<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, 1998
-------------
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
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(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
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INDEX
SYGNET WIRELESS, INC.
FORM 10-Q
PERIOD ENDED JUNE 30, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1998 and December
31, 1997
Consolidated Statements of Operations for the Three Months
Ended June 30, 1998 and June 30, 1997 and the Six Months Ended
June 30, 1998 and June 30, 1997
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and June 30, 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
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SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31
<TABLE>
<CAPTION>
1998 1997
---------------------------------
<S> <C> <C>
ASSETS (UNAUDITED) (NOTE)
Current assets:
Cash and cash equivalents $ 635,537 $ 860,086
Accounts receivable, less allowance for doubtful accounts of $590,198 at
June 30, 1998 and $809,800 at December 31, 1997 12,865,639 10,711,627
Inventory 1,636,643 1,867,445
Prepaid expenses 725,557 309,460
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Total current assets 15,863,376 13,748,618
Other assets:
Cellular licenses - net 242,663,619 245,866,235
Customer lists - net 16,812,087 19,382,087
Deferred financing costs - net 8,411,581 8,982,430
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Total other assets 267,887,287 274,230,752
Property, plant and equipment--net 54,264,525 53,007,015
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Total assets $ 338,015,188 $ 340,986,385
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 2,512,404 $ 3,264,206
Deferred revenue 2,291,827 2,058,066
Accrued expenses and other liabilities 4,360,807 4,196,230
Interest payable 6,416,455 6,749,755
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Total current liabilities 15,581,493 16,268,257
Long-term debt 310,099,000 305,500,000
Shareholders' equity:
Common shares, $.01 par, Class A, 1 vote per share, 60,000,000 shares
authorized, 4,022,091 shares issued and outstanding as of June 30, 1998;
4,010,653 shares issued and outstanding as of December 31, 1997 40,221 40,107
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized, 5,148,539 shares issued and outstanding as of June 30, 1998;
5,159,977 shares issued and outstanding as of December 31,1997 51,485 51,599
Additional paid-in capital 47,598,498 47,598,498
Retained deficit (35,105,557) (28,222,124)
Note receivable from officer/shareholder (249,952) (249,952)
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Total shareholders' equity 12,334,695 19,218,128
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Total liabilities and shareholders' equity $ 338,015,188 $ 340,986,385
============= =============
<FN>
Note: The balance sheet at December 31, 1997 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.
</TABLE>
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SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenue:
Subscriber revenue $ 15,865,654 $ 12,830,909 $ 30,228,194 $ 24,556,009
Roamer revenue 8,354,745 6,610,335 14,585,146 11,755,838
Equipment sales 1,460,697 976,125 2,650,504 1,920,802
Other revenue 401,160 429,341 787,108 867,803
-------------------------------------- -------------------------------------
Total revenue 26,082,256 20,846,710 48,250,952 39,100,452
Costs and expenses:
Cost of services 2,967,773 2,175,475 5,750,332 4,364,947
Cost of equipment sales 2,720,656 2,253,562 4,961,044 4,409,269
General and administrative 4,828,235 3,705,491 9,458,926 7,379,571
Selling and marketing 3,023,564 2,446,384 5,799,814 4,789,063
Depreciation and amortization 6,715,221 7,020,793 14,519,847 13,757,443
-------------------------------------- -------------------------------------
Total costs and expenses 20,255,449 17,601,705 40,489,963 34,700,293
-------------------------------------- -------------------------------------
Income from operations 5,826,807 3,245,005 7,760,989 4,400,159
Other:
Interest expense, net 7,297,760 7,839,711 14,367,681 15,242,123
Other 214,443 11,035 276,743 11,035
====================================== =====================================
Net loss $ (1,685,396) $ (4,605,741) $ (6,883,435) $ (10,852,999)
====================================== =====================================
Earnings per share information:
Net loss $ (1,685,396) $ (4,605,741) $ (6,883,435) $ (10,852,999)
Preferred stock dividend and accretion - (1,322,683) - (2,121,472)
-------------------------------------- -------------------------------------
Net loss applicable to common shareholders $ (1,685,396) $ (5,928,424) $ (6,883,435) $ (12,974,471)
====================================== =====================================
Net loss per share applicable to common
shareholders $ (0.18) $ (0.91) $ (0.75) $ (2.04)
====================================== =====================================
Common shares outstanding 9,170,630 6,533,267 9,170,630 6,352,950
====================================== =====================================
</TABLE>
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SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
--------------------------------------------
1998 1997
--------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (6,883,434) $ (10,852,999)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 8,176,381 7,400,810
Amortization 6,343,466 6,356,633
Loss on disposal of assets 83,378 -
Changes in operating assets and liabilities:
Accounts receivable (2,154,012) (2,049,946)
Inventory 230,802 193,021
Prepaid and deferred (416,097) 250,555
expenses
Accounts payable and accrued expenses (353,464) 588,078
Accrued interest payable (333,300) (264,645)
--------------------------------------------
Net cash provided by operating activities 4,693,720 1,621,507
INVESTING ACTIVITIES
Acquisition of Horizon - (599,442)
Purchases of property and equipment (9,917,769) (10,941,918)
Proceeds from sale of assets 400,500 -
--------------------------------------------
Net cash used in investing activities (9,517,269) (11,541,360)
FINANCING ACTIVITIES
Proceeds from long-term debt 14,000,000 22,000,000
Principal payments on long-term debt (9,401,000) (34,250,000)
Increase in financing costs - (72,394)
Redemption of preferred stock - (21,839,451)
Net proceeds from sale of common stock - 43,875,000
--------------------------------------------
Net cash provided by financing activities 4,599,000 9,713,155
Decrease in cash and cash equivalents (224,549) (206,698)
Cash and cash equivalents at beginning of period 860,086 2,257,748
--------------------------------------------
Cash and cash equivalents at end of period $ 635,537 $ 2,051,050
============================================
</TABLE>
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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. 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, 1998 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. 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, 1997 (File No. 333-10161) filed with the Securities
and Exchange Commission.
