<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 333-10161
Sygnet Wireless, Inc.
---------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1689165
- -------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6550-B Seville Drive, Canfield, Ohio 44406
- ------------------------------------- ------------
(Address of principal executive offices) Zip Code)
(330) 565-1000
- ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(x) Yes ( ) No
As of August 8, 1997, there were outstanding 3,010,653 shares of the
registrant's Class A common stock, $.01 par value, and 6,159,977 shares of the
registrant's Class B common stock, $.01 par value.
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INDEX
SYGNET WIRELESS, INC.
FORM 10-Q
PERIOD ENDED June 30, 1997
PART I - FINANCIAL INFORMATION
- --------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996
Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and June 30, 1996 and the Six Months Ended
June 30, 1997 and June 30, 1996.
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and June 30, 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
- -----------------------------
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
2
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<TABLE>
SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
-------------------------------------
ASSETS (UNAUDITED) (NOTE)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,051,050 $ 2,257,748
Accounts receivable, less allowance for doubtful accounts of $973,685 at
June 30, 1997 and $1,168,800 December 31, 1996 10,906,973 8,857,028
Inventory 1,503,931 1,696,952
Prepaid expenses 280,336 531,171
-------------------------------------
Total current assets 14,742,290 13,342,899
Other assets:
Cellular licenses - net 249,068,851 252,271,468
Customer lists - net 21,952,085 24,535,885
Deferred financing costs - net 9,564,395 10,068,956
-------------------------------------
Total other assets 280,585,331 286,876,309
Property, plant and equipment--net 47,500,077 43,958,969
-------------------------------------
Total assets $ 342,827,698 $ 344,178,177
=====================================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,477,401 $ 2,227,187
Amount payable--Horizon acquisition - 599,442
Deferred revenue 1,876,188 1,679,873
Accrued expenses and other liabilities 3,424,020 2,282,472
Accrued interest payable 6,675,978 6,940,623
--------------------------------------
Total current liabilities 13,453,587 13,729,597
Long-term liabilities:
Deferred liability--utility property tax 462,317 462,317
Long-term debt 300,000,000 312,250,000
--------------------------------------
Total long-term liabilities 300,462,317 312,712,317
Redeemable Series A Senior Cumulative Nonvoting Preferred Stock, $.01 par,
aggregate redemption value of $20,690,411 as of December 31, 1996, 500,000
shares authorized, 200,000 shares issued and outstanding and
warrants as of December 31, 1996. - 19,718,028
Shareholders' equity (deficit):
Common shares, $.01 par, Class A, 1 vote per share, 60,000,000 shares
authorized, 3,010,653 shares issued and outstanding 30,107 27
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized, 6,159,977 shares issued and outstanding 61,599 61,679
Additional paid-in capital 47,528,770 5,812,211
Retained deficit (18,458,730) (7,605,730)
Note receivable from officer/shareholder (249,952) (249,952)
--------------------------------------
Total shareholders' equity (deficit) 28,911,794 (1,981,765)
--------------------------------------
Total liabilities and shareholders' equity (deficit) $ 342,827,698 $ 344,178,177
======================================
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
consolidated 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.
<PAGE> 4
<TABLE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
-------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Subscriber revenue $ 12,830,909 $ 6,870,052 $ 24,556,009 $ 12,968,212
Roamer revenue 6,610,335 1,514,458 11,755,838 2,759,586
Equipment sales 976,125 437,961 1,920,802 742,779
Other revenue 429,341 378,457 867,803 756,088
-------------------------------------- -------------------------------------
Total revenue 20,846,710 9,200,928 39,100,452 17,226,665
Costs and expenses:
Cost of services 2,175,475 1,197,309 4,364,947 2,330,531
Cost of equipment sales 2,253,562 1,002,470 4,409,269 2,003,169
General and administrative 3,705,491 1,951,250 7,379,571 3,809,533
Selling and marketing 2,446,384 1,125,578 4,789,063 2,159,795
Depreciation and amortization 7,020,793 1,247,158 13,757,443 2,482,516
-------------------------------------- -------------------------------------
Total costs and expenses 17,601,705 6,523,765 34,700,293 12,785,544
-------------------------------------- -------------------------------------
Income from operations 3,245,005 2,677,163 4,400,159 4,441,121
Other:
Interest expense, net 7,839,711 1,329,106 15,242,123 2,632,728
Other 11,035 226,265 11,035 228,916
-------------------------------------- -------------------------------------
Net (loss) income before income taxes (4,605,741) 1,121,792 (10,852,999) 1,579,477
Income tax expense - 119,000 - 119,000
====================================== =====================================
Net (loss) income $ (4,605,741) $ 1,002,792 $ (10,852,999) $ 1,460,477
====================================== =====================================
Earnings per share information (pro forma for (Pro forma) (Pro forma)
1996):
(Loss) income before income taxes $ (4,605,741) $ 1,121,792 $ (10,852,999) $ 1,579,477
Income taxes - (538,460) - (758,149)
Preferred stock dividend and accretion (1,322,683) - (2,121,472) -
-------------------------------------- -------------------------------------
Net (loss) income applicable to common
shareholders $ (5,928,424) $ 583,332 $ (12,974,471) $ 821,328
====================================== =====================================
Net (loss) income per share applicable to
common shareholders $ (0.91) $ 0.10 $ (2.04) $ 0.14
====================================== =====================================
Common shares outstanding 6,533,267 6,170,630 6,352,950 6,170,630
====================================== =====================================
</TABLE>
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<TABLE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
--------------------------------------------
1997 1996
--------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (10,852,999) $ 1,460,477
Adjustments to reconcile net
(loss) income to net cash
provided by operating
activities:
Depreciation 7,400,810 1,732,635
Amortization 6,356,633 749,881
Loss on disposal of equipment - 153,151
Changes in operating assets and
liabilities:
Accounts receivable (2,049,946) 899,145
Inventory 193,021 359,056
Prepaid and deferred 250,555 27,990
expenses
Accounts payable and 588,078 221,030
accrued expenses
Accrued interest payable (264,645) 58,360
--------------------------------------------
Net cash provided by operating 1,621,507 5,661,725
activities
INVESTING ACTIVITIES
Acquisitions of Horizon and Erie (599,442) (1,920,190)
Purchases of property and equipment (10,941,918) (3,266,841)
--------------------------------------------
Net cash used in investing activities (11,541,360) (5,187,031)
FINANCING ACTIVITIES
Dividends paid - (261,623)
Proceeds from long-term debt 22,000,000 2,000,000
Principal payments on long-term debt (34,250,000) (1,000,000)
Increase in financing costs (72,394) -
Redemption of preferred stock (21,839,451) -
Net proceeds from sale of common 43,875,000 -
stock
--------------------------------------------
Net cash provided by financing 9,713,155 738,377
activities
(Decrease) increase in cash and cash (206,698) 1,213,071
equivalents
Cash and cash equivalents at 2,257,748 448,292
beginning of period
--------------------------------------------
Cash and cash equivalents at end of $ 2,051,050 $ 1,661,363
period
============================================
</TABLE>
<PAGE> 6
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND PRO FORMA INFORMATION
The accompanying unaudited consolidated financial statements 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. The unaudited consolidated
financial statements include the combined financial statements of SYGNET
Communications, Inc. (SYGNET) and Wilcom Corporation (Wilcom) through August
31, 1996, the effective date of the merger described below, and the accounts
of Sygnet Wireless, Inc. and its subsidiary (the Company) thereafter. 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, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended December 31, 1996 (File No.
333-10161) filed with the Securities and Exchange Commission.
As described below, SYGNET and Wilcom terminated their status as Subchapter S
Corporations in August 1996. A pro forma adjustment has been made to the
financial statements for the three and six months ended June 30, 1996,
respectively, to reflect a provision for federal, state and local income
taxes as though the Subchapter S election was terminated on January 1, 1996
at an effective rate of 48%.
Pro forma net income per share is presented as though the 6,170,630 shares
issued at the date of the corporate restructuring described below were
outstanding for all periods presented for 1996.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement No. 128 on the calculation of both primary and fully diluted
earnings per share for these quarters is not expected to be material.
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which is required to be adopted on January 1, 1998. This Statement
establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
Reclassification of financial statements for earlier periods presented is
required. The impact of Statement No. 130 on the Company's financial
statements is not expected to be material.
In June 1997, the FASB also issued Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information, which is required to be
adopted on January 1, 1998. This Statement changes the way companies report
segment information in annual financial statements and also requires those
companies to report selected segment information in interim financial reports
to shareholders. The impact of Statement No. 131 on the Company's financial
statements is not expected to be material.
3. MERGER AND RECAPITALIZATION
On August 19, 1996, the shareholders of SYGNET and Wilcom effected a
corporate restructuring whereby Wilcom was merged into SYGNET and
shareholders of Wilcom received 8.72 shares of SYGNET common stock for each
share of Wilcom common stock held as of August 31, 1996, the effective date
of the merger. Effective August 31, 1996, 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. In conjunction with
this merger, the shareholders of SYGNET amended the articles of incorporation
to change SYGNET's name to Sygnet Wireless, Inc.
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<PAGE> 7
3. MERGER AND RECAPITALIZATION (CONTINUED)
On August 28, 1996, the Company approved a plan to recapitalize the Company
whereby the SYGNET common stock Type A (205,698 shares) and Type B (1,028,428
shares) were converted into 6,170,630 shares of Sygnet Wireless, Inc. Class B
common stock in a 5 for 1 stock split. In addition, on October 3, 1996 the
Company's shareholders amended the articles of incorporation to create a new
class of preferred stock (described below) effective October 4, 1996.
4. ACQUISITIONS
On October 9, 1996, the Company acquired certain cellular licenses, property,
equipment, customer lists, current assets and current liabilities of 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. (hereinafter collectively referred to as the "Horizon Acquisition") for
cash of $252.9 million. The systems acquired in the Horizon Acquisition
provide cellular service to an estimated population of 1.4 million in
contiguous markets in western Pennsylvania and western New York. This
acquisition was financed through the issuance of senior notes, the issuance
of $20,000,000 in redeemable preferred stock and by a syndicated bank credit
facility.
The pro forma unaudited condensed combined results of operations for the
three and six months ended June 30, 1996, respectively, as if the Horizon
Acquisition occurred on January 1, 1996, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
--------------------------- ----------------------
<S> <C> <C>
Revenue $ 17,354,058 $ 32,802,641
=========================== ======================
Net loss $ (6,233,777) $(13,913,322)
=========================== ======================
Pro forma net loss per share applicable
to common shareholders $ (1.01) $ (2.26)
=========================== ======================
</TABLE>
5. LONG-TERM DEBT
On September 19, 1996, the Company issued $110,000,000 11.5% unsecured
Senior Notes due October 1, 2006 (the Notes). The Notes pay interest
semiannually on April 1 and October 1 of each year. The Notes are redeemable
at the option of the Company at redemption prices (expressed as a percentage
of principal amount) ranging from 105.75% in 2001 to 100.00% in 2005 and
thereafter. Among other things, the Notes contain certain covenants which
limit additional indebtedness, payment of dividends, sale of assets or stock,
changes in control and transactions with related parties. The proceeds from
the Notes were used to repay amounts borrowed under a $75 million bank credit
agreement and to finance the Horizon Acquisition described in Note 4.
On October 9, 1996, Sygnet Communications, Inc.(Sygnet), a wholly-owned
subsidiary of the Company, entered into a new financing agreement (the Bank
Credit Facility) with a commercial bank group. The Bank Credit Facility is a
senior secured reducing revolver that provides Sygnet the ability to borrow
up to $300 million through June 30, 1999. Mandatory reductions in the
revolver occur quarterly thereafter through June 30, 2005, when the Bank
Credit Facility terminates. The Bank Credit Facility is secured by certain
assets and the stock of Sygnet. The Bank Credit Facility provides for various
borrowing rate options based on either a fixed spread over the London
Interbank Offered Rate or the prime rate. Interest payments will be made
quarterly. As of June 30, 1997, $190 million was outstanding under the Bank
Credit Facility.
7
<PAGE> 8
6. REDEEMABLE PREFERRED STOCK
On October 9, 1996, the Company issued 200,000 shares of Series A Senior
Cumulative Nonvoting Preferred Stock (Preferred Stock). The Preferred Stock
has a redemption value of $100 per share and is recorded at fair value on the
date of issuance less issuance costs. Dividends are cumulative from the date
of issuance, accrue quarterly in arrears and are payable in shares of
Preferred Stock. The dividend rates increase annually from 15% in the year
ending September 30, 1997; to 17% in the year ending September 30, 1998; to
19% in the year ending September 30, 1999; and to 21% in the year ending
September 30, 2000 and thereafter.
On April 3, 1997, 100,000 shares of Preferred Stock were redeemed by the
Company at a cost of $10,000,000 which was funded by the Bank Credit
Facility. On June 20, 1997, the remaining 118,394.51 shares of Preferred
Stock were redeemed by the Company at a cost of $11,839,451. This redemption
was funded by the Common Stock Sale described in Note 7.
7. SHAREHOLDERS EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $.01 par value, to Boston Ventures Limited Partnership V
(Boston Ventures) at a price of $15 per share (Common Stock Sale). The
proceeds of $43.9 million, net of issuance fees, were used to redeem the
remaining outstanding Preferred Stock as described in Note 5, and to reduce
amounts outstanding under the Bank Credit Facility. As a condition of the
Common Stock Sale, Boston Ventures will have two representatives on the
Company's eleven member board of directors.
8
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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 unaudited consolidated financial statements and the notes thereto
appearing elsewhere in this report. References to pro forma information give
effect to the Horizon Acquisition as if it occurred on January 1, 1996. As a
result of the Horizon Acquisition, the Company's operating results for the
periods discussed may not be indicative of future performance. In the text
below, financial statement numbers have been rounded, however, the percentage
changes are based on the actual financial statement numbers.
THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996.
For the three months ended June 30, 1997, the Company posted total revenue of
$20.8 million, which was more than double the total revenue of $9.2 million for
the comparable period in 1996. Earnings before interest, taxes, depreciation and
amortization, and other non-cash expenses (EBITDA) also more than doubled to
$10.3 million (49.3% of total revenue) for the three months ended June 30, 1997
from $3.9 million (42.7%. of total revenue) during the comparable period in
1996. The growth in revenue and EBITDA was the result of the Horizon Acquisition
and continued growth of the subscriber base. Increased interest expense,
depreciation, and amortization charges related to the Horizon Acquisition more
than offset the increased revenue and EBITDA to produce a net loss of $4.6
million for the three months ended June 30, 1997, a decrease from net income of
$1.0 million for the comparable period in 1996.
Subscriber revenue grew by 86.8 % to $12.8 million for the three months ended
June 30, 1997 compared to $6.9 million for the comparable period in 1996 mainly
as a result of the Horizon Acquisition and continued subscriber growth in the
Company's markets. Subscriber revenue, on a pro forma basis including the
effects of the Horizon Acquisition, grew by 20.2% for the three months ended
June 30, 1997 over the comparable period in 1996 due to growth in the subscriber
base, despite a decline in average revenue per subscriber. The Company's
subscribers more than doubled to 121,414 at June 30, 1997 from 50,797 at June
30, 1996 due mainly to the Horizon Acquisition as well as internal growth.
Including the pro forma effect of the Horizon Acquisition, the subscriber base
increased by 36.2% on June 30, 1997 from the June 30, 1996 level due to internal
growth. On a per subscriber pro forma basis, including the effect of the Horizon
Acquisition, average monthly revenue declined by 10.9% to $55.06 during the
three months ended June 30, 1997 from $61.81 in the comparable 1996 quarter.
This was due to competitive market pressures, lower customer usage, and the
changing mix of subscribers reflecting increasing levels of safety and security
subscribers, who typically purchase less expensive rate plans that include
limited free minutes of use.
Roamer revenue more than tripled to $6.6 million during the three months ended
June 30, 1997 compared to $1.5 million in the comparable period in 1996. This
increase was mainly a result of the Horizon Acquisition as well as increased
roaming traffic throughout all of the Company's systems. Including the pro-forma
effects of the Horizon Acquisition, roamer revenue grew by 23.5% for the three
months ended June 30, 1997 over the comparable period in 1996 due mainly to a
greater volume of roaming traffic despite a reduction in roaming revenue per
minute. Including the results of the Horizon Acquisition, the roaming revenue
per minute for the three months ended June 30, 1997 decreased to $0.59 from
$0.67 for the comparable period in 1996. This was mainly a result of reduced
roaming rates in the newly acquired markets.
