Ended
-------------------------------------- ---------------- December 31 June 30
1991(c) 1992(c) 1993 1994 1995 1995 1996 1995 (a) 1996 (a)
-------------------------------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from continuing
operations, including preferred stock dividend
requirement...................................... $(116) $ 866 $1,660 $1,795 $2,015 $1,409 $ 1,579 $(29,509) $(12,393)
Less capitalized interest ......................... 0 0 0 0 0 0 0 0 0
----- ------ ------ ------ ------ ------ -------- -------- --------
(116) 866 1,660 1,795 2,015 1,409 1,579 (29,509) (12,393)
Fixed Charges:
Interest expense ................................ 219 997 702 989 2,660 844 2,642 28,444 14,222
Amortization of deferred financing costs ........ 10 10 14 61 197 7 103 1,068 528
Estimated interest portion of rentals............ 7 23 69 75 153 77 94 366 375
Preferred stock dividend requirement............. 0 0 0 0 0 0 0 7,570 4,408
----- ------ ------ ------ ------ ------ -------- -------- --------
Total fixed charges ............................... 236 1,030 785 1,125 3,010 928 2,839 37,448 19,533
----- ------ ------ ------ ------ ------ -------- -------- --------
Earnings used in ratio
computation ..................................... $ 120 $1,896 $2,445 $2,920 $5,025 $2,337 $ 4,418 $ 7,939 $ 7,140
===== ====== ====== ====== ====== ====== ======== ======== ========
Ratio of Earnings to Fixed Charges (b)............. 1.84 3.11 2.60 1.67 2.52 1.56
- ----------
<FN>
(a) To give effect to the increase in interest expense, amortization of deferred financing costs and interest portion of rentals due
to the following: (i) Sale of the Notes, (ii) borrowings under the Bank Credit Facility, (iii) the Erie Acquisition, (iv)
the Horizon Acquisition, and (v) the Preferred Stock Investment.
(b) The ratio of earnings to fixed charges is determined by dividing the sum of earnings before extraordinary items and accounting
changes, interest expense, amortization of deferred financing cost, taxes and a portion of rent expense representative of
interest by the sum of interest expense, amortization of deferred financing costs and a portion of rent expense representative
of interest. The ratio of earnings to fixed charges is not meaningful for periods that result in a deficit. For the year ended
December 31, 1991, the deficit of earnings to fixed charges was $116. On a pro forma basis, the Company includes preferred
stock dividend requirements in computing its ratio of earnings to combined fixed charges and preferred stock dividends. On a pro
forma basis, the deficit of earnings to combined fixed charges and preferred stock dividends was $29,509 and $12,393,
respectively for the year ended December 31, 1995 and six months ended June 30, 1996.
(c) Operating results of Wilcom Corporation, which consist of paging operations, have been combined effective December 31, 1992.
Prior to such date, the operations of Wilcom Corporation were not significant and would not impact comparability of the
financial data.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report on the combined financial
statements of SYGNET Communications, Inc. and Wilcom Corporation dated August
8, 1996 (except as to Note 12, as to which the date is September 16, 1996), in
Amendment No. 3 to the Registration Statement (Form S-1 No. 333-10161) and
related Prospectus of Sygnet Wireless, Inc. for the registration of
$110,000,000 of Senior Notes due 2006.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
September 16, 1996
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of DICOMM Cellular Limited
Partnership dated March 25, 1994, in Amendment No. 3 to the Registration
Statement (Form S-1 No. 333-10161) and related Prospectus of Sygnet Wireless,
Inc. for the registration of $110,000,000 of Senior Notes due 2006.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
September 16, 1996
<PAGE> 1
EXHIBIT 23.3
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data -- Horizon Companies" and "Experts" and to the use of our report dated
July 26, 1996, with respect to the combined financial statements of Selected
Systems of Horizon Cellular Telephone Company, L.P. included in Amendment No. 3
to the Registration Statement (Form S-1 No. 333-10161) and related Prospectus
of Sygnet Wireless, Inc. for the registration of $110,000,000 of Senior Notes
due 2006.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
September 16, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report,
dated January 27, 1995 (except with respect to the matter discussed in Note 9,
as to which the date is August 2, 1996) on the financial statements of Erie
Cellular Telephone Company as of December 31, 1994 and 1993, and for the years
then ended, (and to all references to our Firm) included in Amendment No. 3 to
the Registration Statement (Form S-1 No. 333-10161) and related Prospectus of
Sygnet Wireless, Inc. for registration of $110,000,000 of its Senior Notes due
2006.
/s/ ARTHUR ANDERSEN, LLP
Seattle, Washington,
August 30, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 3 to the Registration Statement
(Form S-1 No. 333-10161) of SYGNET Wireless, Inc. of our report dated
August 2, 1996, on our audit of the statements of operations and changes in
partners' capital and cash flows of Erie Cellular Telephone Company for the
period January 1, 1995 to September 29, 1995. We also consent to the reference
to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Seattle, Washington
September 16, 1996.