2. LONG-TERM DEBT
The Company has $110 million 11 1/2% 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.
Sygnet Communications, Inc.(Sygnet), a wholly-owned subsidiary of the
Company, has a 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 (LIBOR)
or the prime rate.
On April 8, 1998 Sygnet entered into an amendment to the Bank Credit Facility
which provides for a Swing Loan with one of the members of the commercial
bank group. The Swing Loan terms are mainly the same as the Bank Credit
Facility except for interest which is calculated at a fixed spread over the
Federal Funds Rate. The combined amounts outstanding under the Bank Credit
Facility and the Swing Loan cannot exceed $300 million. As of June 30, 1998
the amounts outstanding under the Bank Credit Facility and the Swing Loan are
$197.5 million and $2.6 million respectively.
3. REDEEMABLE PREFERRED STOCK AND WARRANTS
On April 3, 1997, 100,000 shares of Series A Senior Cumulative Nonvoting
Preferred Stock (Preferred Stock), were redeemed by the Company at a cost of
$10 million 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 4.
The Preferred Stock had a redemption value of $100 per share and was recorded
at fair value on the date of issuance less issuance costs. Dividends were
cumulative from the date of issuance, accrued quarterly in arrears and were
payable in shares of Preferred Stock. The dividend rates increased annually
from 15% in 1997 to 21% in 2000 and thereafter. The Preferred Stock included
the potential issuance of warrants to purchase shares of the Company's Class
A Common Stock. For financial reporting purposes, the estimated fair value of
the warrants was included with the Preferred Stock in the accompanying
balance sheet and the excess of the redemption value of the Preferred Stock
over the carrying value was accreted by periodic charges to additional
paid-in capital over the life of the issue. No warrants were issued.
The Company has authorized 5 million shares of Nonvoting Preferred Stock, par
value $.01 per share, of which 500,000 are designated as Series A Senior
Cumulative Nonvoting Preferred Stock.
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4. 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 3, and to reduce
amounts outstanding under the Bank Credit Facility. As a condition of the
Common Stock Sale, Boston Ventures has two representatives on the Company's
eleven member board of directors.
In August 1997, Boston Ventures purchased 1,000,000 shares of Class B Common
Stock from shareholders pursuant to a tender offer which, upon purchase,
became Class A Common Stock.
5. COMMITMENTS AND CONTINGENCIES
On April 30, 1998, the Company announced that it has decided to explore
strategic alternatives, including the possible sale of the Company. In
accordance with this announcement the Company may be liable to pay severance
and incentive compensation to employees if a sale were to occur and certain
other conditions are met before December 31, 1998.
On June 8, 1998, the Company entered into an agreement with Pinellas
Communications to purchase the license to operate a cellular telephone system
in the Rural Service Area PA-2. The purchase is for $6 million and is pending
FCC approval.
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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. 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 statements.
THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
For the three months ended June 30, 1998, the Company's total revenue increased
by 25.1% to $ 26.1 million, from $20.8 million in the comparable period in 1997.
Earnings before interest, taxes, depreciation and amortization, and other
non-cash expenses (EBITDA) increased by 22.2% to $ 12.5 million ( 48.1% of total
revenue) for the three months ended June 30, 1998 from $10.3 million (49.2%. of
total revenue) during the comparable period in 1997. The growth in revenue and
EBITDA was the result of continued growth of the subscriber base and increased
roaming revenue generated by additional usage. The interest expense on the debt
incurred as a result of the Horizon Acquisition, as well as the amortization
expense from the acquired licenses and customer lists, contributed to a net loss
of $1.7 million for the three months ended June 30, 1998. This loss represents
an improvement from the $4.6 million loss for the second quarter of 1997. This
improvement was due mainly to the increase in revenue and EBITDA, as described
above, in addition to a decrease in interest expense due to a lower level of
debt.