Equipment sales more than doubled to $1.0 million for the three months ended
June 30, 1997 compared to $0.4 million for the comparable period in 1996. This
increase was due mainly to the Horizon Acquisition, and an increased number of
telephones and accessories distributed as new subscriber acquisitions increased,
as well as from additional sales of equipment to existing customers. Other
revenue increased to $0.43 million for the three months ended June 30, 1997 from
$0.38 million for the comparable period in 1996 due mainly to the Horizon
Acquisition.
Cost of services increased 81.7% to $2.2 million for the three months ended June
30, 1997 from $1.2 million for the comparable period in 1996. This increase was
due mainly to the Horizon Acquisition. On a pro forma basis including the
Horizon Acquisition, cost of services for the three months ended June 30, 1997
decreased by 4.5% from the comparable period in 1996 due mainly to lower rates
for interconnection and long distance charges which largely offset the higher
volume associated with increased traffic levels.
9
<PAGE> 10
Cost of equipment sales more than doubled to $2.3 million for the three months
ended June 30, 1997 from $1.0 million in the comparable 1996 period. This
increase was due mainly to the Horizon Acquisition and to an increased number of
telephones and accessories distributed as new subscriber acquisitions increased.
Sales of equipment to existing subscribers were also responsible for a portion
of this increase. On a pro-forma basis including the effect of the Horizon
Acquisition, cost of equipment sales for the three months ended June 30, 1997
increased 31.2% over the comparable period for 1996.
General and administrative costs increased by 89.9% to $3.7 million for the
three months ended June 30, 1997 from $2.0 million for the comparable period in
1996. This increase is due primarily to the Horizon Acquisition and an increase
in operating costs due to internal growth. On a pro forma basis including the
effect of the Horizon Acquisition, general and administrative expenses for the
three months ended June 30, 1997 increased 8.8% over the comparable period for
1996 due mainly to an increase in operating costs due to internal growth.
Selling and marketing costs more than doubled to $2.4 million for the three
months ended June 30, 1997 from $1.1 million in the second quarter of 1996. This
increase is due to the Horizon Acquisition and a higher level of new subscribers
added period to period. Selling and marketing cost per gross new subscriber,
including the equipment subsidy, decreased to $316 for the three months ended
June 30, 1997 from $344 for the comparable period in 1996 on a pro forma basis
including the effect of the Horizon Acquisition.
Depreciation and amortization increased to $7.0 million for the three months
ended June 30, 1997 from $1.2 million for the comparable period in 1996 due to
depreciation on higher levels of fixed assets resulting from the Horizon
Acquisition and purchases for system growth, and amortization of the licenses
from the Horizon Acquisition. The amortization of the acquired cellular licenses
and subscriber lists contributed $2.6 million to this increased amortization.
For the three months ended June 30, 1997, the Company spent approximately $6.6
million in capital expenditures, primarily for new cell sites, cell site
conversions, and system growth.
Interest expense increased to $7.8 million for the three months ended June 30,
1997 from $1.3 million for the comparable period in 1996. This increase was
primarily a result of increased borrowings associated with the Horizon
Acquisition.
THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
For the six months ended June 30, 1997, the Company posted total revenue of
$39.1 million, which was more than double the total revenue of $17.2 million for
the comparable period in 1996. EBITDA also more than doubled to $18.2 million
(46.4% of total revenue) for the six months ended June 30, 1997 from $6.9
million (40.2%. of total revenue) during the comparable period in 1996. The
growth in revenue and EBITDA was the result of the Horizon Acquisition and
continued growth of the subscriber base. Increased interest expense,
depreciation, and amortization charges related to the Horizon Acquisition more
than offset the increased revenue and EBITDA to produce a net loss of $10.9
million for the six months ended June 30, 1997, a decrease from net income of
$1.5 million for the comparable period in 1996.
Subscriber revenue grew by 89.4% to $24.6 million for the six months ended June
30, 1997 compared to $13.0 million for the comparable period in 1996 mainly as a
result of the Horizon Acquisition and continued subscriber growth in the
Company's markets. Subscriber revenue, on a pro forma basis including the
effects of the Horizon Acquisition, grew by 20.8% for the six months ended June
30, 1997 over the comparable period in 1996 due to growth in the subscriber
base, despite a decline in average revenue per subscriber. The Company's
subscribers more than doubled to 121,414 at June 30, 1997 from 50,797 at June
30, 1996 due mainly to the Horizon Acquisition as well as internal growth.
Including the pro forma effect of the Horizon Acquisition, the subscriber base
increased by 36.2% on June 30, 1997 from the June 30, 1996 level due to internal
growth. On a per subscriber pro forma basis, including the effect of the Horizon
Acquisition, average monthly revenue declined by 12.0% to $53.09 during the six
months ended June 30, 1997 from $60.27 in the comparable 1996 period. This was
due to competitive market pressures, lower customer usage, and the changing mix
of subscribers reflecting increasing levels of safety and security subscribers,
who typically purchase less expensive rate plans that include limited free
minutes of use.
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<PAGE> 11
Roamer revenue more than tripled to $11.8 million during the six months ended
June 30, 1997 compared to $2.8 million in the comparable period in 1996. This
increase was mainly a result of the Horizon Acquisition as well as increased
roaming traffic throughout all of the company's systems. Including the pro-forma
effects of the Horizon Acquisition, roamer revenue grew by 18.6% for the six
months ended June 30, 1997 over the comparable period in 1996 due mainly to a
greater volume of roaming traffic. Including the results of the Horizon
Acquisition, the roaming revenue per minute for the six months ended June 30,
1997 decreased to $0.59 from $0.66 for the comparable period in 1996. This was
mainly a result of reduced roaming rates in the newly acquired markets.
Equipment sales almost tripled to $1.9 million for the six months ended June 30,
1997 compared to $0.7 million for the comparable period in 1996. This increase
was due mainly to the Horizon Acquisition, and an increased number of telephones
and accessories distributed as new subscriber acquisitions increased, as well as
from additional sales of equipment to existing customers. Other revenue
increased to $0.9 million for the six months ended June 30, 1997 from $0.8
million for the comparable period in 1996 due mainly to the Horizon Acquisition.
Cost of services increased 87.3% to $4.4 million for the six months ended June
30, 1997 from $2.3 million for the comparable period in 1996. This increase was
due mainly to the Horizon Acquisition. On a pro forma basis including the effect
of the Horizon Acquisition, cost of services for the six months ended June 30,
1997 remained flat from the comparable period in 1996 due mainly to lower rates
for interconnection and long distance charges which largely offset the higher
volume associated with increased traffic levels.
Cost of equipment sales more than doubled to $4.4 million for the six months
ended June 30, 1997 from $2.0 million in the comparable 1996 period. This
increase was due mainly to the Horizon Acquisition and to an increased number of
telephones and accessories distributed as new subscriber acquisitions increased.
Sales of equipment to existing subscribers were also responsible for a portion
of this increase. On a pro forma basis including the effect of the Horizon
Acquisition, cost of equipment sales for the six months ended June 30, 1997
increased 28.0% over the comparable period for 1996.
General and administrative costs increased by 93.7% to $7.4 million for the six
months ended June, 1997 from $3.8 million for the comparable period in 1996.
This increase is due primarily to the Horizon Acquisition and an increase in
operating costs due to company growth. On a pro forma basis including the effect
of the Horizon Acquisition, general and administrative expenses for the six
months ended June 30, 1997 increased 11.9% over the comparable period for 1996
due mainly to an increase in operating costs due to internal growth.
Selling and marketing costs more than doubled to $4.8 million for the six months
ended June 30, 1997 from $2.2 million for the second quarter of 1996. This
increase is due to the Horizon Acquisition and a higher level of new subscribers
added period to period. Selling and marketing cost per gross new subscriber,
including the equipment subsidy, decreased to $313 for the six months ended June
30, 1997 from $352 for the comparable period in 1996 on a pro forma basis for
the Horizon Acquisition.
Depreciation and amortization increased to $13.8 million for the six months
ended June 30, 1997 from $2.5 million for the comparable period in 1996 due to
depreciation on higher levels of fixed assets resulting from the Horizon
Acquisition and purchases for system growth, and amortization of the licenses
from the Horizon Acquisition. The amortization of the acquired cellular licenses
and subscriber lists contributed $5.1 million to this increased amortization.
For the six months ended June 30, 1997, the Company spent approximately $10.9
million in capital expenditures, primarily for new cell sites, cell site
conversions, and system growth. As of June 30, 1997, the Company had completed
24 new cell sites during 1997 bringing the total cell sites in service to 141.
Interest expense increased to $15.2 million for the six months ended June 30,
1997 from $2.6 million for the comparable period in 1996. This increase was
primarily a result of increased borrowings associated with the Horizon
Acquisition.
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. During 1996, the Company issued Senior Notes and
Preferred Stock to fund the Horizon Acquisition. During 1997, the Company issued
additional Common Stock and redeemed the outstanding Preferred Stock. See Note 6
and 7, Notes to Consolidated Financial Statements (Unaudited).
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<PAGE> 12
Net cash provided by operating activities was $1.6 million for the six months
ended June 30, 1997 compared to $5.7 million for the comparable period in 1996.
The decrease was primarily the result of the increase in interest expense, which
more than offset the increase in the number of subscribers that occurred due to
growth in revenue and EBITDA.
Net cash used in investing activities was $11.5 million for the six months ended
June 30, 1997 compared to $5.2 million for the comparable period in 1996. This
increase reflects final payments for the acquisition of businesses and increased
levels of purchases of property and equipment primarily for system buildout.
Net cash provided by financing activities was $9.7 million for the six months
ended June 30, 1997 compared to $0.7 million for the comparable period in 1996.
This includes $45 million in gross proceeds from the Common Stock Sale, and $22
million in proceeds from the Bank Credit Facility, which were partially used
primarily to retire the Preferred Stock, reduce bank debt, and fund capital
expenditures.
The Company's plans include a rapid buildout of the newly acquired systems in
order to improve coverage and increase usage. During the remainder of 1997, the
Company expects to complete 15 to 20 new cell sites in addition to the 24
completed to date. The Company continues to convert cell sites from Ericsson to
Northern Telecom equipment to more efficiently serve communities of interest in
and around the existing Northern Telecom systems in Youngstown and Erie and to
expand the digital service footprint, in addition to upgrading switches and
other network equipment. Aggregate capital expenditure levels are expected to be
approximately $25 to $30 million for the year ending 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. At June 30
1997, the Company had approximately $90.1 million in additional funds available
to borrow under the Bank Credit Facility.
On June 3, 1997, the Federal Communications Commission granted the application
of Pinellas Communications for a license to operate a permanent cellular
telephone system in the PA-2 Rural Service Area (PA-2). As a part of the Horizon
Acquisition, the Company acquired interim operating authority for PA-2. The
Company does not believe that the loss of PA-2 would have a material adverse
effect upon the Company's result of operations, financial position or cash
flows.
The Company is a holding company with no direct operations and no significant
assets other than the stock of Sygnet Communications, Inc., its wholly owned
subsidiary. Accordingly, the Company's ability to make principal, interest and
other payments to holders of the Senior Notes when due, and to meet its other
obligations, is dependent upon the receipt of sufficient funds from its
subsidiary. The Bank Credit Facility contains certain restrictions upon the
ability of the subsidiary to distribute funds to the Company. The indenture
under which the Senior Notes were issued imposes certain limits on the ability
of the Company to, among others things, incur additional indebtedness.
FORWARD LOOKING STATEMENTS
The description of the Company's capital expenditure plans set forth above are
forward looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These plans involve a number
of risks and uncertainties. The important factors that could cause actual
capital expenditures or the Company's performance to differ materially from the
plans include, without limitation, the Company's continued ability to satisfy
the financial performance and other covenants of the Bank Credit Facility; the
impact of competition from other providers of cellular telephone and personal
communications services, other technologies that may be developed; and the
occurrence of other technological changes affecting the Company's business. In
addition, the agreement under which the Company issued Common Stock in June 1997
imposes certain limits on the ability of the Company to, among other things,
incur additional indebtedness, issue additional capital stock or engage in
certain types of transactions. For further information regarding these and other
risk factors, see "Business" in the Company's annual report, on Form 10K for the
fiscal year ended December 31, 1996 (File No. 333-10161) filed with the
Securities and Exchange Commission. The Company disclaims any duty to release
publicly any updates or revisions to these forward looking statements.
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<PAGE> 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On June 20, 1997, the Company issued and sold 3,000,000 shares of its
Class A Common Stock, $.01 par value, to Boston Ventures Limited
Partnership V at a price of $15 per share. The sale was to an
accredited investor and was exempt from the registration requirements
of the Securities Act of 1933 under Rule 506 of Regulation D.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and restated Articles of Incorporation of Sygnet
Wireless, Inc. *[3.1]
3.2 Code of Regulations of Sygnet Wireless, Inc. *[3.2]
4.1 Indenture dated as of September 26, 1996 between
Sygnet Wireless, Inc. and Fleet National Bank, as
Trustee. *[4]
10.23 Investment Agreement dated as of June 20, 1997 between
Sygnet Wireless, Inc. and Boston Ventures Limited
Partnership V.
10.24 Registration Rights Agreement dated as of June 20, 1997
among Sygnet Wireless, Inc., Boston Ventures Limited
Partnership V, J.D. Williamson, II and Warren P.
Williamson, III.
10.25 Stockholders Agreement dated as of June 20, 1997 among
Sygnet Wireless, Inc., Boston Ventures Limited
Partnership V, J.D. Williamson, II and
Warren P. Williamson, III.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1997
* Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996, as the exhibit number indicated
in brackets and incorporated by reference herein.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYGNET WIRELESS, INC.
By: /s/ CRAIG T. SHEETZ
---------------------------
Craig T. Sheetz
Vice President and Chief
Financial Officer
(as duly authorized officer
and principal financial
officer of the registrant)
Dated: August 11, 1997
14
<PAGE> 1
Exhibit 10.23
INVESTMENT AGREEMENT
--------------------
This Investment Agreement is entered into as of June 20, 1997 by and
between Sygnet Wireless, Inc., an Ohio corporation (the "COMPANY"), and Boston
Ventures Limited Partnership V, a Delaware limited partnership (the "INVESTOR").
Introduction
------------
The Company wishes to sell shares of its Class A Common Stock and to
use the proceeds to redeem its outstanding preferred stock and to repay
temporarily certain indebtedness of Sygnet Communications, Inc., a wholly-owned
subsidiary ("SCI"), and for other general corporate purposes. The Investor
wishes to purchase such shares on the terms and conditions contained herein.
Certain capitalized terms used herein are defined in Article VII of
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
TERMS AND CONDITIONS
--------------------
ARTICLE I. THE INVESTMENT
- ---------- --------------
SECTION 1.01. PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions hereof, and in reliance on the representations and warranties
contained herein, (a) the Company shall issue and sell to the Investor and the
Investor shall purchase from the Company at the Initial Closing (as hereinafter
defined) 3,000,000 shares of the Company's Class A Common Stock, $.01 par value,
at a price per share of $15 (an aggregate purchase price of $45 million) and (b)
the Investor shall purchase from the holders of record of the Company's Common
Stock and from the Company (if applicable) at the Subsequent Closing (as
hereinafter defined) up to 1,000,000 shares of the Company's Common Stock, $.01
par value, at a purchase price per share of $15 as more fully described in
Section 1.05.
SECTION 1.02. PAYMENT FOR THE STOCK. The Investor shall pay in full at
each Closing the purchase price for the Stock to
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<PAGE> 2
be purchased at such Closing by wire transfer to an account designated in
writing (a) by the Company if purchased from the Company or (b) by the Selling
Stockholders (as defined below), if purchased from such Selling Stockholders.
SECTION 1.03. THE CLOSINGS. The purchase and sale of the Stock shall
take place at closings (the "CLOSINGS") to be held at the offices of Choate,
Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts 02109 at
the times specified below.
(a) INITIAL CLOSING. The initial Closing (the "INITIAL
CLOSING") shall take place at 10:00 a.m. local time on (i) June 20, 1997 (the
"INITIAL CLOSING DATE") or (ii) if later, the date which is five business days
after the conditions to the Initial Closing specified in Article IV have been
satisfied.
(b) SUBSEQUENT CLOSING. The subsequent Closing (the
"SUBSEQUENT CLOSING") shall take place within 15 days after expiration of the
offer specified in Section 1.05 on a date to be selected by the Investor, if the
conditions to the Subsequent Closing specified in Article IV have been
satisfied. The Subsequent Closing may occur no later than six months after the
Initial Closing Date.
SECTION 1.04. USE OF PROCEEDS FROM THE INITIAL CLOSING. The Company
shall use the proceeds of the sale of the Stock received at the Initial Closing
(a) to redeem all outstanding shares of its Preferred Stock, (b) to make a
capital contribution to SCI, for the purpose of enabling SCI to repay
temporarily certain of its outstanding indebtedness, (c) to pay fees and
expenses of the transaction contemplated by this Agreement, or (d) for general
corporate purposes.