Subscriber revenue grew by 23.7 % to $15.9 million for the three months ended
June 30, 1998 compared to $12.8 million for the comparable period in 1997 mainly
as a result of continued subscriber growth in the Company's markets, despite a
decline in average revenue per subscriber. The Company's number of subscribers
increased by 29.5% to 157,220 at June 30, 1998 from 121,414 at June 30, 1997 due
to internal growth. On a per subscriber basis, average monthly subscriber
revenue declined by 4.5% to $34.69 in the second quarter of 1998 from $36.34 in
the second quarter of 1997. This was due to continuing promotional activity,
competitive market pressures and the changing mix of subscribers reflecting
increasing levels of subscribers who typically purchase less expensive rate
plans that include packaged minutes of use.
Roamer revenue grew by 26.4% to $8.4 million during the three months ended June
30, 1998 compared to $6.6 million for the comparable period in 1997. This
increase was mainly a result of increased roaming traffic throughout all of the
Company's systems which more than offset the decline in roaming revenue per
minute of use. Roaming minutes of use increased by 31.3 % to 14.8 million for
the three months ended June 30, 1998 from 11.3 million for the comparable period
in 1997. Roaming revenue per minute, including tolls, for the three months ended
June 30, 1998 decreased to $0.57 from $0.59 for the comparable period in 1997.
This decrease was mainly a result of increased regional roaming traffic that is
priced lower than other roaming traffic.
Equipment sales revenue increased by 49.6 % to $1.5 million for the three months
ended June 30, 1998 compared to $1.0 million for the comparable period in 1997.
This increase was due mainly to an increased number of telephones and
accessories sold to existing customers for retention purposes.
Cost of services increased by 36.4% to $3.0 million for the three months ended
June 30, 1998 from $2.2 million for the comparable period in 1997. This increase
was mainly a result of an increase in home subscriber net roaming costs as well
as increased billing and call delivery expenses associated with the growth in
the subscriber base. The increase in net roaming costs is attributed mostly to
increased levels of regional roaming for which rates to customers are low which
has stimulated usage. Partially offsetting this increase are lower costs to the
Company for long distance charges and the elimination of costs associated with a
terminated switching agreement. As a percentage of total revenue, cost of
services was 11.4% for the three months ended June 30, 1998 compared to 10.5%
for the same period in 1997.
Cost of equipment sales increased 20.7% to $2.7 million for the three months
ended June 30, 1998 from $2.3 million in the comparable 1997 period. This
increase was due mainly to an increased number of telephones and accessories
sold to existing subscribers as described above, as well as equipment subsidies
and sales to new subscribers, offset by a reduction in the average cost of
telephones and accessories.
General and administrative costs increased by 30.3% to $4.8 million for the
three months ended June 30, 1998 from $3.7 million for the comparable period in
1997. This increase was mainly a result of increased customer retention costs
due to competitive pressures as well as the growth in the subscriber base which
caused an increase in compensation and bad debt expense. As a percentage of
total revenues general and administrative expense was 18.5% for the three months
ended June 30, 1998 compared to 17.9% for the same period in 1997.
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Selling and marketing costs increased by 23.6% to $3.0 million for the three
months ended June 30, 1998 from $2.4 million during the second quarter of 1997.
This increase is mainly due to an increase in new subscribers added period to
period which caused higher commission and compensation expenses. Selling and
marketing cost per gross new subscriber, including the equipment subsidy,
decreased by 9.8% to $285 for the three months ended June 30, 1998 from $316 for
the comparable period in 1997. This was primarily a result of an improvement in
the margin on telephone and accessory subsidies and sales as well as lower
advertising expenses.
Depreciation and amortization decreased to $6.7 million for the three months
ended June 30, 1998 from $7.0 million in the comparable period in 1997. This
decrease was mainly due to certain cell site equipment obtained in the Horizon
Acquisition which became fully depreciated in April 1998. This reduction of
depreciation more than offsets the depreciation on higher levels of fixed assets
resulting from capital expenditures for system growth. For the three months
ended June 30, 1998, the Company incurred $5.2 million in capital expenditures,
primarily for cell site and system enhancements.
Interest expense decreased to $7.3 million for the three months ended June 30,
1998 from $7.8 million for the comparable period in 1997. This decrease was
primarily a result of a lower level of borrowing due to the Common Stock Sale as
described in Note 4, Notes to Consolidated Financial Statements (unaudited).
THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
For the six months ended June 30, 1998, the Company's total revenue increased by
23.4% to $48.3 million, from $39.1 million in the first six months of 1997.
Earnings before interest, taxes, depreciation and amortization, and other
non-cash expenses (EBITDA) increased by 22.7% to $22.3 million (46.2% of total
revenue) for the six months ended June 30, 1998 from $18.2 million (46.4%. of
total revenue) during the comparable period in 1997. The growth in revenue and
EBITDA was the result of continued growth of the subscriber base and increased
roaming revenue generated by additional usage. The interest expense on the debt
incurred as a result of the Horizon Acquisition, as well as the amortization
expense from the acquired licenses and customer lists, contributed to a net loss
of $6.9 million for the six months ended June 30, 1998. This loss represents an
improvement from the $10.9 million loss for the six months ended June 30, 1997.
This improvement was due mainly to the increase in revenue and EBITDA, as
described above, in addition to a decrease in interest expense due to a lower
level of debt.
Subscriber revenue grew by 23.1% to $30.2 million for the six months ended June
30, 1998 compared to $24.6 million for the comparable period in 1997 mainly as a
result of continued subscriber growth in the Company's markets, despite a
decline in average revenue per subscriber. The Company's number of subscribers
increased by 29.5% to 157,220 at June 30, 1998 from 121,414 at June 30, 1997 due
to internal growth. On a per subscriber basis, average monthly subscriber
revenue declined by 6.5% to $33.57 in the first half of 1998 from $35.90 in the
first half of 1997. This was due to continuing promotional activity, competitive
market pressures and the changing mix of subscribers reflecting increasing
levels of subscribers who typically purchase less expensive rate plans that
include packaged minutes of use.
Roamer revenue grew by 24.1% to $14.6 million during the six months ended June
30, 1998 compared to $11.8 million in the comparable period in 1997. This
increase was mainly a result of increased roaming traffic throughout all of the
company's systems which more than offset the decline in roaming revenue per
minute of use. Roaming minutes of use increased by 31.2% to 26.1 million for the
six months ended June 30, 1998 from 19.9 million for the comparable period in
1997. Roaming revenue per minute, including toll, for the six months ended June
30, 1998 decreased to $0.56 from $0.60 for the comparable period in 1997. This
decrease was mainly a result of increased regional roaming traffic that is
priced lower than other roaming traffic.
Equipment sales revenue increased by 38.0 % to $2.7 million for the six months
ended June 30, 1998 compared to $1.9 million for the comparable period in 1997.
This increase was due mainly to an increased number of telephones and
accessories sold to existing customers for retention purposes.
Cost of services increased by 31.7% to $5.8 million for the six months ended
June 30, 1998 from $4.4 million for the comparable period in 1997. This increase
was mainly a result of an increase in home subscriber net roaming costs as well
as increased billing and call delivery expenses associated with the growth in
the subscriber base. The increase in net roaming costs is attributed mostly to
increased levels of regional roaming for which rates to customers are low which
has stimulated usage. Partially offsetting this increase are lower costs to the
Company for long distance charges and the elimination of costs associated with a
terminated switching agreement. As a percentage of total revenue, cost of
services was 11.9% for the six months ended June 30, 1998 compared to 11.2% for
the same period in 1997.
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Cost of equipment sales increased 12.5% to $5.0 million for the six months ended
June 30, 1998 from $4.4 million in the comparable 1997 period. This increase was
due mainly to an increased number of telephones and accessories sold to existing
subscribers, as well as the equipment subsidies and sales to new subscribers,
offset by a reduction in the average cost of telephones and accessories.
General and administrative costs increased by 28.2% to $9.5 million for the six
months ended June 30, 1998 from $7.4 million for the comparable period in 1997.
This increase was mainly a result of the growth in the subscriber base which
caused an increase in compensation and increased customer retention costs due to
competitive pressures. As a percentage of total revenues general and
administrative expense was 19.6% for the six months ended June 30, 1998 compared
to 18.9% for the same period in 1997.
Selling and marketing costs increased by 21.1% to $5.8 million for the six
months ended June 30, 1998 from $4.8 million for the comparable period in 1997.
This increase is mainly due to an increase in new subscribers added period to
period which caused higher compensation and commission expenses. Selling and
marketing cost per gross new subscriber, including the equipment subsidy,
decreased by 7.0% to $291 for the six months ended June 30, 1998 from $313 for
the comparable period in 1997. This was primarily a result of an improvement in
the margin on telephone and accessory subsidies and sales.
Depreciation and amortization increased to $14.5 million for the six months
ended June 30, 1998 from $13.8 million for the comparable period in 1997 due to
the depreciation on higher levels of fixed assets resulting from capital
expenditures for system growth. This increase more than offset the decrease in
depreciation due to certain cell site equipment obtained in the Horizon
Acquisition which became fully depreciated in April 1998. For the six months
ended June 30, 1998, the Company incurred $9.9 million in capital expenditures,
primarily for cell site and system enhancements.
Interest expense decreased to $14.4 million for the six months ended June 30,
1998 from $15.2 million for the comparable period in 1997. This decrease was
primarily a result of a lower level of borrowing due to the Common Stock Sale as
described in Note 4, Notes to Consolidated Financial Statements (unaudited).