SECTION 1.05. OFFER TO EXISTING STOCKHOLDERS. The Investor and the
Company will duly perform each of its obligations hereinafter set forth in this
Section 1.05 subsequent to the Initial Closing:
(a) As soon as practicable after the Initial Closing, the
Investor shall make an offer in writing to the holders of the Company's Common
Stock to purchase for cash up to an aggregate of 1,000,000 shares of Common
Stock at a price per share of $15, such offer to remain open for at least 20
business days. The Investor shall purchase all shares tendered in response to
such offer up to 1,000,000 shares at the price specified. If more than 1,000,000
shares are tendered, the Investor shall purchase a total of 1,000,000 shares
ratably from each tendering stockholder on the basis of the number of shares
tendered by each such stockholder. Within five days after the expiration of the
offer, the Investor shall notify each tendering stockholder of the number of
shares to be acquired from such stockholder and the time, place and manner of
the Subsequent Closing. Each tendering
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<PAGE> 3
stockholder from which the Investor purchases such shares shall be referred to
herein as a "Selling Stockholder". For purposes of this Section, all classes of
Common Stock shall be treated as a single class.
(b) If less than 333,333 shares are tendered, the Investor
shall purchase from the Company and the Company shall issue and sell to the
Investor the number of shares of the Company's Class A Common Stock that is the
difference between 333,333 shares and the number of shares actually tendered by
the stockholders pursuant to this Section at a purchase price per share of $15.
(c) The Company shall administer, and the Investor shall
cooperate in, the foregoing process in its entirety, subject to the Investor's
approval, and shall bear all reasonable expenses incurred by the Investor during
such process up to $35,000 in the aggregate, and shall indemnify the Investor as
set forth in Section 8.02(b) to the extent permitted by that certain Trust
Indenture dated as of September 26, 1996.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ----------- ---------------------------------------------
The Company represents and warrants to the Investor that the statements
contained in this Article II are true and correct. For purposes of Sections 2.09
and 2.11, the terms Company and Subsidiary also include their respective
predecessors, unless the context requires otherwise.
SECTION 2.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio and has all necessary corporate and other power and
authority to conduct its business and own its properties as now conducted and
owned and as now proposed to be conducted and owned. True and correct copies of
the Articles of Incorporation and Code of Regulations of the Company, with all
amendments thereto, as in effect on the date hereof, have been furnished to the
Investor by the Company. The Company is licensed or qualified to do business as
a foreign corporation in each jurisdiction in which the nature of its business
or the ownership of its properties makes such licensing or qualification
necessary, except where the failure to be so licensed or so qualified would not
result in a Material Adverse Change.
SECTION 2.02. SUBSIDIARIES. SCI is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Ohio and
has all necessary corporate and other power and authority to conduct its
business and own its properties as now conducted and owned and as now proposed
to be conducted and owned. True and correct copies of the Articles of
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<PAGE> 4
Incorporation and Code of Regulations of SCI, with all amendments thereto, as in
effect on the date hereof, have been furnished to the Investor by the Company.
SCI is licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership of its
properties makes such licensing or qualification necessary, except where the
failure to be so licensed or so qualified would not result in a Material Adverse
Change. SCI is the only Subsidiary of the Company. Neither the Company nor SCI
is a party to any joint venture. Neither the Company nor SCI owns any legal or
beneficial interest in any Person, except for the Company's ownership of SCI.
SECTION 2.03. POWER AND AUTHORITY RELATIVE TO THIS TRANSACTION. The
Company has full power and authority and has taken all required corporate and
other action necessary to authorize and permit it to execute and deliver the
Agreements and to issue and sell the Stock as provided in Article I, and to
otherwise carry out the terms of the Agreements.
SECTION 2.04. CAPITAL STOCK.
(a) The authorized capital stock of the Company consists of
(i) 60,000,000 shares of Class A Common Stock, $.01 par value per share, of
which 10,653 are outstanding, (b) 10,000,000 shares of Class B Common Stock,
$.01 par value per share, of which 6,159,977 are outstanding, (c) 5,000,000
shares of Preferred Stock, of which 114,992.01 are outstanding, and (d)
10,000,000 shares of Voting Preferred Stock, $.01 par value per share, none of
which are outstanding.
(b) Section 2.04 of the DISCLOSURE SCHEDULE sets forth a
complete and accurate list of all holders of the Company's outstanding capital
stock, and all options, warrants, convertible securities and other rights which
may afford any Person the right to acquire shares of any class of capital stock
of the Company.
(c) The authorized capital stock of SCI consists of 750 shares
of Common Stock, $.01 par value, per share, of which 200 shares are held
beneficially and of record by the Company. Except as set forth on Section 2.04
of the DISCLOSURE SCHEDULE, there are no other outstanding shares of capital
stock of SCI nor any option, warrant, convertible security or other right or
agreement which affords any Person the right to purchase or otherwise acquire
any shares of SCI's capital stock.
(d) Except as set forth in Section 2.04 to the Disclosure
Schedule, neither the Company nor SCI is subject to any obligation (contingent
or otherwise) to purchase or otherwise acquire or retire any of its equity
securities and no Person has any right of first refusal or preemptive right in
connection with the issuance of the Stock or with respect to any future offer,
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<PAGE> 5
sale or issuance of securities by the Company, its stockholders or SCI, other
than as provided in this Agreement.
(e) The Stock is duly authorized and, when delivered at each
Closing, will be duly and validly issued and outstanding, fully paid and
nonassessable, and free to the Investor of any liens, encumbrances and
restrictions (other than under applicable securities laws).
(f) The offer and sale of all shares of capital stock or other
securities of the Company (including without limitation the Company's 11.5%
Senior Notes due October 1, 2006) complied with or were exempt from all federal
and state securities laws. Assuming the accuracy of the representations and
warranties contained in Article III, the offer and sale of the Stock will be
exempt from the registration and prospectus delivery requirements of the 1933
Act and will comply with or be exempt from all state securities laws.
(g) Except as set forth in Section 2.04 to the DISCLOSURE
SCHEDULE, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
(h) For purposes of section 1701.01(Z)(1) of the Ohio General
Corporation Law, the purchase of the Stock hereunder is not a "control share
acquisition".
SECTION 2.05. COMPLIANCE WITH LAW, ETC. Neither the Company nor any
Subsidiary is in violation of any term of its charter, code of regulations, or
similar governing document, or of any agreement, instrument, judgment, decree,
order, statute, or governmental rule or regulation applicable to the Company or
any of its Subsidiaries, in any way which has resulted in, or could reasonably
be expected to result in, a Material Adverse Change. The execution, delivery and
performance of the Agreements by the Company will not result in any such
violation or be in conflict with or constitute a default under any such term, or
result in the creation of any mortgage, lien, charge or encumbrance upon any of
the properties or assets of the Company or any Subsidiary pursuant to any such
term. Neither the Company nor any Subsidiary is a party to or bound by any
contract, indenture, agreement, order, law, rule or regulation which in any way
restricts its ability to perform under the Agreements.
SECTION 2.06. BUSINESS. Except as set forth in Section 2.06 of the
DISCLOSURE SCHEDULE, (a) the Company and its Subsidiaries are engaged only in
the business described in (i) the Company's 1996 Annual Report on Form 10-K for
the year ended December 31, 1996; and (ii) the Company's report on Form
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<PAGE> 6
10-Q for the quarter ended March 31, 1997 (collectively, the "DISCLOSURE
DOCUMENTS"), true and correct copies of which have been furnished to the
Investor, and (b) the DISCLOSURE DOCUMENTS contain a complete and accurate
description of the Company's and SCI's business.
SECTION 2.07. FINANCIAL STATEMENTS. The financial statements contained
in the Disclosure Documents have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby. The balance sheets contained in the Disclosure
Documents are complete and accurate in all material respects and fairly present
the financial position of the Company and its Subsidiaries as at the respective
dates indicated, and in each case reflect all material liabilities, contingent
or otherwise, at such dates, required by generally accepted accounting
principles to be reflected therein (subject, in the case of unaudited financial
statements, to year-end and audit adjustments which the Company has no reason to
believe will be material). The statements of operations and cash flows contained
in the Disclosure Documents are complete and accurate in all material respects
and fairly present the results of operations and the changes in financial
position of the Company and its Subsidiaries for the respective periods
indicated (subject, in the case of unaudited financial statements, to year-end
and audit adjustments which the Company has no reason to believe will be
material). The information contained in the Annual Report under the heading
"Selected Historical Consolidated Financial and Other Data" is true and correct
in all material respects.
SECTION 2.08. CHANGES, ETC. Except as set forth in Section 2.08 to the
DISCLOSURE SCHEDULE, since March 31, 1997: each of the Company and its
Subsidiaries has conducted its business only in the usual and ordinary course
and there has been no (a) Material Adverse Change and no event or condition
which could reasonably be expected to result in a Material Adverse Change, (b)
increase in the compensation or commission rate payable by the Company or its
Subsidiaries to any of its directors, any of its 5 most highly compensated
officers or employees or any Affiliate thereof or any bonus or other payment (or
commitment therefor) to any of its directors, any such officer or employee or
any Affiliate thereof, (c) dividend, distribution, redemption, recapitalization
or other transaction by the Company involving the Company's capital stock, (d)
material capital expenditure or commitment therefor not in the ordinary course
of business, or (e) material acquisition or disposition of assets or property or
commitment therefor not in the ordinary course of business.
SECTION 2.09. TAX RETURNS AND PAYMENTS. The Company and its
Subsidiaries have correctly and timely prepared and filed all tax returns
required to have been filed by it with all appropriate federal, state and local
governmental agencies and
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<PAGE> 7
timely paid all taxes owed by them. The charges, accruals and reserves on the
books of the Company and its Subsidiaries in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid
assessments of the Company or any Subsidiary nor, to the knowledge of the
Company, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audit by any federal, state or local taxing
authority except such as which are not material and are being contested in good
faith by the Company and set forth in Section 2.09 of the DISCLOSURE SCHEDULE.
All material taxes and other assessments and levies which the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third
party. The Company has furnished the Investor with true and correct copies of
all of its and the Subsidiaries' tax returns, including any amendments, for all
open years. There are no tax liens or claims pending or threatened against the
Company, or any Subsidiary or any of their respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements between the
Company or any Subsidiary and any other corporation or entity (other than
between the Company and its consolidated Subsidiaries). The tax basis of the
assets of the Company by category, including the classification of such assets
as being depreciable or amortizable, as reflected in its tax returns and related
work papers, is true and correct in all material respects. Except as set forth
in Section 2.09 of the DISCLOSURE SCHEDULE, neither the Company, its
Subsidiaries nor any of the Company's stockholders has ever filed (a) an
election pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "CODE"), that the Company or any Subsidiary be taxed as an S
corporation or (b) a consent pursuant to Section 341(f) of the Code, relating to
collapsible corporations.
SECTION 2.10. LITIGATION. Except as set forth in Section 2.10 of the
DISCLOSURE SCHEDULE, there are no suits, proceedings or investigations pending
or, to the knowledge of the Company threatened against or directly affecting the
Company or its Subsidiaries, or any of their directors, officers or employees
with respect to the affairs of the Company or any Subsidiary, nor, to the
knowledge of the Company is there any basis for any such suit, proceeding, or
investigation which is material.
SECTION 2.11. LICENSES, ETC. The Company and its Subsidiaries have all
necessary franchises, permits and licenses, including all licenses and approvals
from all federal, state, and local agencies and authorities with jurisdiction
over the business or affairs of the Company or any of its Subsidiaries,
including, without limitation, the Federal Communications Commission (the
"FCC"), and other rights to allow them to conduct their businesses and own their
properties as currently owned and
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<PAGE> 8
conducted and as proposed to be owned and conducted hereunder, free from any and
all material restrictions, except such franchises, permits, licenses or rights
the absence of which would not result in a Material Adverse Change. Neither the
Company nor any Subsidiary is in violation, in any material respect, of any
order or decree of any court or administrative agency, including, without
limitation, the FCC, or of any law, order or regulation of any other
governmental authority and neither the Agreements nor the transactions
contemplated hereby will result in any such violation.
The Company and its Subsidiaries have made all filings necessary for
the commencement and completion of construction, and for the operation of their
cellular telephone systems (collectively, the "Systems") as described in the
Disclosure Documents. A complete listing of all of the licenses issued by the
FCC or any other administrative agency to operate the Systems (the "LICENSES")
is set forth on Section 2.11 of the DISCLOSURE SCHEDULE hereto. The Licenses
were duly and validly issued and to the knowledge of the Company, are in full
force and effect, and are valid and enforceable in accordance with their
respective terms, except to the extent that the failure of the Licenses to be
duly and validly issued, in full force and effect, and valid and enforceable
would not result in a Material Adverse Change. Except as set forth on Section
2.11 of the Disclosure Schedule, the issuance of each License is subject to no
further administrative or judicial review and, if issued by the FCC, is a Final
Order (as defined below). There exists no fact or circumstance which constitutes
or which, with the passage of time or the giving of notice, or both, would
constitute a material default under any license or permit or would permit the
grantor to cancel or cause the early termination of the Company's rights
thereunder.
The Investor will not by reason of the execution, delivery and
performance of this Agreement or any of the agreements contemplated herein be
subject to the regulation or control of either the FCC or any state regulatory
agency governing the Licenses. The execution, delivery and performance of this
Agreement or any of the agreements contemplated herein will not require the
approval of the FCC or any state regulatory agency governing the Licenses.
For purposes of this Section, a "Final Order" means an order by the FCC
(i) which has not been vacated, reversed, stayed, set aside, annulled or
suspended, (ii) with respect to which no timely appeal, request for stay, or
petition for rehearing, reconsideration or review by any party or by the FCC on
its own motion is pending, and (iii) as to which the time for filing any such
appeal, request, petition or similar document, for the reconsideration or review
by the FCC on its own motion, has expired.
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SECTION 2.12. MATERIAL CONTRACTS. Section 2.12 of the DISCLOSURE
SCHEDULE is a complete and accurate list of all of the following kinds of
contracts, agreements and arrangements (whether written or unwritten) of the
Company or any Subsidiary:
(a) material contracts of the Company and its Subsidiaries
required to be filed pursuant to Item 601(b)(10) of Regulation S-K promulgated
by the Securities and Exchange Commission;
(b) contracts with any Executive Officer, director or
stockholder, or any relative or Affiliate thereof;
(c) contracts under which the amount payable by the Company
or any Subsidiary is dependent on the revenues or income or similar measure of
the Company or any Subsidiary, in each case involving more than $500,000;
(d) agreements, contracts or instruments relating to the
borrowing of money, the capital lease or purchase on an installment basis of
any asset or the guarantee of any of the foregoing, in each case involving more
than $1,000,000;
(e) contracts with respect to which the Company or any
Subsidiary has any liability or obligation involving more than $500,000,
contingent or otherwise, or which may otherwise have any material continuing
effect after the date of this Agreement;
(f) contracts which place any material limitation on the
method of conducting or scope of the business of the Company or any Subsidiary;
(g) agreements or instruments relating to any debt or equity
securities of the Company or any Subsidiary, including without limitation stock
option plans, warrants, convertible securities, loan agreements, note purchase
agreements, indentures and other similar items;
(h) agreements for the use by the Company or any Subsidiary
of spectrum of others, or for use of their spectrum by others;
(i) agreements relating to the name and affiliation with
"Cellular One", in each case involving more than $250,000; and
(j) agreements and instruments effecting the
Restructuring described in the Annual Report.
The Company has furnished to the Investor copies of all such
contracts (including all amendments and modifications thereto),
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or written descriptions thereof, in the case of oral contracts, and each such
contract (or written description) sets forth in all material respects the entire
agreement and understanding between the Company and the other parties thereto.
Each such contract is valid, binding and in full force and effect, and, to the
knowledge of the Company, there is no event which has occurred or exists, which
constitutes or which, with notice, the happening of any event and/or the passage
of time, would constitute a material default or breach under any such contract
or would cause the acceleration of any obligation of any party thereto or give
rise to any right of termination or cancellation thereof. The Company has no
reason to believe that the parties to such contracts will not fulfill their
obligations thereunder in all material respects.
SECTION 2.13. DISCLOSURE. Neither the Agreements nor any other
document, certificate or statement furnished to the Investor by or on behalf of
the Company or its Subsidiaries in connection with the transactions contemplated
hereby (including, without limitation, the Disclosure Documents), 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 not misleading in
the light of the circumstances under which such statements were made. To the
knowledge of the Company, there is no fact which is material to the condition
(financial or otherwise), ownership, business, performance, operations,
properties or prospects of the Company and its Subsidiaries taken as a whole
which has resulted in, or could reasonably be expected to result in, a Material
Adverse Change which has not been set forth in the Agreements, the DISCLOSURE
SCHEDULE or in the other documents, certificates or statements furnished to the
Investor by or on behalf of the Company prior to the date hereof in connection
with the transactions contemplated hereby.
SECTION 2.14. GOVERNMENT APPROVALS. Except as set forth in Section 2.14
of the DISCLOSURE SCHEDULE, neither the Company nor any Subsidiary is required
to obtain any order, consent, approval or authorization of, or make any
declaration or filing with, any governmental authority in connection with the
execution, delivery and performance of the Agreements, or the offer, issue, sale
and delivery of the Stock pursuant hereto.
SECTION 2.15. PROPERTY. Except as set forth in Section 2.15 of the
DISCLOSURE SCHEDULE, the Company and each Subsidiary owns, or has a valid
leasehold or license interest in, all assets necessary for the conduct of its
business as presently conducted and as proposed to be conducted, in each case
free and clear of all liens, claims, security interests, charges and
encumbrances, other than immaterial liens arising in the ordinary course of
business. All of such assets are reflected on the balance sheets contained in
the DISCLOSURE DOCUMENTS, except to the extent
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acquired or disposed of in the ordinary course of business after the date
thereof. All material operating assets of the Company and the Subsidiaries are
in good operating condition and repair, normal wear and tear excepted. The
Company and each Subsidiary enjoys peaceful and quiet possession of its leased
premises and has not received any notice asserting the existence of a default
under any such lease or indicating that the lessor thereunder has taken action
or threatened early termination of the lease. The leased and owned premises
occupied by the Company or any Subsidiary are adequate for the reasonably
foreseeable needs of the Company and the Subsidiaries. Except as set forth in
Section 2.15 of the DISCLOSURE SCHEDULE, (a) the ownership or use of the
Company's and the Subsidiaries' premises and assets, the occupancy and operation
thereof, and the conduct of the Company's and the Subsidiaries' business are in
compliance in all material respects with all applicable federal, state and local
laws, ordinances, regulations, standards and requirements relating to safety,
health, pollution, environmental protection, hazardous substances and related
matters and (b) to the knowledge of the Company, there is no material liability
attaching to such premises or assets or the ownership, use or operation thereof
as a result of any hazardous substance that may have been discharged on or
released from such premises, or disposed of on-site or off-site, or any other
circumstance occurring prior to the Initial Closing or existing as of the
Initial Closing. For purposes of this Section, "hazardous substance" shall mean
oil or any other substance which is included within the definition of a
"hazardous substance", "pollutant", "toxic substance", "toxic waste", "hazardous
waste", "contaminant" or other words of similar import in any federal, state or
local environmental law, ordinance or regulation.
SECTION 2.16. INTELLECTUAL PROPERTY. Section 2.16 of the DISCLOSURE
SCHEDULE sets forth all patents, trademarks, service marks, trade names,
copyrights, franchises and licenses, all royalties and license agreements, all
applications therefor, and all other rights with respect to the foregoing owned
or used by the Company or any Subsidiary (other than immaterial items such as
licenses to use generally available software). The intellectual property and
rights set forth on such Schedule include all of the foregoing necessary for the
operation of the Company's and the Subsidiaries' business as now conducted and
as proposed to be conducted. To the knowledge of the Company, the Company's and
each Subsidiary's ownership and use of the foregoing does not infringe or
conflict with the rights of others; neither the Company nor any Subsidiary is or
will be obligated to make any royalty, fee or other payments in connection with
its ownership or use of any patent, trademark, trade name, copyright or other
intangible asset in connection with the conduct of its business as now conducted
and as purposed to be conducted, except as described in Section 2.16 of the
DISCLOSURE SCHEDULE. To the knowledge of the Company, except as
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set forth in Section 2.16 of the DISCLOSURE SCHEDULE, neither the Company nor
any Subsidiary has been notified of any claim by any person or entity that the
Company or any Subsidiary is violating any trademark, service mark, trade name,
patent or copyright, or other intangible asset or right owned by any other
person or entity or that it is using any name that is confusingly similar to
that of any other person or entity, and there is no basis for any such claim.
SECTION 2.17. EMPLOYEE BENEFIT PLANS.
(a) Section 2.17 of the DISCLOSURE SCHEDULE, sets forth all
material employee benefit plans, agreements, commitments, practices or
arrangements of any type (including, but not limited to, plans described in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained by the Company or any Subsidiary for the benefit of
current or former employees or directors of the Company or any Subsidiary, or
with respect to which the Company or any Subsidiary has a liability, whether
direct or indirect, actual or contingent (including, but not limited to,
liabilities arising from affiliation under Section 414(b), (c), (m) or (o) of
the Code or Section 4001 of ERISA) (collectively, the "BENEFIT PLANS"). There
are no material benefit plans, agreements, commitments, practices or
arrangements of any type providing benefits to employees or directors of the
Company or any Subsidiary, other than the Benefit Plans.
(b) With respect to each Benefit Plan, (other than the Health
Care Plan and the Life Insurance Plan, Short Term Disability Plan and Long Term
Disability Plan, each as described in Section 2.17 of the DISCLOSURE SCHEDULE,
for which only item (i) has been delivered), the Company has delivered to the
Investor true and complete copies of: (i) any and all plan texts and agreements;
(ii) the most recent annual report, if applicable; (iii) the most recent annual
and periodic accounting of plan assets, if applicable; (iv) the most recent
determination letter received from the Internal Revenue Service and (v) the most
recent actuarial evaluation report, if applicable.
(c) With respect to each Benefit Plan: (i) if intended to
qualify under Section 401(a) of the Code, such plan so qualifies, and its trust
is exempt from taxation under Section 501(a) of the Code; (ii) such plan has
been administered and enforced in accordance with its terms and all applicable
laws in all material respects; (iii) no breach of fiduciary duty has occurred
with respect to which the Company, any Subsidiary or any Benefit Plan may be
liable or otherwise damaged in any material respect; (iv) no material disputes
are pending or threatened; (v) no "prohibited transaction" (within the meaning
of either Section 4975(c) of the Code or Section 406 of ERISA) has occurred with
respect to which the Company or any Benefit Plan may be liable or
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otherwise damaged in any material respect; (vi) all contributions, premiums, and
other payment obligations have been accrued on the financial statements of the
Company in accordance with generally accepted accounting principles, and, to the
extent due, have been made on a timely basis, in all material respects; (vii)
all contributions made or required to be made under such plan meet the
requirements for deductibility under the Code; (viii) the Company has expressly
reserved in itself the right to amend, modify or terminate such plan, or any
portion of it, without liability to itself; (ix) no such plan requires the
Company to continue to employ any employee or director.
(d) No Benefit Plan is, or has ever been, subject to Title IV
of ERISA.
(e) With respect to each Benefit Plan which provides welfare
benefits of the type described in Section 3(1) of ERISA: no such plan provides
medical or death benefits with respect to current or former employees or
directors of the Company beyond their termination of employment, other than
coverage mandated by Sections 601-608 of ERISA and 4980B(f) of the Code, (ii)
each such plan has been administered in compliance with Sections 601- 608 of
ERISA and 4980B(f) of the Code; and (iii) no such plan has reserves, assets,
surpluses or prepaid premiums.
SECTION 2.18. INSURANCE. The Company and its Subsidiaries have in full
force and effect (a) insurance reasonably believed to be adequate on all assets
and activities of a type customarily insured, covering property damage and loss
of income by fire or other casualty, and (b) insurance protection reasonably
believed to be adequate against all liabilities, claims and risks against which
it is customary for companies similarly situated as the Company and the
Subsidiaries to insure.
SECTION 2.19. AFFILIATE TRANSACTIONS. Except as set forth in Section
2.19 of the Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any agreement, transaction or arrangement with any of their Executive
Officers, directors, stockholders, affiliates or relatives of any of the
foregoing.
SECTION 2.20. VOTING PROVISIONS. Except as contained in the Company's
Articles of Incorporation and Code of Regulations, there are no agreements,
voting trusts or other arrangements which contain any provision requiring, or
having the effect of requiring a higher voting requirement with respect to
action taken by the Company's or any Subsidiary's Board of Directors or other
governing body, or the holders of its capital stock or other interests than that
which would apply in the absence of such provisions.
SECTION 2.21. BROKERS, ETC. The Company has not dealt with any broker,
finder, commission agent or other similar person in
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connection with the offer or sale of the Stock and the transactions contemplated
by this Agreement other than Lehman Bros., and the Company is under no
obligation to pay any broker's fee, finder's fee, or commission in connection
with such transactions except to Lehman Bros. in an amount not to exceed $1.35
million.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company that:
SECTION 3.01. PARTNERSHIP EXISTENCE AND POWER. The Investor is a
limited partnership duly formed, validly existing and in good standing under the
laws of the State of Delaware and has all necessary partnership power and
authority to enter into and perform its obligations under this Agreement.
SECTION 3.02. INVESTMENT INTENT. The Stock to be acquired by it is
being acquired solely for its own account, for investment purposes only and,
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution.
SECTION 3.03. ECONOMIC RISK; SOPHISTICATION. The Investor is able to
bear the economic risk of an investment in the Stock to be acquired by it, can
afford to sustain a total loss on such investment and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the proposed investment.
SECTION 3.04. AUTHORITY. The Investor has all requisite power and
authority to enter into this Agreement and perform its obligations hereunder,
and this Agreement constitutes a valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms.
SECTION 3.05. BROKERS. No finder, broker, agent, financial advisor or
other intermediary has acted on behalf of the Investor in connection with the
negotiation or consummation of this Agreement or any of the transactions
contemplated hereby, and no such person it entitled to any fee, payment,
commission or other consideration with respect thereto as a result of any
arrangement made by the Investor.
SECTION 3.06. LIMITED LIQUIDITY. The Investor understands that the
Stock to be acquired by it may not be sold, transferred or otherwise disposed of
without registration under the 1933 Act and any state securities laws, or an
exemption therefrom, and that in the absence of an effective registration
statement covering such securities or an available exemption from registration,
such Stock may be required to be held indefinitely.
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The Investor is aware that the Stock to be acquired by it may not be sold
pursuant to Rule 144 promulgated under the 1933 Act unless all of the conditions
of that Rule are met. The Investor represents that, in the absence of an
effective registration statement covering the Stock, it shall sell, transfer or
otherwise dispose of such Stock only in a manner consistent with the
representations set forth herein. Prior to transferring Stock pursuant to an
exemption, Investor shall, upon request, provide the Company with an opinion of
counsel, in form and substance reasonably acceptable to the Company, to the
effect that an exemption from registration is available. Investor further
understands that the Stock may be transferred only in compliance with the rules
and regulations of the FCC.
SECTION 3.07. ACCREDITED INVESTOR. The Investor is an "accredited
investor" as defined in Regulation D under the 1933 Act, an "institutional
buyer" as defined in 950 Code of Massachusetts Regulations section
14-401(L)4(a), and an "institutional investor" as defined in section 1707.01(S)
of the Ohio General Corporation Law.
SECTION 3.08. LEGENDS. The Investor understands that the
certificates representing the Stock it has agreed to purchase,
and any certificate issued in transfer thereof, will bear the
following legend:
"The securities evidenced by this certificate have
not been registered under the Securities Act of
1933, as amended, or under any applicable state
securities laws. These securities may not be sold
or transferred in the absence of such registration
or an exemption therefrom under such Act and under
any applicable state securities laws."
The certificates representing such Stock, and each certificate issued
in transfer thereof, will also bear any legend required under any applicable
state securities law. The Investor understands that the legend set forth above
shall be removed and the Company shall issue a certificate without such legend
to the holder of any such Stock (a) if such Stock is registered under the 1933
Act, or (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope reasonably acceptable to the Company, to the effect
that a public sale or transfer of such Stock may be made without registration
under the 1933 Act and applicable state securities laws or (c) such holder
provides the Company with reasonable assurances that such Stock can be sold
pursuant to Rule 144(k) under the 1933 Act.
SECTION 3.09. INFORMATION. The Investor has been furnished with
certain materials relating to the business, finances and operations of the
Company and its Subsidiaries and materials
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relating to the offer and sale of the Stock. The Investor has been afforded an
opportunity to ask questions of the Company and its Subsidiaries, and has
received what the Investor believes to be satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by the Investor shall modify, amend or affect the Investor's right to
rely on the Company's representations and warranties contained in Article II;
provided, that the Investor shall promptly provide written notice to the Company
if the Investor determines through its investigation that the Company is in
breach in a material respect of any of its representations or warranties set
forth in this Agreement.
ARTICLE IV. CLOSING CONDITIONS
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SECTION 4.01. CONDITIONS TO INITIAL CLOSING. The obligations of the
Investor to purchase the Stock to be purchased at the Initial Closing shall be
subject to the satisfaction of the following conditions at and as of the time
of the Initial Closing:
(a) ISSUANCE OF STOCK. The Company shall have duly issued and
delivered to the Investor certificates for the Stock to be issued at the
Initial Closing.
(b) LEGAL OPINION FROM COUNSEL FOR THE COMPANY, ETC. The
Investor shall have received the written opinion of Harrington & Mitchell,
Ltd., counsel to the Company, and Bryan Cave LLP, FCC counsel to the Company,
in the form of EXHIBIT 4.01(B) hereto.
(c) REPRESENTATIONS CORRECT, ETC. The representations and
warranties of the Company set forth in Article II shall be true in all material
respects, and Section 2.04 shall be true in all respects, at and as of the
Initial Closing, as if made as of the date of the Initial Closing.
(d) CLOSING CERTIFICATE. The Company shall have delivered to
the Investor a certificate signed by a principal officer of the Company dated
the date of the Initial Closing to the effect set forth in Section 4.01(c), and
stating that each of the conditions in this Article have been satisfied.
(e) CONSENTS AND APPROVALS. On or before the Initial Closing,
the Company and its Subsidiaries shall have received all consents, approvals
and authorizations of, and shall have made all declarations and filings with,
any other Person, including, without limitation, any governmental authority,
which are required as a condition precedent to the valid execution, delivery
and performance of and the consummation of the transactions contemplated by the
Agreements, including, without limitation, the valid offer, issue, sale and
delivery of the
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Stock, and all such consents, approvals, authorizations, declarations and
filings shall be in full force and effect at the time of the Initial Closing and
none of the same shall be subject to appeal or review.
(f) BOARDS OF DIRECTORS. As of the Initial Closing, the Board
of Directors of the Company shall consist of eleven directors, including at
least two nominees of the Investor, and the Investor Directors shall comprise
at least 2/11ths of the Board of Directors of each Subsidiary. If the Board has
an Executive Committee or any similar committee empowered to act generally on
behalf of the entire Board, no fewer than 2/11ths of the members shall be
Investor Directors.
(g) STOCKHOLDERS AGREEMENT. The Company, the Investor, J. D.
Williamson, II and Warren P. Williamson, III shall have entered into a
Stockholders Agreement in the form of EXHIBIT 4.01(G) hereto (the "STOCKHOLDERS
AGREEMENT").
(h) REGISTRATION RIGHTS AGREEMENT. The Company and the
Investor shall have entered into a Registration Rights Agreement in the form of
EXHIBIT 4.01(H) (the "REGISTRATION RIGHTS AGREEMENT").
(i) NO LITIGATION. No action, suit, proceeding or
investigation shall have been instituted or threatened which seeks to restrain,
restrict or prohibit or impose penalties or damages with respect to the
consummation of the transactions contemplated by the Agreements.
(j) HSR ACT. All necessary filings under the Hart-
Scott-Rodino Antitrust Improvements Act (the "HSR ACT") shall have been made
and the applicable waiting period specified therein shall have expired.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in form and substance to the Investor and its counsel.
(l) REDEMPTION OF PREFERRED STOCK. The Company shall have
made arrangements reasonably satisfactory to the Investor to redeem the
outstanding Preferred Stock in accordance with the terms of the Preferred
Stock.
If the conditions to Initial Closing set forth in this Article have not
been satisfied prior to September 30, 1997, the Company or the Investor may
terminate its obligations under this Agreement.