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 1997, the Company issued additional Common
Stock and redeemed its outstanding Preferred Stock. See Notes 3 and 4, Notes to
Consolidated Financial Statements (unaudited).
Net cash provided by operating activities was $4.7 million for the six months
ended June 30, 1998 compared to $1.6 million for the comparable period in 1997.
The increase was primarily the result of the increase in the number of
subscribers and the related growth in revenue and EBITDA, offset somewhat by a
decrease in net working capital.
Net cash used in investing activities was $9.5 million for the six months ended
June 30, 1998 compared to $11.5 million for the comparable period in 1997. In
1997, this activity reflects final payments for businesses acquired in 1996. In
1998, this activity reflects decreased levels of purchases of property and
equipment primarily for system buildout in addition to proceeds of $300,000
associated with the sale of an undeveloped patent to an officer/shareholder of
the Company.
Net cash provided by financing activities was $4.6 million for the six months
ended June 30, 1998 compared to $9.7 million for the comparable period in 1997
as the combination of reduced capital expenditures and increased EBITDA reduced
the need for outside financing. In 1997, this activity includes $45 million in
gross proceeds from the Common Stock Sale which were used primarily to redeem
the remaining outstanding Preferred Stock and to reduce amounts outstanding
under the Bank Credit Facility.
The Company's capital expenditure plans include a continued buildout of its
systems in order to improve coverage and increase usage. During the remainder of
1998 the Company plans to add 8 to 12 new cell sites in addition to the 14
completed through June 30, 1998. In accordance with its plans to strengthen its
existing cellular network the Company has completed sectorizing high traffic
cell sites and is in the process of increasing microwave capacity and upgrading
the Ohio and Pennsylvania systems to state of the art IS-136 TDMA digital. As of
June 30, 1998, the Company has incurred $9.9 million in capital expenditures and
expects to spend between $15 to $17 million for the year ending December 31,
1998. The Company plans to use internally generated funds plus funds available
under the Bank Credit Facility to finance this capital expenditure program. As
of June 30, 1998, the Company had $83.8 million in additional funds available to
borrow under the Bank Credit Facility.
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<PAGE> 11
As a part of the Horizon Acquisition, the Company acquired interim operating
authority for the Rural Service Area PA-2. 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 PA-2 and the
interim operating authority for PA-2 was terminated. On June 8, 1998, Sygnet
entered into an agreement with Pinellas Communications to purchase PA-2. The
purchase price of $6 million will be funded through the Bank Credit Facility.
The purchase is pending FCC approval. Pending FCC approval, Sygnet has entered
into a management agreement and a lease agreement to operate PA-2, subject to
oversight by Pinellas Communications.
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 other things, incur additional indebtedness. 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.
11
<PAGE> 12
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of the inability of some computer programs to
distinguish the year 1900 from the year 2000. Most computer programs and
operating systems were written using two digits to define the applicable year
rather than four digits. This means that any equipment containing computer
programs with time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. In some instances this could result in
system failures, disruption in operations and possible inaccuracies of data.
To address the Year 2000 Issue, the Company is in the process of contacting its
significant vendors to determine how the Company might be impacted by the Year
2000 Issue. The Company is also in the process of completing an inventory of all
its systems and equipment in each market to determine if the Year 2000 Issue
could cause a problem.
The Company's primary focus with respect to the Year 2000 Issue is on areas that
could materially interrupt the Company's revenue stream. Presently, it appears
three main systems have the potential to interrupt the revenue stream due to the
Year 2000 Issue: the two cellular switches and the billing system. To address
this risk, the Northern Telecom switch, which serves Ohio and Pennsylvania, is
expected to have its software upgraded to a Year 2000 compliant version in the
fourth quarter of 1998. The Ericsson switch, which serves New York, is expected
to have its software upgraded to a Year 2000 compliant version in the first
quarter of 1999. It is expected that Northern Telecom and Ericsson will provide
sufficient testing prior to installation. The upgrade of the billing system
software to a Year 2000 compliant version is expected to be completed in the
fourth quarter of 1998. The vendor that provides this system has indicated that
Year 2000 compliance testing will be completed by June of 1999.
The expected cost of testing and upgrading these systems has not been
determined. Management's current estimate is that the cost of becoming year 2000
compliant is not expected to exceed $250,000. This estimate may change
significantly upward or downward as the process continues. Specifically, this
estimate may change substantially if other systems or vendors are deemed to be
capable of a material interruption of the revenue stream.
12
<PAGE> 13
FORWARD LOOKING STATEMENTS
The description of the Company's capital expenditure plans and Year 2000
preparedness 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, Year 2000 preparedness 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 and
other technologies that may be developed; the inability of third party vendors
to provide products and services which are Year 2000 compliant; and the
occurrence of other technological changes affecting the Company's business. For
further information regarding these and other risk factors, see "Business - Risk
Factors" in the Company's annual report (File No. 333-10161) on Form 10K for the
year ended December 31, 1997 filed with the Securities and Exchange Commission.