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SECTION 4.02. CONDITIONS TO SUBSEQUENT CLOSING. The obligations of the
Investor to purchase the Stock at the Subsequent Closing shall be subject to
the satisfaction of the following conditions at and as of the time of the
Subsequent Closing:
(a) SECTION 4.01 CONDITIONS. Each of the conditions to the
Initial Closing set forth in Section 4.01 above shall be satisfied (except that
the representations contained in Section 2.04(e) shall refer only to any Stock
to be issued by the Company in the Subsequent Closing), to the reasonable
satisfaction of the Investor, as of the time of the Subsequent Closing, the
Company shall have delivered all items referred to in Subsections (b) and (d)
thereof as of the time of the Subsequent Closing, and the Company is in
compliance with this Agreement.
(b) STOCKHOLDER SHARES. Each of the Selling Stockholders
shall have tendered certificates representing duly issued and outstanding
shares of capital stock of the Company for which they hold good, marketable and
unencumbered title ("TENDERED SHARES"), duly endorsed for transfer or with duly
executed stock powers attached.
(c) STOCKHOLDER REPRESENTATIONS. Each Selling Stockholder
shall represent and warrant to the Investor, and shall deliver a certificate to
the Investor to such effect, that each of the following statements is true and
correct as of the date thereof:
(i) TITLE. Such Selling Stockholder is the record
and beneficial owner of the Tendered Shares. Such Selling Stockholder has good,
marketable and unencumbered title to the Tendered Shares being sold by such
Selling Stockholder hereunder and full legal right, power and authority to
sell, transfer, assign and deliver such Tendered Shares as herein agreed. The
Investor will, on transfer and delivery of the Tendered Shares at the
Subsequent Closing, acquire good and marketable title to such Tendered Shares,
free and clear of any liens, encumbrances, security interests, claims of other
persons or restrictions on transfer other than restrictions under generally
applicable securities laws and other than liens, encumbrances, security
interests, claims of other persons or restrictions on transfer caused by
actions of the Investor. Such Selling Stockholder has not granted any option or
right, and is not a party to any other agreement, which requires, or upon the
passage of time or payment of money, or occurrence of any other event, may
require such Selling Stockholder to transfer any of the Tendered Shares being
sold by such Selling Stockholder to anyone other than the Investor.
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(ii) DUE ISSUANCE. The Tendered Shares held by
such Selling Stockholder are duly authorized, validly issued, and fully paid and
nonassessable.
(iii) AUTHORIZATIONS OR APPROVALS. No consents,
authorizations or approvals are required to permit such Selling Stockholder to
sell the Tendered Shares to the Investor.
(d) ADDITIONAL COMPANY SHARES. In the event the Company
issues Stock at the Subsequent Closing pursuant to Section 1.05, the Company
shall have duly issued and delivered to the Investor certificates for the Stock
to be issued at the Subsequent Closing.
ARTICLE V. GENERAL COVENANTS OF THE COMPANY
The Company will duly perform and observe each and all of the covenants
and agreements hereinafter set forth in this Article V (i) prior to the Initial
Closing, in the case of Section 5.01, and (ii) subsequent to the Initial
Closing, in the case of each other Section:
SECTION 5.01. COVENANTS PENDING INITIAL CLOSING. Prior to the Initial
Closing, the Company will use its best efforts to (a) cause the Company and its
Subsidiaries to conduct their businesses and affairs in such a manner as to
cause the representations and warranties specified in Article II to be true and
correct at all times, and (b) cause the conditions to the Initial Closing
specified in Article IV to be satisfied. In particular, the Company will file,
or cause to be filed, all reports and notifications required under the HSR Act
and will respond promptly to any second request or other inquiry with respect
thereto.
SECTION 5.02. REPORTS. The Company will furnish to the Investor the
following reports:
(a) MONTHLY REPORTS. As soon as available and in any event
within 30 days after the end of each fiscal month of the Company, consolidated
balance sheets of the Company and its Subsidiaries as at the end of such period
and the related consolidated and consolidating (which for purposes of this
Agreement shall mean by System or business unit consistent with current Company
practice) statements of operations, stockholders' equity and cash flows for such
period and for the portion of the Company's fiscal year ended on the last day of
such month, in the case of statements of operations setting forth in comparative
form the corresponding figures for the same period of the current
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approved budget, all in reasonable detail and certified by a principal financial
officer of the Company to have been prepared in accordance with generally
accepted accounting principles, subject to year-end and audit adjustments.
(b) QUARTERLY REPORTS. As soon as available and in any event
within 45 days after the end of each fiscal quarter of the Company, consolidated
balance sheet of the Company and its Subsidiaries as at the end of such period
and the related consolidated statements of operations, stockholders' equity and
cash flows for such period and for the portion of the Company's fiscal year
ended on the last day of such quarter, all in reasonable detail and certified by
a principal financial officer of the Company to have been prepared in accordance
with generally accepted accounting principles, subject to year-end and audit
adjustments.
(c) ANNUAL REPORTS. As soon as available and in any event
within 90 days after the end of each fiscal year of the Company, consolidated
balance sheet of the Company and its Subsidiaries as at the end of such year and
the related consolidated statements of earnings, stockholders' equity and cash
flows for such year, all in reasonable detail and accompanied by the report on
such consolidated financial statements of Ernst & Young or other "Big 6"
independent certified public accountants selected by the Company and reasonably
satisfactory to the Investor.
(d) AUDIT REPORTS. As promptly as practicable and in any
event within five days after receipt thereof, copies of all reports (including,
without limitation, audit reports and so-called management letters) or written
comments submitted to the Company or any of its Subsidiaries by independent
certified public accountants or other management consultants in connection with
each annual, interim or special audit in respect of the financial statements or
the accounts or the financial or accounting systems or controls of the Company
or any Subsidiary made by any such accountants or other management consultants;
(e) BUDGET. For each fiscal year of the Company, the Company
shall prepare a monthly and annual operating plan and budget, covenant
compliance calculations for all outstanding and projected indebtedness, cash
flow projections and profit and loss projections for the Company and its
Subsidiaries, all in reasonable detail (collectively, the "BUDGET") for such
fiscal year. The Company shall furnish the Investor the Budget promptly after
its completion, but in any event prior to the beginning of each such fiscal
year, and shall furnish to the Investor any
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material changes thereto promptly after such changes have been made.
(f) SECURITIES FILINGS, ETC. As promptly as practicable and
in any event within five days after the same are issued or filed, copies of (i)
all press releases issued by the Company or any Subsidiary, and all notices,
proxy statements, financial statements, reports and documents as the Company or
any Subsidiary shall send or make available generally to its stockholders
(other than the Company, in the case of any Subsidiary) or to financial
analysts, and (ii) all periodic and special reports, documents and registration
statements (other than on Form S-8) which the Company or any Subsidiary
furnishes or files, or any officer or director of the Company or any of its
Subsidiaries furnishes or files with respect to the Company or any of its
Subsidiaries, with the Securities and Exchange Commission (the "SEC") or any
Securities Exchange.
(g) MATERIAL ADVERSE CHANGES. As promptly as practicable and
in any event within five days after any Executive Officer of the Company
obtains knowledge of the existence of any condition or event (including,
without limitation, the filing of any litigation against or the commencement of
any proceeding or investigation involving the Company or any Subsidiary), which
has resulted in, or could reasonably be expected to result in, a Material
Adverse Change written notice specifying in reasonable detail the nature of
such condition or event and what action the Company proposes to take with
respect thereto.
(h) OTHER INFORMATION. Such other information relating to the
Company or its Subsidiaries as from time to time may reasonably be requested by
the Investor.
(i) Prior to its receipt of any such non-public information
pursuant to this Section 5.02, the Investor will execute an agreement
containing customary provisions with respect to the use and confidentiality of
such information.
SECTION 5.03. INSPECTION. The Company will permit any Person designated
by the Investor, on reasonable notice and during normal business hours, to visit
and inspect any of the properties of the Company and its Subsidiaries, to
examine their books, records and other materials relating thereto (and to make
copies thereof and take extracts therefrom) and to discuss its and their
affairs, finances and accounts with, and to be advised as to the same by, its
and their officers, employees, counsel and independent certified public
accountants provided that the Investor has executed an agreement containing
customary
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provisions with respect to the use and confidentiality of such information.
SECTION 5.04. CORPORATE EXISTENCE. The Company shall, and shall cause
each Subsidiary to, maintain its corporate existence, foreign qualifications,
and all rights, permits, licenses and authorizations material to its business
unless a majority of the Company's Board of Directors, including at least one
Investor Director, shall determine otherwise.
SECTION 5.05. BOARDS OF DIRECTORS.
(a) SIZE, ETC. To the extent of its powers under the Ohio
General Corporation Law, the Company shall not permit the Board or the board of
directors of SCI or any other Subsidiary to be classified, and directors shall
not have different rights, except as provided in the Articles of Incorporation
or Code of Regulation of the Company at the date hereof.
(b) BOARD REPRESENTATION. The Investor shall be entitled to
designate the greater of (i) two members of the Board and (ii) and the minimum
number of members of the Board which will cause the nominees of the Investor to
constitute not less than 2/11ths of the members of the Board. The Company will
cause each such designee to be included among the nominees who are recommended
for election as directors by management of the Company, at each meeting of the
Company's stockholders at which directors of the Company are proposed to be
elected (or, if the terms of directors are staggered, at each meeting at which
it is necessary to elect one or more designees of the Investor in order to
insure that the number of designees of the Investor specified in the first
sentence of this Subsection will serve on the Board at all times). The Company
will also cause a special meeting of its Board to be held as soon as practicable
after the creation of any vacancy on the Board arising out of the death,
resignation, removal or other similar occurrence of a designee of the Investor,
or any increase in the number of members of the Board which would entitle the
Investor to designate another director pursuant to the first sentence of this
Subsection, to fill such vacancy with a designee of the Investor or to add one
or more additional designees of the Investor, as appropriate, so that the proper
number of designees of the Investor will at all times serve as directors of the
Company.
(c) SUBSIDIARY BOARDS. The Company shall at all times cause
the board of directors of each Subsidiary to consist of not less than 2/11ths
representation by the Investor Directors.
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(d) MEETINGS. The Company will take such action as shall be
required to cause the Board to meet not less often than quarterly, and will give
each director at least 3 days prior notice of the time and place of any meeting.
(e) INDEMNIFICATION; INSURANCE. The Company shall maintain in
effect a directors and officers liability insurance policy covering the
designees of the Investor to the Board and the boards of directors of each
Subsidiary, providing at least the same coverage as for the other directors of
the Company.
(f) COMMITTEES. Neither the Board nor the boards of directors
of the Subsidiaries shall have an Executive Committee or any similar committee
empowered to act generally on behalf of the Board or the Subsidiaries' boards of
which fewer than 2/11ths of the members are Investor Directors.
SECTION 5.06. VENTURE CAPITAL EXCEPTION. Until six months following
such time as the Investor no longer holds at least 20% of the Stock, (a) the
Investor shall be permitted to consult on a regular basis with the Company's
management with respect to the business and affairs of the Company and, if
requested by the Investor, exercise other "management rights" as may be
necessary to qualify the securities of the Company owned by the Investor as a
"venture capital investment" within the plan asset regulations under ERISA
(Department of Labor Regulation 2510.3-101) (the "PLAN ASSET REGULATIONS"), it
being agreed that all the rights of the Investor under this Agreement and all
rights which the Investor may then have with respect to the management of any
other companies in which such Investor holds investments shall be considered in
determining whether the Investor is permitted to exercise "management rights" to
the extent required under such regulations for venture capital investments, and
(b) the Company will not take any action that would cause it to cease to be an
"operating company" within the meaning of the Plan Asset Regulations.
SECTION 5.07. EXPENSES. The Company will bear all reasonable expenses
of the Investor relating to the transactions contemplated by the Agreements,
including the negotiation, preparation, execution, amendment, waiver and
enforcement thereof, and including without limitation, the reasonable fees and
disbursements of counsel and FCC counsel to the Investor but excluding the fees
and expenses of the Walter Group.
SECTION 5.08. NO CONFLICTING AGREEMENTS. The Company will not, and
will not permit its Subsidiaries to, take any action, enter into any agreement
or make any commitment which would
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conflict or interfere in any material respect with the obligations to the
Investor under the Agreements.
SECTION 5.09. INSURANCE. The Company shall, and shall cause each
Subsidiary to, have in full force and effect (a) insurance reasonably believed
to be adequate on all assets and activities of a type customarily insured,
covering property damage and loss of income by fire or other casualty, and (b)
insurance reasonably believed to be adequate protection against all liabilities,
claims and risks against which it is customary for companies similarly situated
as the Company and the Subsidiaries to insure.
SECTION 5.10. COMPLIANCE WITH LAWS. The Company will use reasonable
efforts, and will cause each of its Subsidiaries to use reasonable efforts to,
comply in all material respects with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities.
SECTION 5.11. AFFILIATE TRANSACTIONS. The Company shall not, and shall
not permit any Subsidiary to buy, sell or lease any assets, borrow or lend any
money, or deal with or enter into any other transactions or agreements with any
stockholders, officer or director, or any relative or Affiliate of any of the
foregoing, other than (a) as expressly contemplated by this Agreement or any
other agreement contemplated hereby, (b) those that are (i) fully disclosed in
advance to the Board of Directors, and (ii) approved by a disinterested majority
of the Board, including at least one Investor Director, (c) the purchase of
advertising in the ordinary course of business, with affiliated radio and
television stations on terms no more favorable to such radio and television
stations than are generally obtained by them from unaffiliated third parties, or
(d) those that are (i) on terms no less favorable to the Company or any
Subsidiary than could have been obtained from an unaffiliated third party and
(ii) involve less than $100,000 annually, in the aggregate.
SECTION 5.12. AMENDMENTS TO CHARTER, ETC. To the extent permitted by
Ohio General Corporation Law, without the prior approval of at least one
Investor Director, the Company shall not, and shall not permit any Subsidiary
to, amend its Code of Regulations or amend its Articles of Incorporation.
SECTION 5.13. MERGERS. Without the prior approval of at least one
Investor Director, the Company shall not, and shall not permit any Subsidiary
to, (a) merge or consolidate with any person or entity, other than a
wholly-owned Subsidiary in a
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transaction in which the Company is the surviving corporation and in which its
Articles of Incorporation are not altered, (b) sell, lease (as lessor) or
otherwise dispose of all or any substantial portion of its assets, (c) sell,
transfer or otherwise dispose of capital stock of any Subsidiary or (d) enter
into any joint venture, partnership or similar arrangement in which the amount
involved, taken in the aggregate with any arrangements or transactions
contemplated by Sections 5.13(d) and 5.16(a), exceeds $10 million in any twelve
month period, other than any joint venture, partnership or similar arrangement
in the ordinary course of business.
SECTION 5.14. DIVIDENDS. Without the prior approval of at least one
Investor Director, the Company shall not pay or declare any dividend or make any
distribution of money or other property on account of any of its capital stock,
or accord any other payment, benefit or preference to any share of capital
stock, other than pro rata dividends payable solely in shares of Common Stock.
SECTION 5.15. REDEMPTIONS. Without the prior approval of at least one
Investor Director, the Company shall not, and shall not permit any Subsidiary
to, purchase, redeem or otherwise acquire any share of its capital stock, or any
options, warrants, convertible securities or other rights to acquire capital
stock other than (a) the redemption of the Preferred Stock in accordance with
its terms using the proceeds of the issuance of the Stock to be purchased at the
Initial Closing, or (b) repurchases of shares from employees or former employees
of the Company, other than any party to the Stockholders Agreement, PROVIDED
that such repurchases have been approved by the Board and the aggregate amount
spent annually to repurchase such shares shall not exceed $250,000.
SECTION 5.16. ACQUISITIONS AND INVESTMENTS. Without the prior approval
of at least one Investor Director, the Company shall not, and shall not permit
any Subsidiary to:
(a) make any acquisition of stock or assets, or make any
investment in or with any other entity, other than in the ordinary course of the
Company's or any Subsidiary's business, except for acquisitions (including
acquisitions effected by merger) in which the amount involved, together with any
other arrangements or transactions contemplated by Section 5.13(d) and 5.16(a),
does not exceed $10 million in any twelve month period (including purchase
price, assumption of liabilities and other acquisition costs, however
characterized), in the cellular telephone business; or
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(b) make any loan or advance to any person or entity other
than in the ordinary course of the Company's or any Subsidiary's business.
SECTION 5.17. DEBT FINANCING. Without the prior approval of at least
one Investor Director, the Company will not, and will not permit any Subsidiary
to, (a) enter into any new debt financing arrangement or (b) materially modify
the principal amount under any existing debt financing arrangement, involving
borrowed money, capital leases, installment purchases or guarantees, in excess
of $30 million in each case.