The Company disclaims any duty to release publicly any updates or revisions to
these forward looking statements.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 12, 1998, the annual meeting of Common Stockholders was held at
which the shareholders unanimously approved (i) the election of three
Class II directors, (ii) stock option grants and other compensation to
the Company's executives, (iii) the sale of a company owned patent to
Sycord Limited Partnership, a business newly formed by the Chairman,
for $300,000 and (iv) the selection of Ernst & Young LLP as the
Company's independent auditors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and restated Articles of Incorporation of Sygnet
Wireless, Inc. 1[3.1]
3.2 Code of Regulations of Sygnet Wireless, Inc. 1[3.2]
4.1 Indenture dated as of September 26, 1996 between Sygnet
Wireless, Inc. and Fleet National Bank, as Trustee. 1[4]
10.18 Credit Agreement dated October 9, 1996 among the
Registrant and The Toronto Dominion Bank and PNC Bank,
National Association. 3[10.18]
10.18a Amendment to Credit Agreement dated October 9, 1996 among
the Registrant and The Toronto Dominion Bank and PNC
Bank, National Association.
10.23 Investment Agreement dated as of June 20, 1997 between
Sygnet Wireless, Inc. and Boston Ventures Limited
Partnership V. 2[10.23]
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. 2[10.24]
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. 2[10.25]
10.25a Amendment to Stockholders Agreement among Sygnet
Wireless, Inc., Boston Ventures Limited Partnership V,
J.D. Williamson, II and Warren P. Williamson, III.
10.31 Amended and restated Sygnet Wireless, Inc. 1996 Stock
Option Plan for Non-Employee Directors.
10.32 Purchase Agreement dated June 8, 1998 between Sygnet
Communications, Inc. and Pinellas Communications.
10.33 Assignment Agreement dated June 5, 1998 among Sygnet
Wireless, Inc., Everett G. Dennison, Gregory T. Pauley,
Scott L. Jones, Timothy J. Duffy and Sycord Limited
Partnership.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. On May 5, 1998 the Company filed an 8-K
reporting the issuance of a press release which announced the
decision of the Company to explore strategic alternatives, including
the possible sale of the company.
1 Filed as an exhibit to the Company's Quarterly Report on Form 10Q for the
quarterly period ended September 30, 1996, as the exhibit number
indicated in brackets and incorporated by reference herein.
2 Filed as an exhibit to the Company's Quarterly Report on Form 10Q for the
quarterly period ended June 30, 1997, as the exhibit number indicated in
brackets and incorporated by reference herein.
3 Filed as an exhibit to the Company's Annual Report on Form 10K for the
year ended December 31, 1996, as the exhibit number indicated in brackets
and incorporated by reference herein.
14
<PAGE> 15
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: July 24, 1998
15
<PAGE> 1
Exhibit 10.18a
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT is dated as of April
8, 1998 (this "SECOND AMENDMENT"), is entered into by and among SYGNET
COMMUNICATIONS, INC., an Ohio corporation (the "BORROWER"), the Lenders which
are parties to the Credit Agreement referred to below (collectively the
"LENDERS"), TORONTO DOMINION (TEXAS), INC. as the Administrative Agent and PNC
BANK, NATIONAL ASSOCIATION as the Documentation Agent and as the Collateral
Agent, and amends the Credit Agreement dated as of October 9, 1996, as
previously amended by that certain Consent, Waiver and Amendment dated March 28,
1997 (the foregoing herein referred to collectively as the "ORIGINAL CREDIT
AGREEMENT"), entered into by and among the Borrower, the Lenders and the Agents
(as that term is defined in the Original Credit Agreement).
WITNESSETH:
WHEREAS, the Borrower and the Lenders have agreed to make
certain changes to the interest rates set forth in the Original Credit
Agreement, to provide for a swing line in the principal amount of $5,000,000 to
be made available by PNC Bank, National Association, and to make certain other
changes to the Original Credit Agreement, upon the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and with the intent to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS TO ORIGINAL CREDIT AGREEMENT
---------------------------------------
SECTION 1.01 AMENDMENT TO SECTION 1.1 OF THE ORIGINAL CREDIT
AGREEMENT. Section 1.1 of the Original Credit Agreement is hereby amended as
follows:
(a) The following defined terms and the definitions therefor
are added to Section 1.1 in appropriate alphabetical order:
FIRST AMENDMENT: The Consent, Waiver and
Amendment dated March 28, 1997 entered into by and between the
Borrower and the Documentation Agent, for and on behalf of the
Lenders.
PNC BANK: PNC Bank, National Association,
and its successors and assigns.