SECTION 5.18. EQUITY FINANCING. Without the approval of at least one
Investor Director, the Company will not, and will not permit any Subsidiary to,
issue any shares of capital stock, or any options, warrants, convertible
securities or other rights to acquire capital stock, other than the issuance or
grant of not more than 1,000,000 shares of Common Stock or rights thereto
pursuant to the Company's 1996 Stock Option Plan and not more than 250,000
shares of Common Stock or rights thereto pursuant to the Company's 1996 Stock
Option Plan for Non-Employee Directors (less all such rights outstanding on the
date hereof or shares of stock issued under such plans or upon exercise of
rights previously granted thereunder), without duplication, adjusted
appropriately for any stock splits, stock dividends, combination or the like.
SECTION 5.19 REGISTRATION. Without the approval of at least one
Investor Director, the Company will not, and will not permit any Subsidiary to,
register shares of capital stock or any options, warrants, convertible
securities or other rights to acquire capital stock pursuant to the 1933 Act
except (a) pursuant to the Registration Rights Agreement, (b) registration of
shares issued under currently existing employee benefit plans on Form S-8 and
similar or successor forms or (c) pursuant to the request of the holders of at
least 30% of the then current outstanding Common Stock and involving a
registration of the Company's common stock with an anticipated aggregate
offering price of at least $25,000,000, net of underwriting fees, discounts and
expenses.
SECTION 5.20. KEY EMPLOYEE COMPENSATION. Without the prior approval of
at least one Investor Director, the Company (a) will not hire or terminate, any
of the 5 most highly compensated employees of the Company (including, in any
case, Albert H. Pharis, Jr., Craig T. Sheetz, William Zlotnick and Gregory T.
Pauley), or (b) materially change the compensation, benefits, stock, option or
other equity arrangements of any of (i) J. D.
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Williamson, II, (ii) Warren P. Williamson, III, (iii) any person holding
directly or indirectly, at least 5% of the Company's fully-diluted outstanding
capital stock, or (iv) relatives or Affiliates of any of the foregoing.
SECTION 5.21. LINE OF BUSINESS. Without the prior approval of at least
one Investor Director, the Company shall not, and shall not permit any
Subsidiary to, engage in any line of business other than the businesses in which
the Company and the Subsidiaries are currently engaged, as described in the
Annual Report.
SECTION 5.22. SURVIVAL OF COVENANTS. (a) Except as set forth in (b)
below, the covenants set forth in this Article V, other than in Section 5.06,
shall survive until such time as the Investor beneficially owns or holds less
than 40% of the Stock, and thereafter shall be void and of no further effect.
(b) The covenants set forth in Sections 5.09, 5.10, 5.11 and
5.14 through 5.21 shall survive until the closing of a public offering of the
Company's Common Stock registered under the 1933 Act and resulting in proceeds
to the Company of at least $25,000,000 (net of underwriting fees, discounts and
expenses), and thereafter shall be void and of no further force and effect.
ARTICLE VI. NEW ISSUANCE OF STOCK OR RIGHTS
- ----------- -------------------------------
SECTION 6.01. RIGHT OF FIRST REFUSAL. If the Company (including, for
purposes of this Article, any Subsidiary) proposes to issue for cash or notes
any capital stock or any security convertible into, exchangeable for or having
rights to purchase capital stock, the Company shall first offer in writing to
sell to the Investor a pro rata portion (calculated as a percentage, the
numerator of which is the Common Stock held by the Investor and the denominator
of which is all outstanding Common Stock at the time of such offer) of the
securities proposed to be issued (the "Offered Securities"). Such offer shall
describe the securities proposed to be issued and specify the quantity, price
(which shall be in U.S. dollars) and the payment terms. If within 15 days after
receipt of such offer the Investor accepts the same in writing as to all or a
lesser amount of the Offered Securities, then the Company shall sell all, or
such lesser amount, as the case may be, of the Offered Securities as the
Investor may specify, to the Investor upon the terms specified. Such sale shall
occur within 60 days thereafter.
SECTION 6.02. SALE TO THIRD PARTY. The Company shall be free to sell
at any time prior to 120 days after the date an
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offer pursuant to Section 6.01 was made, the quantity of such securities not
agreed by the Investor to be purchased by it at a price no less favorable to the
Company than that specified in such offer and on terms no less favorable to the
Company than those specified in such offer. If such sale is not consummated
within the time specified in the preceding sentence, the Company shall not sell
such securities without again complying with Section 6.01.
SECTION 6.03. EXCLUDED TRANSACTIONS. The following transactions shall
be excluded from the restrictions of this Article:
(a) any issuance to an employee, director or consultant of
the Company of Common Stock or rights to purchase Common Stock and as part of
the Company's 1996 Stock Option Plan and 1996 Stock Option Plan for
Non-Employee Directors, provided that, without the prior approval of at least
one Investor Director, not more than 1,000,000 shares and 250,000 shares,
respectively, of Common Stock or rights thereto (less all such rights
outstanding as of the date hereof or shares of stock issued under such plans or
upon exercise of shares previously granted thereunder), adjusted appropriately
for any stock dividends, stock splits, combinations or the like, may be
excluded pursuant to this Subsection;
(b) any issuance of Common Stock to all holders of all
classes of Common Stock, pro rata to the number of shares held by each; and
(c) any issuance of securities upon the exercise of options
or warrants outstanding on the date hereof or other rights which were not
issued in violation of the terms of this Article.
(d) any issuance of securities in connection with any loan or
debt financing arrangements;
(e) any issuance of securities in a public offering
registered under the 1933 Act; and
(f) any issuance of capital stock by a Subsidiary to the
Company.
SECTION 6.04. SURVIVAL OF RIGHT OF FIRST REFUSAL. The obligations set
forth in this Article VI shall survive until such time as the Investor
beneficially owns or holds less than 40% of the Stock, and thereafter shall be
void and of no further effect.
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ARTICLE VII. DEFINITIONS
The terms defined in this Article VII, whenever used and capitalized in
this Agreement, shall, unless the context otherwise requires, have the following
respective meanings:
AFFILIATE: shall have the meaning given to it in the Rules promulgated
under the 1933 Act.
AGREEMENTS: shall mean this Agreement, the Stockholders Agreement, the
Registration Rights Agreement and each of the other agreements and instruments
contemplated to be executed in connection with the transactions contemplated by
this Agreement.
BENEFIT PLANS: shall have the meaning specified in Section 2.17.
BOARD: the Board of Directors of the Company.
BUDGET: shall have the meaning specified in Section 5.02.
CLOSINGS: shall have the meaning specified in Section 1.03.
CODE: shall have the meaning specified in Section 2.09.
COMMON STOCK: shall mean the Class A and Class B Common Stock, $.01 par
value per share, of the Company, or, after the Initial Closing, such other
generally held class of common stock of the Company as may be outstanding from
time to time.
COMPANY: shall have the meaning set forth at the beginning of this
Agreement.
DISCLOSURE DOCUMENTS: shall have the meaning specified in Section
2.06.
DISCLOSURE SCHEDULE: shall mean the separate Disclosure Schedule
delivered by the Company to the Investor on the date hereof, and certified by
the Company to be the Disclosure Schedule referred to herein.
ERISA: shall have the meaning specified in Section 2.17.
EXECUTIVE OFFICER: shall mean the five (5) most highly compensated
employees of the Company.
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FCC: shall have the meaning specified in Section 2.11.
FINAL ORDER: shall have the meaning specified in Section 2.11.
HSR ACT: shall have the meaning specified in Section 4.09.
INITIAL CLOSING: shall have the meaning specified in Section 1.03(a).
INVESTOR: shall mean Boston Ventures Limited Partnership V unless it
transfers 55% or more of the Stock in a single transaction approved by the
Company's Board of Directors, if transferred within five years of the date
hereof, which approval shall not be unreasonably withheld, to another Person or
entity in which case Investor thereafter shall mean such Person provided,
however, that Boston Ventures shall notify the Company at least 30 days prior to
any such transfer; and provided, further, that without the prior approval of the
Company's Board of Directors, no such transfer shall be to a Person that has a
material cellular telephone or similar service operating presence in or
contiguous to the areas served by the Company or its Subsidiaries, or to any
Affiliate of such a Person; and provided further that any Investor other than
Boston Ventures Limited Partnership V must beneficially own and hold at least
55% of the Stock to be entitled to the rights of the Investor herein. There
shall be only one Investor at any time for purposes of this Agreement and if
there is such transfer of the Stock, such transferee shall be deemed to be the
Investor without further action.
INVESTOR DIRECTOR: shall mean a member of the Board designated by the
Investor pursuant to the Stockholders Agreement.
KNOWLEDGE OF THE COMPANY: shall mean that any Executive Officer or
director of the Company has actual awareness or knowledge of such matters.
LICENSES: shall have the meaning specified in Section 2.11.
LOSSES: shall have the meaning specified in Section 8.02.
MATERIAL ADVERSE CHANGE: shall mean a material adverse change in any
of (a) the condition (financial or otherwise), business, ownership,
performance, operations, properties or prospects of the Company and its
Subsidiaries taken as a whole; (b) the ability of the Company or any Subsidiary
to perform any
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of their material obligations under the terms of the Agreements; or (c) the
rights and remedies of any Investor under the Agreements.
1933 ACT: shall mean the Securities Act of 1933, as amended.
1934 ACT: shall mean the Securities Exchange Act of 1934, as amended.
OFFERED SECURITIES: shall have the meaning specified in Section 6.01.
PERSON: shall mean an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity of any nature.
PLAN ASSET REGULATIONS: shall have the meaning specified in Section
5.05.
PREFERRED STOCK: shall mean the Company's redeemable Series A Senior
Cumulative Nonvoting Preferred Stock, $.01 par value per share.
REGISTRATION RIGHTS AGREEMENT: shall have the meaning specified in
Section 4.08.
SCI: shall have the meaning specified in the Introduction hereto.
SEC: shall have the meaning specified in Section 5.02(f).
SECURITIES EXCHANGE: shall mean any national or regional securities
exchange including without limitation the NASDAQ Stock Market.
SELLING STOCKHOLDER shall have the meaning specified in Section 1.05.
STOCK: shall mean the Common Stock issued to the Investor hereunder,
together with any stock or other securities issued as a dividend or distribution
thereon, any securities issued to the Investor in substitution therefor or in
connection with any merger, consolidation, reorganization, recapitalization or
other transaction affecting the Common Stock.
STOCKHOLDERS AGREEMENT: shall have the meaning specified in Section
4.07.
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SUBSEQUENT CLOSING: shall have the meaning specified in Section
1.03(b).
SUBSIDIARY: shall mean as to any Person, a corporation or other Person
of which more than fifty percent of the outstanding capital stock (or other
beneficial interest) is at the time directly or indirectly owned or controlled
by such Person.
SYSTEMS: shall have the meaning specified in Section 2.11.
TENDERED SHARES: shall have the meaning specified in Section 1.05.
ARTICLE VIII. MISCELLANEOUS
- ------------- -------------
SECTION 8.01. NOTICES. All notices to a party hereunder shall be in
writing and shall be deemed to have been adequately given if delivered in
person, by facsimile transmission with receipt acknowledged or by delivery by a
recognized courier for overnight delivery, or mailed, certified mail, return
receipt requested, to such party at its address set forth below (or such other
address as it may from time to time designate in writing to the other parties
hereto).
The Company: Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Attention: Craig T. Sheetz
Fax: (330) 565-9557
With a copy to: William Bavinger, Esquire
Byran Cave LLP
700 13th Street, N.W.
Washington, D.C. 20005
Fax: (202) 508-6200
The Investor: Boston Ventures Limited Partnership V
21 Custom House Street
Boston, Massachusetts 02110
Attention: John Hunt
Fax: (617) 737-3709
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<PAGE> 33
With a copy to: Stephen M. L. Cohen, Esquire
Choate, Hall & Stewart
Exchange Place
Boston, Massachusetts 02109
Fax: (617) 248-4000
SECTION 8.02. INDEMNIFICATION. (a) The Company shall indemnify the
Investor and each of its partners, Affiliates, successors and assigns from and
against all losses, claims, damages, expenses (including reasonable attorneys
fees) and liabilities, and actions in respect thereof (collectively "LOSSES"),
resulting from or arising out of or relating to any misrepresentation or breach
of any warranty or representation made by the Company herein, or the failure to
comply with or nonfulfillment of any covenant or agreement by the Company or any
Subsidiary under the Agreements, except such as may have been disclosed by the
Company to, and specifically waived by, the Investor in writing.
(b) To the extent permitted by that certain Trust Indenture
dated as of September 26, 1996, the Company shall indemnify the Investor and
each of its partners, Affiliates, successors and assigns from and against all
Losses resulting from or arising out of or relating to the purchase of Common
Stock from the Selling Stockholders, except to the extent such Losses result
from, arise out of, or relate to, the gross negligence or willful misconduct of
the Investor or a general decline in value of the Company or the Common Stock
purchased by the Investor at the Subsequent Closing.
(c) The Investor shall indemnify the Company and each of its
partners, Affiliates, successors and assigns from and against all Losses
resulting from or arising out of or relating to any misrepresentation or breach
of any warranty or representation made by the Investor herein, or the failure
to comply with or nonfulfillment of any covenant or agreement by the Investor
under the Agreements, except such as may have been disclosed by the Investor
to, and specifically waived by, the Company in writing.
SECTION 8.03. NO WAIVER. No failure to exercise and no delay in
exercising, on the part of the Investor, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
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SECTION 8.04. AMENDMENTS AND WAIVERS, ETC. Except as hereinafter
provided, this Agreement may be modified or amended by a writing signed by the
Company and the Investor. No waiver of any term or provision hereof shall be
effective unless made in the same manner as an amendment of such term or
provision.
SECTION 8.05. SURVIVAL OF AGREEMENTS, ETC. Except as otherwise provided
herein or therein, all agreements, representations and warranties contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement, the Closings and any investigation at any time made by or on
behalf of the Investor. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties by the Company.
SECTION 8.06. CONSTRUCTION. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Ohio (without
regard for its conflicts of laws principles). The descriptive headings of the
several Sections hereof are for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
SECTION 8.07. BINDING EFFECT AND BENEFITS. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs and successors.
SECTION 8.08. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and with counterpart signature pages (including
signature pages signed and delivered by facsimile transmission), and all such
counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
SYGNET WIRELESS, INC.
By____________________________________
(Title)
BOSTON VENTURES LIMITED PARTNERSHIP V
By Boston Ventures Company V, L.L.C.,
its general partner
By____________________________________
(Title)
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<PAGE> 1
Exhibit 10.24
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of June 20, 1997 by and among Sygnet Wireless,
Inc., an Ohio corporation (the "COMPANY"), Boston Ventures Limited Partnership
V, a Delaware limited partnership (the "INVESTOR"), and J.D. Williamson, II and
Warren P. Williamson, III, each an individual resident of Ohio (the
"WILLIAMSONS").
Introduction
------------
The Investor has agreed to purchase up to 4,000,000 shares of the
Company's Class A Common Stock pursuant to an Investment Agreement dated as of
June 20, 1997 (the "INVESTMENT AGREEMENT"). The execution of this Agreement is
a condition precedent to the obligation of the Investor to purchase such
shares. Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Investment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
SECTION 1. DEMAND REGISTRATION RIGHTS.
(a) At any time after the earlier of January 1, 2000 or the
closing of the Company's first underwritten public offering of shares of its
Common Stock, if holders of Registrable Securities (as defined in Section 4)
request the Company to file a registration statement under the Securities Act
of 1933, as amended (the "ACT"), for a firm commitment underwritten public
offering of Registrable Securities with an anticipated aggregate offering
price, net of underwriting discounts and commissions, of at least $25,000,000
(or less, if the requesting holder is the Investor, J.D. Williamson, II or
Warren P. Williamson, III, and such holder does not hold a sufficient number of
Registrable Securities to equal such minimum aggregate offering price), the
Company shall (i) within 10 days notify all holders of Registrable Securities
of such request and (ii) use its best efforts to so register under the Act the
Registrable Securities initially requested to be registered and the Registrable
Securities of all holders who request within 30 days after receiving the
Company's notice that their Registrable Securities be included therein. The
Company is obligated to effect a
<PAGE> 2
maximum of three such demand registrations, which shall not be within the same
six-month period. At least one of such demand registrations shall be initiated
solely by holders of Investor Registrable Securities, and at least one such
registration shall be initiated solely by holders of Williamson Registrable
Securities.
(b) If the underwriter managing the offering determines that,
because of marketing considerations, all of the Registrable Shares requested to
be registered may not be included in the offering, the underwriter may reduce
the number of Registrable Securities included therein. After such reduction has
been applied first to holders of shares other than Registrable Securities, 70%
of any remaining reduction shall be applied pro rata among the holders of
Williamson Registrable Securities based upon the number of shares requested by
each such holder to be included in the registration and 30% of any remaining
reduction shall be applied pro rata among the holders of Investor Registrable
Securities based upon the number of shares requested by each such holder to be
included in the registration. If any such reduction results in the inclusion of
less than 50% of the Investor Registrable Securities requested to be included
therein, the holders of Investor Registrable Securities shall have the right to
one additional registration under this Section 1. If any such reduction results
in the inclusion of less than 50% of the Williamson Registrable Securities
requested to be included therein, the holders of Williamson Registrable
Securities shall have the right to one additional registration under this
Section 1.
(c) If the Company includes in any registration required under
this Section 1 a number of shares other than Registrable Securities that
exceeds the number of Registrable Securities to be included, then such
registration shall be deemed to be a registration under Section 2 instead of
this Section 1. In all other cases where the Company includes in such
registration any shares other than Registrable Securities, such registration
shall remain subject to this Section 1, PROVIDED that in no event shall other
shares be included if such inclusion would (i) prevent holders of Registrable
Securities from registering all Registrable Securities requested by them or
(ii) adversely affect the offering price of the Registrable Securities in such
registration.
SECTION 2. PIGGYBACK REGISTRATION RIGHTS.
(a) Whenever the Company proposes to register any Common Stock
for its own or others' account under the Act, other than a registration
relating to employee benefit plans or a registration solely relating to shares
to be sold under Rule 145 under the Act, the Company shall give each holder of
Registrable Securities prompt written notice of its intent to do so. Upon
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<PAGE> 3
the written request of any such holder given within 15 days after receipt of
such notice, the Company will use its best efforts to cause to be included in
such registration all of the Registrable Securities which such holder requests.
(b) If the Company is advised in writing in good faith by any
managing underwriter of the securities being offered pursuant to any
registration statement under this Section 2 that, because of marketing
considerations, the number of shares to be sold by persons other than the
Company is greater than the number of such shares which can be offered without
adversely affecting the offering, the Company may reduce pro rata the number of
shares offered for the accounts of such persons (based upon the number of
shares requested by each such person to be included in the registration) to a
number deemed satisfactory by such managing underwriter. After such reduction
has been applied first to holders of shares other than Registrable Securities,
70% of any remaining reduction shall be applied pro rata among the holders of
Williamson Registrable Securities based upon the number of shares requested by
each such holder to be included in the registration and 30% of any remaining
reduction pro rata among the holders of Investor Registrable Securities based
upon the number of shares requested by each such holder to be included in the
registration.
SECTION 3. FORM S-3 REGISTRATION RIGHTS. If, at a time when Form S-3
is available for such registration, the Company shall receive from any holder
of Registrable Securities a written request or requests that the Company effect
a registration on Form S-3 of any of such holder's Registrable Securities, the
Company will promptly give written notice of the proposed registration to all
other holders of Registrable Securities and, as soon as practicable, effect
such registration and all related qualifications and compliances as may be
requested and as would permit or facilitate the sale and distribution of all
Registrable Securities as are specified in such request and any written
requests of other holders given within 15 days after receipt of such notice.
The Company shall have no obligation to effect a registration under this
Section 3 (a) unless the aggregate offering price of the Registrable Securities
requested to be sold pursuant to such registration is expected to be equal to
or greater than $6,000,000, (b) more often than once in any six-month period
for holders of Investor Registrable Securities and (c) more often than once in
any six-month period for holders of Williamson Registrable Securities. Any
registration under this Section 3 will not be counted as a registration under
Section 1 above.
SECTION 4. INVESTOR REGISTRABLE SECURITIES; WILLIAMSON REGISTRABLE
SECURITIES; REGISTRABLE SECURITIES; STOCK EQUIVALENTS.
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<PAGE> 4
(a) As used herein, "INVESTOR REGISTRABLE SECURITIES" means (i)
the Stock, as defined in the Investment Agreement; (ii) any other shares of
Common Stock of the Company acquired (or which may be acquired upon the
exercise or conversion of securities for or into shares of Common Stock) by the
Investor pursuant to any preemptive right, rights of first refusal or
otherwise; and (iii) any other shares of Common Stock of the Company issued in
respect of any such securities (as a result of stock splits, stock dividends,
reclassifications, recapitalizations or other events; PROVIDED, however, that
such securities shall cease to be Investor Registrable Securities upon (i) any
sale pursuant to a registration statement under the Act or (ii) any sale
pursuant to Rule 144 under the Act.
(b) As used herein, "WILLIAMSON REGISTRABLE SECURITIES" means (i)
all shares of Common Stock of the Company held on the date hereof by the
Williamsons, or those persons and entities listed on SCHEDULE 1 attached hereto
who agree in writing to be parties to, and be bound by, this Agreement (the
"WILLIAMSON TRANSFEREES"); (ii) any other shares of Common Stock of the Company
acquired (or which may be acquired upon the exercise or conversion of
securities for or into shares of Common Stock) by the Williamsons or the
Williamson Transferees, pursuant to any preemptive right, rights of first
refusal or otherwise; and (iii) any other shares of Common Stock of the Company
issued in respect of any such securities (as a result of stock splits, stock
dividends, reclassifications, recapitalizations or other events; PROVIDED,
however, that such securities shall cease to be Williamson Registrable
Securities upon (i) any sale pursuant to a registration statement under the Act
or (ii) any sale pursuant to Rule 144 under the Act.
(c) As used herein, "REGISTRABLE SECURITIES" means (i) the
Investor Registrable Securities and (ii) the Williamson Registrable Securities.
(d) As used herein, "COMMON STOCK" means the Company's Common
Stock and any replacement class of common stock of the Company into which the
Common Stock is exchanged or converted.
(e) Whenever reference is made in this Agreement to a request or
consent of holders of a certain percentage of Investor Registrable Securities,
Williamson Registrable Securities or Registrable Securities, the determination
of such percentage shall include shares of Common Stock issuable upon
conversion of any convertible securities or exercise of any options, warrants
or other rights that are held by persons or entities who are holders of
Investor Registrable Securities, Williamson Registrable Securities or
Registrable Securities or who would hold Investor Registrable Securities,
Williamson Registrable Securities or Registrable Securities upon the conversion
or exercise of such convertible securities, options, warrants or
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<PAGE> 5
other rights, and for purposes of this Agreement, the parties may rely on the
statements of the largest single holder of the Investor Registrable Securities
and the largest single holder of the Williamson Registrable Securities as to
whether any such consent has been obtained.
SECTION 5. SELECTION OF UNDERWRITER. The underwriter of any offering
registered under Section 1 shall be selected (a) by holders of a majority of
the Investor Registrable Securities included therein if initiated by holders of
Investor Registrable Securities, or (b) by holders of a majority of the
Williamson Registrable Securities if initiated by holders of Williamson
Registrable Securities, PROVIDED that in each case such underwriter shall be
reasonably acceptable to the Company and PROVIDED FURTHER that the Company may
select a co-managing underwriter for each such offering. The underwriter of any
offering registered under Section 2 shall be selected by the Company.
SECTION 6. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Securities under the Act, the
Company shall:
(a) expeditiously (and, in the case of a registration under
Section 1, within 60 days of any request thereunder) file with the Securities
and Exchange Commission (the "COMMISSION") a registration statement, in form
and substance required by the Act, with respect to such Registrable Securities
and use its best efforts to cause that registration statement to become
effective;
(b) expeditiously prepare and file with the Commission any
amendments and supplements to the registration statement and the prospectus
included in the registration statement as may be necessary to keep the
registration statement effective, in the case of a firm commitment underwritten
public offering, until completion of the distribution of all securities
described therein and, in the case of any other offering, until the earlier of
the sale of all Registrable Securities covered thereby or 120 days after the
effective date thereof;
(c) expeditiously furnish to each holder that requested that
Registrable Securities be included in such registration, such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as such
holder may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such holder;
(d) expeditiously use its best efforts to register or qualify
the Registrable Securities covered by the registration
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<PAGE> 6
statement under the securities or Blue Sky laws of such states as the holders
thereof shall reasonably request, and do any and all other acts and things that
may be necessary or desirable to enable the holders thereof to consummate the
public sale or other disposition in such states of the Registrable Securities
owned by the holders; PROVIDED, HOWEVER, that the Company shall not be required
in connection with this paragraph (d) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction;
(e) in connection with each registration pursuant to Sections
1, 2 and 3 above covering an underwritten public offering, the Company and each
participating holder agrees to enter into a written agreement with the managing
underwriter in such form and containing such provisions (including, if the
underwriter so requests, customary contribution provisions on the part of the
Company) as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature, PROVIDED that the holders shall not be obligated to enter into any
such underwriting agreement if the indemnification provisions thereof are more
burdensome on such holder than those contained herein or if any standback
requirement therein is for a period that exceeds the period required by this
Agreement;
(f) at the request of any participating holder, the Company
will furnish to each underwriter, if any, and the participating holders, in
connection with a registration pursuant to Section 1, a legal opinion of its
counsel and a letter from its independent certified public accountants, each in
customary form and substance, at such time or times as such documents are
customarily provided in the type of offering involved;
(g) whenever the Company is registering any Common Stock
under the Act and a holder of Registrable Securities is selling securities
under such registration or determines that it may be a controlling person under
the Act, the Company will keep such holder advised in writing of the
initiation, progress and completion of such registration, will allow such
holder and such holders's counsel to participate in the preparation of the
registration statement and to have access to all relevant corporate records,
documents and information, will include in the registration statement such
information as such holder may reasonably request and will take all such other
action as such holder may reasonably request, provided that such holder has
executed an agreement containing customary provisions with respect to the use
and confidentiality of such information;
(h) each holder of Registrable Securities included in a
registration shall furnish to the Company such information regarding such
holder and the distribution proposed by such holder as the Company may
reasonably request in writing and as
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<PAGE> 7
shall be required in connection with the registration, qualification or
compliance referred to in this Agreement;
(i) as of the effective date of any registration statement
relating thereto, use its best efforts to cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
the Company are then listed and the Company meets the published criteria for
such listing, and, if not so listed, to be listed on the New York Stock
Exchange or the NASDAQ Stock Market National Market System; and
(j) as of the effective date of any registration statement
relating thereto, provide a transfer agent and registrar for all such
Registrable Securities.
SECTION 7. EXPENSES. The Company will pay all expenses incurred by the
Company in complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses,
transfer taxes, fees and expenses of counsel for the Company and the reasonable
fees and expenses of one counsel selected by the holders of Registrable
Securities to be included in such registration to represent them (not to exceed
$30,000 with respect to a registration pursuant to Section 1 or $20,000 with
respect to any other registration), state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts and selling commissions relating to the
sale of the Registrable Securities.
SECTION 8. NOTIFICATION. The Company shall promptly notify each holder
of Registrable Securities covered by any registration statement of any event
which results in the prospectus included in such registration statement, as
then in effect, containing an untrue statement of a material fact or omitting
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
SECTION 9. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify and hold harmless each holder of Registrable Securities included in
any registration, its officers, directors and partners, each underwriter of the
Registrable Securities being sold by such holder, and each controlling person
of any of the foregoing, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering, circular, or other document relating to such Registrable Securities
(or in any related registration statement, notification or the like) or any
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<PAGE> 8
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Act, or the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or any applicable state securities laws,
or any rule or regulation promulgated thereunder, applicable to the Company and
relating to action or inaction required of the Company in connection with any
registration, qualification or compliance contemplated by this Agreement, and
will reimburse each such holder, each of its officers, directors and partners,
and each such underwriter and controlling person for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, whether or not resulting in
liability; PROVIDED, HOWEVER, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage or liability (i) arises
out of or is based on any untrue statement or omission based upon and in
conformity with written information furnished to the Company by such holder or
underwriter and stated to be specifically for use therein, or (ii) results
solely from the failure of such holder to deliver a copy of the registration
statement, prospectus, offering circular or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient number of
copies thereof.
(b) INDEMNIFICATION BY THE HOLDERS OF REGISTRABLE SECURITIES.
Each participating holder of Registrable Securities shall indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each underwriter, each other participating
holder of Registrable Securities, its officers, directors and partners, and
each controlling person of any of the foregoing, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document relating to
the Registrable Securities (or in any related registration statement,
notification or the like) or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or by the failure of such holder to deliver
a copy of the registration statement, prospectus, offering circular, or any
amendments or supplements thereto after the Company has furnished the holder
with a sufficient number of copies thereof, and will reimburse the Company and
each such director, officer or controlling person for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, PROVIDED, HOWEVER, that no
holder of Registrable Securities will be liable in any such case except to the
extent that any such claim, loss, damage or liability arises out of any untrue
statement or omission based upon and in conformity with written information
furnished to the Company by
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<PAGE> 9
such holder and stated to be specifically for use therein, and PROVIDED,
FURTHER, that no holder of Registrable Securities will be liable under this
Section for losses, costs, damages or expenses exceeding in the aggregate the
net proceeds to such holder in such offering.
(c) PROCEDURES FOR INDEMNIFICATION. Each party entitled to
indemnification under Subsection (a) or (b) (the "INDEMNIFIED PARTY") shall
give notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
PROVIDED, that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or any litigation resulting therefrom, shall be approved
by the Indemnified Party (whose approval shall not be unreasonably withheld);
and, PROVIDED, FURTHER, that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent the indemnifying party is
prejudiced thereby. The Indemnified Party may participate in such defense at
such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party shall pay
the reasonable fees and expenses of not more than one counsel selected by the
Indemnified Parties and reasonably acceptable to the Indemnifying Party, if the
Indemnified Party shall believe in good faith that representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
(d) CONTRIBUTION. If the indemnification provided for in
Subsections (a) or (b) is unavailable to any indemnified party thereunder in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to in such Sections, then each person or entity that would
have been an indemnifying party thereunder shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and such indemnified party on the other. The relative fault shall be
determined by
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<PAGE> 10
reference to, among other things, whether any untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or such
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
or whether such losses, claims, damages or liabilities (or actions in respect
thereof) arose out of the action or failure to act of one or more of such
parties. Notwithstanding the foregoing, (i) no holder of Registrable Securities
will be required to contribute any amount in excess of the net proceeds to such
holder of all Registrable Securities sold by such holder pursuant to such
registration statement, and (ii) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Act, shall be
entitled to contribution from any person or entity who is not guilty of such
fraudulent misrepresentation.
SECTION 10. REPORTS UNDER EXCHANGE ACT. With a view to making
available to the holders of Registrable Securities the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the Commission
that may at any time permit a holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to use its best efforts to satisfy the requirements of all such
rules and regulations (including the requirements for public information,
registration under the Exchange Act and timely reporting to the Commission) at
the earliest possible date (but in any event not later than 90 days) after the
effective date of the registration statement for its first registered public
offering. The Company will furnish to each holder of Registrable Securities,
whenever requested, a written statement as to its compliance with the reporting
requirements of Rule 144, the Act and the Exchange Act, a copy of its most
recent annual or quarterly report, and such other reports and information filed
by the Company as the Investor may reasonably request in connection with the
sale of Registrable Securities without registration.
SECTION 11. REGISTRATION RIGHTS OF OTHERS. Other than as stated in
this Agreement, the Company will not, without the prior written consent of the
Investor, grant to any other person or entity the right to (a) require the
Company to initiate the registration of any securities or (b) require the
Company to include in any registration, securities owned by such holder, unless
under the terms of such arrangement such holder may include securities in such
registration only to the extent that the inclusion thereof does not limit the
number of Registrable Securities included therein or adversely affect the
offering price thereof. The Company represents and warrants that it has not
granted any person or entity the right to require the Company to initiate the
registration of any securities or include in any
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<PAGE> 11
registration any securities owned by such holder, other than as stated in this
Agreement.
SECTION 12. LOCK-UP AGREEMENT. Each holder of Registrable Securities
agrees that in connection with any public offering of the Company's Common
Stock, and upon the request of the managing underwriter in such offering, such
holder will not sell, grant any option for the purchase of, or otherwise
dispose of any of the Company's securities held by such holder (other than
those included in such registration) without the prior written consent of such
underwriter, for such period of time as may be requested by such underwriter
(not to exceed (a) 180 days after the effective date of such registration, in
the case of the initial public offering of the Company's Common Stock or (b) 30
days after the effective date of such registration, in the case of any other
registration). The obligation of the holders of Registrable Securities under
this Section 12 is conditional upon the agreement of all of the Company's
officers and directors and of all persons holding 5% or greater of the
Company's capital stock to be bound by the terms of this Section 12.