<PAGE> 2
RATABLE SHARE: The proportion that a
Lender's Commitment bears to the Commitments of all the
Lenders.
SECOND AMENDMENT: The Second Amendment to
Credit Agreement dated as of April 8, 1998 entered into by and
among the Borrower, the Lenders and the Agents.
SWING LOAN: Any loan made by PNC Bank to the
Borrower pursuant to Section 2.1a(ii) hereof.
SWING LOAN COMMITMENT: PNC Bank's commitment
to make Swing Loans to the Borrower pursuant to Section
2.1a(ii) hereof in an aggregate Dollar amount not to exceed at
any one time outstanding $5,000,000.
SWING LOAN NOTE: The Swing Loan Note of the
Borrower in the form of Exhibit "A" to the Second Amendment
evidencing the Swing Loans, together with all extensions,
renewals, amendments, substitutions and replacements thereto
and thereof.
SWING LOAN RATE: For any day, a floating
rate of interest per annum equal to the sum of (i) the Federal
Funds Rate on the day a Swing Loan is requested by the
Borrower, plus (ii) (A) the Applicable Margin then in effect
with respect to Euro-Rate Loans less (B) the Commitment Fee
then in effect pursuant to Section 2.7a. For purposes of this
definition only, (i) "Federal Funds Rate" shall mean, for any
day, (A) the interest rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) determined by PNC Bank
(such determination shall be conclusive absent manifest error)
to be equal to the weighted average of rates on federal funds
transactions among members of the Federal Reserve System
arranged by Federal funds brokers at or about 9:00 a.m.
(Eastern time) on such day; provided, however, that if such
day is not a Business Day, the Federal Funds Rate for such day
shall be such rate for such transactions on the immediately
preceding Business Day or (B) if no such rates shall be quoted
by Federal funds brokers at such time, such other rate as
determined by PNC Bank in accordance with its usual procedures
(such determination shall be conclusive absent manifest
error), and (ii) "Business Day" shall mean any day other than
a Saturday or Sunday or a legal holiday on which commercial
banks are authorized or required to be closed for business in
Philadelphia, Pennsylvania.
-2-
<PAGE> 3
SWING LOAN REQUEST: A request for Swing
Loans made in accordance with Section 2.4b hereof.
(b) The definitions of the following defined terms are hereby
amended and restated to read as follows:
LOAN: An individual borrowing by the
Borrower under the Revolving Credit Commitment or any Swing
Loan.
LOAN DOCUMENT: Any of this Agreement, any
Revolving Credit Note, the Swing Line Note, any Security
Document, any Subsidiary Guaranty Agreement, any Fee Letter,
any Interest Hedge Agreement entered into with a Lender, the
Management Agreement and all other agreements, documents and
instruments executed and delivered to govern, evidence or
secure the Obligations, and the statements, reports,
certificates and other documents required by, or related to,
any of the foregoing, together with all extensions, renewals,
amendments, substitutions and replacements to and of any of
the foregoing.
OBLIGATIONS: Collectively, (i) all unpaid
principal and accrued and unpaid interest (including, without
limitation, any interest accruing subsequent to the
commencement of a bankruptcy, insolvency or similar proceeding
with respect to the Borrower, whether or not such interest
constitutes an allowed claim in such proceeding) under the
Loans and the Swing Loans, (ii) all accrued and unpaid Fees,
(iii) any other amounts due hereunder or under any of the
other Loan Documents, including all reimbursements,
indemnities, Fees, costs, expenses, prepayment premiums,
break-funding costs and other obligations of the Borrower, any
Subsidiary of the Borrower or Wireless to any Agent, any
Lender or any indemnified party hereunder and thereunder, (iv)
any obligations owed by the Borrower to any Lender or to any
Affiliate of any Lender pursuant to an Interest Hedge
Agreement and (v) all out-of-pocket costs and expenses
incurred by the Agents and the Lenders in connection with this
Agreement and the other Loan Documents, including but not
limited to the reasonable fees and expenses of the Agents'
counsel, which the Borrower is responsible to pay pursuant to
the terms of this Agreement and the other Loan Documents.
REQUIRED LENDERS: Prior to the termination
of the Revolving Credit Commitment, the Lenders whose
Commitment
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<PAGE> 4
Percentages aggregate at least sixty-six and two-thirds
percent (66 2/3%) of the aggregate Commitment Percentages of
all the Lenders, and after the termination of the Revolving
Credit Commitment, whether on the stated Maturity Date, by
acceleration or otherwise, the Lenders whose outstanding
principal amounts of the Loans (including Swing Loans)
aggregate at least sixty-six and two-thirds (66 2/3%) of the
aggregate principal amount of the outstanding Loans.
SECTION 1.02 AMENDMENTS TO SECTION 2.1 OF THE ORIGINAL CREDIT
AGREEMENT.