SECTION 13. RESTRICTIONS ON REGISTRATION. The Company shall not be
obligated to effect any registration within six months after the effective date
of registration in which the holders of Registrable Securities were given the
opportunity to participate pursuant to Section 2 provided that all of the
Registrable Securities requested by such holders were registered in such
registration. The Company may postpone each registration requested by the
holders of the Registrable Securities once for up to three months if the
Company's Board of Directors determines in good faith that such registration
can be reasonably expected to have a material adverse effect on any material
transaction or series of transactions in which the Company is engaging or
intends to engage.
SECTION 14. NOTICES. All notices, demands, requests or other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered in person, or by United States mail, certified or
registered with return receipt requested, or by nationally recognized overnight
courier service, to the addresses of the respective parties for notices in
accordance with the Investment Agreement (or, if the address of a holder of
Registrable Securities is not included therein, at the address of such holder
on the Company's stock records).
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, including any subsequent holders of Registrable
Securities, provided that such successors and assigns agree in writing to be
bound by this Agreement.
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<PAGE> 12
SECTION 16. SURVIVAL. This Agreement, including without limitation the
obligation of the parties under Section 9 hereof, shall survive indefinitely.
SECTION 17. SEVERABILITY AND GOVERNING LAW. If any provision of this
Agreement is rendered void, invalid or unenforceable by any court of law for
any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other provision of this Agreement. This Agreement
is governed by and construed in accordance with the internal laws of the State
of Ohio.
SECTION 18. AMENDMENTS, ETC. This Agreement may be changed, waived,
discharged or terminated only with the written consent of the Company, holders
of a majority of the Investor Registrable Securities and holders of a majority
of the Williamson Registrable Securities.
SECTION 19. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and with counterpart signature pages, each of which shall be
an original, but all of which together shall constitute one in the same
Agreement.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as a sealed instrument as of the date first above written.
SYGNET WIRELESS, INC.
By____________________________________
(Title)
BOSTON VENTURES LIMITED PARTNERSHIP V
By: Boston Ventures Company V, L.L.C.,
Its General Partner
By____________________________________
(Title)
______________________________________
J.D. Williamson, II
______________________________________
Warren P. Williamson, III
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<PAGE> 1
Exhibit 10.25
STOCKHOLDERS AGREEMENT
----------------------
AGREEMENT dated as of June 20, 1997 by and among Sygnet Wireless,
Inc., an Ohio corporation (the "COMPANY"), Boston Ventures Limited Partnership
V, a Delaware limited partnership ("BOSTON VENTURES"), and J.D. Williamson, II
and Warren P. Williamson, III, each an individual resident of Ohio (the
"WILLIAMSONS").
Introduction
------------
In order to induce Boston Ventures to make an investment in the
Company, and to provide for the ongoing ownership and governance of the
Company, the Company, Boston Ventures and the Williamsons, who are principal
stockholders of the Company, wish to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I. CERTAIN DEFINITIONS.
- ---------- --------------------
SECTION 1.01. CERTAIN DEFINITIONS. As used herein, "INVESTMENT
AGREEMENT" means the Investment Agreement dated June 20, 1997 among the Company
and Boston Ventures, as amended from time to time. As used herein, "ORIGINAL
STOCKHOLDERS" means the Williamsons and each other Stockholder that first
becomes a Stockholder as a result of acquiring Stock from one of the
Williamsons or from another Original Stockholder on or after the date hereof.
As used herein, "INVESTORS" means Boston Ventures, and each other Stockholder
that first becomes a Stockholder as a result of acquiring Stock from Boston
Ventures or from another Investor. As used herein, "STOCK" means all
outstanding capital stock of the Company. As used herein, "STOCKHOLDERS" means
the Investors and the Original Stockholders.
ARTICLE II. BOARD OF DIRECTORS; VOTING.
- ----------- ---------------------------
SECTION 2.01. BOARD SIZE. At all meetings (and written actions in lieu
of meetings) of stockholders of the Company at which the number of directors of
the Company is to be determined, each Stockholder shall vote all of such
Stockholder's Stock to
<PAGE> 2
fix the number of directors of the Company at not more than eleven.
SECTION 2.02. ELECTION OF DIRECTORS. Except as provided in Section
2.04 below, at all meetings (and written actions in lieu of meetings) of
stockholders of the Company at which directors are to be elected, each
Stockholder shall vote all of such Stockholder's Stock so that there will be
(in addition to any other directors of the Company) two directors designated by
Boston Ventures (the "INVESTOR DIRECTORS").
SECTION 2.03. REMOVAL. Each Stockholder agrees to vote such
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company to remove any director designated under Section
2.02, if so requested by Boston Ventures. Each Stockholder agrees not to vote
such Stockholder's Stock in favor of the removal of any such director other
than in accordance with the preceding sentence.
SECTION 2.04. VACANCIES. Each Stockholder agrees to vote such
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company to fill any vacancy on the Board of Directors
caused by the resignation or removal of any director to be designated under
2.02, with a nominee selected as provided therein.
SECTION 2.05. COVENANTS. Each Stockholder agrees to vote such
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company in a manner that is consistent with the
covenants of the Company contained in the Investment Agreement, including
without limitation Section 5.05 therein, and which will not result in a breach
thereof.
ARTICLE III. TRANSFER RESTRICTIONS; RIGHTS OF FIRST REFUSAL AND
- ------------ --------------------------------------------------
CO-SALE.
--------
SECTION 3.01. NO TRANSFER. No Stockholder may sell, pledge, give,
assign, distribute, hypothecate, mortgage or transfer (all hereinafter referred
to as "TRANSFER") any Stock owned by such Stockholder, directly or indirectly,
to any other person or entity, except (a) after January 1, 2000 and upon
compliance with the other provisions of this Article III or (b) as permitted by
Section 3.05.
SECTION 3.02. OFFER TO COMPANY AND STOCKHOLDERS; CO-SALE. If a
Stockholder (the "TRANSFERRING STOCKHOLDER") desires to transfer any of such
Stockholder's shares of Stock, such Stockholder shall first offer such shares
to the Company and the other Stockholders by written notice (the "INITIAL
NOTICE") stating the name of the proposed transferee, the number of shares such
Stockholder desires to transfer and the proposed price
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<PAGE> 3
(expressed in U.S. dollars) and terms of transfer (which shall be for cash
payable at the time of transfer). The Company and the other Stockholders shall
then have 30 days within which to give notice (the "RETURN NOTICE") of the
maximum number of such shares they wish to acquire at the specified price and
terms. Copies of each Return Notice shall be sent to the Company and to the
other Stockholders.
Subject to any applicable restrictions on the Company (including
without limitation under the Investment Agreement), the Company shall be
entitled to purchase any or all of the shares offered. If the Company elects to
purchase fewer than all of the shares offered, the other Stockholders (other
than the Transferring Stockholder) shall be entitled to acquire the balance of
the shares remaining on a pro rata basis, calculated as a fraction, the
numerator of which is the number of shares of Common Stock owned by such
Stockholder and the denominator of which is the number of shares of Common
Stock owned by all Stockholders (other than the Transferring Stockholder). If
any Stockholder elects to acquire less than such Stockholder's pro rata portion
of the available Stock, the other Stockholders (other than the Transferring
Stockholder) may acquire a pro rata portion of the balance of the Stock
remaining.
In addition to the foregoing, in the Return Notice, the other
Stockholders shall indicate whether, if the Company and the Stockholders do not
elect to acquire all Stock offered by the Transferring Stockholder, they desire
to have a proportionate number of their shares of Stock transferred in the same
transaction. In that event, the Transferring Stockholder may not transfer any
Stock unless the transferee also acquires a proportionate amount of the Stock
of each other Stockholder who requested that Stock be included in such
transfer, on the price and terms specified in the Initial Notice. For purposes
of this Section, all classes of Common Stock shall be treated as a single
class.
SECTION 3.03. PAYMENT. If the Company and the other Stockholders give
notice of their intention to acquire all of the shares of Stock pursuant to
Section 3.02, the Company shall, at the close of the 30-day period provided in
Section 3.02 for delivery of the Return Notice, confirm by notice to the
Transferring Stockholder and the other Stockholders the number of shares to be
acquired by the other Stockholders and by the Company. Payment for such shares
shall be delivered within 20 days thereafter at the price and on the terms
specified in the Initial Notice, against receipt from the Transferring
Stockholder of certificates for the shares purchased, duly endorsed for
transfer, free and clear of all liens, restrictions, claims and encumbrances,
except under applicable securities laws and this Agreement.
-3-
<PAGE> 4
SECTION 3.04. RIGHT TO SELL. If, at the close of the 30-day period
provided in Section 3.02 for delivery of the Return Notice, the Company and the
other Stockholders have not sent notice of their intention to acquire, in the
aggregate, all of the Stock offered, the Transferring Stockholder shall have 90
days to transfer the Stock which is not being purchased by the Company or a
Stockholder to the third party specified in the Initial Notice, together with
any additional Stock to be included in such transfer pursuant to the last
paragraph of Section 3.02, at the price and on the terms specified therein. The
Stockholders shall, in order to be entitled to have Stock transferred, deliver
on no less than 20 days' notice from the Transferring Stockholder certificates
representing the shares of Stock to be transferred, duly endorsed for transfer,
free and clear of all liens, restrictions, claims and encumbrances, except
under applicable securities laws and this Agreement.
SECTION 3.05. EXCEPTIONS TO RESTRICTIONS. Notwithstanding any other
provision of this Agreement (other than Section 4.05), the following transfers
of Stock may be consummated without restriction:
(a) Transfers of Stock of an Original Stockholder,
representing an aggregate of not more than 40% of the Stock held by such
Original Stockholder, to the trustees of a trust revocable by him alone, the
beneficiaries of which consist solely of the Original Stockholder and
transferees enumerated in Subsection (d) below;
(b) Transfers of Stock between an Original Stockholder and
his guardian or conservator;
(c) Transfers of Stock of a deceased Original Stockholder to
his executors or administrators or to trustees under his will and thereafter to
transferees enumerated in Subsection (d) below;
(d) Transfers of Stock of an Original Stockholder,
representing an aggregate of not more than 40% of the Stock held by such
Original Stockholder, to the Original Stockholder's spouse, to any of his
children or their issue (or to custodians for the benefit of minor children or
issue), or to the Original Stockholder's parents or siblings;
(e) Transfers of Stock by Boston Ventures to any of its
partners in accordance with the terms of its Agreement of Limited Partnership;
and
(f) Transfers of Stock by a Stockholder to Boston Ventures at
the Subsequent Closing pursuant to the Investment Agreement.
-4-
<PAGE> 5
All Stock transferred pursuant to this Section shall remain subject to
the restrictions contained herein applicable to the initial Stockholders in the
hands of the transferee, PROVIDED, HOWEVER, that such Stock may not be further
transferred, except to a person or entity to which the initial Stockholders
could have transferred such Stock pursuant to Subsections (a) through (e)
above, without first complying with the provisions of Sections 3.02.
SECTION 3.06. LEGENDS. All certificates representing shares of Stock
issued to a Stockholder shall bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER OBLIGATIONS CONTAINED IN A
STOCKHOLDERS AGREEMENT BETWEEN THE COMPANY AND CERTAIN OF ITS
STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL
BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE SECRETARY.
SECTION 3.07. FAILURE TO DELIVER SHARES. If any Stockholder fails to
deliver the shares of Stock to be acquired by the Company or any Stockholder
hereunder, the acquiror may elect to establish a segregated account in the
amount of the price to be paid therefor, such account to be turned over to the
Transferring Stockholder upon delivery of the certificates representing the
shares of Stock as required herein. If a segregated account is so established,
the Company shall take such action as is appropriate to transfer record title
of the shares of Stock from the Transferring Stockholder to the acquiror. Each
Stockholder hereby irrevocably grants the Company a power of attorney to
effectuate the purposes of this Section.
-5-
<PAGE> 6
ARTICLE IV. MISCELLANEOUS.
- ----------- --------------
SECTION 4.01. NOTICES. All notices to a party hereunder shall be in
writing and shall be deemed to have been adequately given if delivered in
person, by facsimile transmission with receipt acknowledged or by delivery by a
recognized courier for overnight delivery, or mailed, certified mail, return
receipt requested, to such party at its address set forth below (or such other
address as it may from time to time designate in writing to the other parties
hereto).
The Company: Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Attention: Craig T. Sheetz
Fax: (330) 565-9557
With a copy to:
William Bavinger, Esquire
Bryan Cave LLP
700 13th Street, N.W.
Washington, D.C. 20005
Fax: (202) 508-6200
J.D. Williamson, II: c/o Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Fax: (330) 565-9557
With a copy to:
Ralph A. Beard, Esquire
Harrington & Mitchell, Ltd.
1200 Mahoning Bank Building
Youngstown, Ohio 44503
Fax: (330) 744-2029
Warren P. Williamson, III: c/o Sygnet Wireless, Inc.
6550-B Seville Drive
Canfield, Ohio 44406
Fax: (330) 565-9557
With a copy to:
Ralph A. Beard, Esquire
Harrington & Mitchell, Ltd.
1200 Mahoning Bank Building
Youngstown, Ohio 44503
Fax: (330) 744-2029
-6-
<PAGE> 7
Boston Ventures: Boston Ventures Limited
Partnership V
21 Custom House Street
Boston, Massachusetts 02110
Attention: John Hunt
Fax: (617) 737-3709
With a copy to: Stephen M. L. Cohen, Esquire
Choate, Hall & Stewart
Exchange Place
Boston, Massachusetts 02109
Fax: (617) 248-4000
or, if the address of a Stockholder is not included herein, at the address of
such Stockholder on the Company's stock records.
SECTION 4.02. BINDING EFFECT AND BENEFIT. This Agreement shall be
binding upon, and inure to the benefit of, the Company and the Stockholders and
their respective heirs, legal representatives, successors and assigns, subject
to the restrictions on transfer contained herein.
SECTION 4.03. WAIVERS, ENTIRE AGREEMENT, MODIFICATIONS. No party shall
be deemed to waive any rights hereunder unless such waiver is in writing and
signed by the Company, Stockholders owning a majority of the shares of Common
Stock held by the Stockholders, and Investors holding a majority of the shares
of Common Stock held by the Investors. A waiver in writing on one occasion
shall not be construed as a consent to or a waiver of any right or remedy on
any future occasion.
SECTION 4.04. GOVERNING LAW, CONSTRUCTION. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Ohio. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision hereof shall be prohibited by or invalid under any such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating or nullifying the remainder of such provision
or any other provisions of this Agreement.
SECTION 4.05. TRANSFEREES OF STOCKHOLDERS. No Stockholder shall
transfer any Stock (except to the Company) unless the person, firm, corporation
or other entity so acquiring such Stock shall first become a signatory to this
Agreement, agreeing to be bound by all the terms of this Agreement as a
Stockholder. The Company shall not transfer any shares of Stock on its books
which have been transferred in violation of this Agreement, or to treat as the
owner of such shares of Stock, or to accord the right to vote as such owner or
to pay dividends to, any person or entity to which any such shares of Stock
shall have been transferred,
-7-
<PAGE> 8
from and after any transfer of any share of Stock made in violation of this
Agreement.
SECTION 4.06. SPECIFIC PERFORMANCE. The parties hereto agree that the
other parties and the Company shall be irreparably harmed if the provisions of
this Agreement are not performed. Accordingly, in the event of any violation or
threatened violation of any provision hereof by any party hereto, each other
party shall, in addition to all other rights and remedies of such parties, be
entitled to injunctive relief and specific performance of the provisions of
this Agreement.
SECTION 4.07. REPRESENTATIONS OF STOCKHOLDERS. Each Stockholder
represents and warrants to each other party that such Stockholder is not bound
by any agreement or commitment that conflicts with or would interfere with the
performance of such Stockholder's obligations under this Agreement.
SECTION 4.07. STOCKHOLDERS' LOCK-UP AGREEMENT. Each Original
Stockholder agrees that such Stockholder will adhere to the restrictions
contained in Section 12 of the Registration Rights Agreement dated June 20,
1997 between the Company and Boston Ventures, as amended or replaced from time
to time, in the circumstances described therein, as if such Original
Stockholder was a party thereto.
SECTION 4.08. TERMINATION. Except for Article II and Section 4.07,
this Agreement shall terminate upon the initial registered underwritten public
offering of the Company's Common Stock, in which the aggregate proceeds to the
Company of the offering are not less than $25,000,000.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date and year first above written.
SYGNET WIRELESS, INC.
By_________________________________
(Title)
___________________________________
J.D. Williamson, II
___________________________________
Warren P. Williamson, III
BOSTON VENTURES LIMITED PARTNERSHIP V
By: Boston Ventures Company V, L.L.C.,
Its General Partner
By_________________________________
(Title)
-9-
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<NAME> SYGNET WIRELESS, INC.
<S> <C>
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<PERIOD-START> JAN-01-1997
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