(a) The heading of Section 2.1 is hereby amended and restated
to read as follows:
2.1 REVOLVING CREDIT COMMITMENT; SWING LOAN COMMITMENT.
(b) Subsection 2.1a is hereby amended and restated to read as
follows:
2.1a LOANS.
(i) REVOLVING CREDIT LOANS. The Lenders
agree, subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, that
the Borrower shall have the right to borrow, repay and
reborrow, from the date hereof until the Maturity Date, a
principal amount not to exceed in the aggregate the Revolving
Credit Commitment at any one time outstanding.
(ii) SWING LOAN COMMITMENT. Subject to the
terms and conditions hereof and relying upon the
representations and warranties herein set forth, PNC Bank may,
at its option, cancelable at any time for any reason
whatsoever, make Swing Loans to the Borrower at any time or
from time to time to, but not including, the Maturity Date, in
an aggregate principal amount not to exceed at any one time
$5,000,000; provided that (A) the sum of the aggregate
principal amount of PNC Bank's Swing Loans and the Loans of
PNC Bank outstanding under the Revolving Credit Commitment
shall not exceed at any time PNC Bank's Commitment, and (B)
the aggregate principal amount of PNC Bank's Swing Loans and
the Loans of all the Lenders at any one time outstanding shall
not exceed the Revolving Credit Commitments of all the
Lenders. Within such limits of time and
-4-
<PAGE> 5
amount and subject to the other provisions of this Agreement,
the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1a(ii).
(c) Subsection 2.1d is hereby amended and restated in its
entirety to read as follows:
2.1d AMOUNT OF LOANS AND REPAYMENTS. Each Base Rate Loan shall
be in a minimum amount of $1,000,000, or if in excess of
$1,000,000, in integral multiples of $100,000. Each Euro-Rate
Loan shall be in a minimum amount of $1,000,000, or if in
excess of $1,000,000, in integral multiples of $500,000. Each
repayment of a Loan (except for repayments relating to
mandatory or voluntary reductions of the Revolving Credit
Commitment described in Section 2.1c and repayments due on the
Maturity Date) shall be in a minimum amount of $1,000,000.
Subject to the other terms and provisions hereof relating to
Swing Loans, Swing Loans and repayments of Swing Loans may be
in any amount.
(d) Subsection 2.1e is hereby amended and restated in its
entirety to read as follows:
2.1e REPAYMENT ON MATURITY DATE. On the Maturity Date the
entire outstanding principal balance of the Loans and the
Swing Loans, plus all accrued and unpaid interest thereon, any
unpaid Fees relating thereto and any other outstanding
Obligations shall be due and payable, in immediately available
funds.
(e) Subsection 2.1f is hereby amended and restated in its
entirety to read as follows:
2.1f NOTES. The obligations of the Borrower to repay, on or
before the Maturity Date, the aggregate unpaid principal
amount of the Loans shall be evidenced by Revolving Credit
Notes, each substantially in the form of EXHIBIT "A", (i)
drawn by the Borrower to the order of a Lender in the maximum
amount of that Lender's Commitment Percentage of the
Revolving Credit Commitment, (ii) duly executed by the
Borrower and (iii) delivered to the Administrative Agent for
redelivery to such Lender. The obligation of the Borrower to
repay, on or before the Maturity Date, the aggregate unpaid
principal amount of the Swing Loans shall be evidenced by the
Swing Loan Note substantially in the form of EXHIBIT "A" to
the Second Amendment, (i) drawn by the Borrower to the order
of PNC Bank in the maximum amount of PNC Bank's Swing Loan
Commitment, (ii) duly executed by the
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<PAGE> 6
Borrower and (iii) delivered to PNC Bank. The principal amount
actually due and owing each Lender under the Revolving Credit
Note payable to it shall be the aggregate unpaid principal
amount of all Loans made by such Lender, and the principal
amount actually due and owing PNC Bank under the Swing Loan
Note payable to it shall be the aggregate unpaid principal
amount of all Swing Loans made by PNC Bank, all as shown on
the Loan Accounts established pursuant to Section 2.6.
(f) The following new Subsection 2.1g is hereby added to the
Original Credit Agreement, immediately following subsection 2.1f:
2.1g OTHER PROVISIONS RELATING TO SWING LOANS.
(i) PNC Bank may, at its option, exercisable
at any time for any reason whatsoever, demand repayment of the
Swing Loans, and each Lender shall make a Loan in an amount
equal to such Lender's Ratable Share of the aggregate
principal amount of the outstanding Swing Loans, plus, if PNC
Bank so requests, accrued interest thereon; PROVIDED that no
Lender shall be obligated in any event to make Loans in excess
of its Commitment, and PROVIDED, FURTHER, that PNC Bank may
not demand repayment of any Swing Loan, and the Lenders shall
not be required to make Loans equal to their respective
Ratable Shares of such Swing Loan, if, at the time such Swing
Loan was originally made by PNC Bank, PNC Bank had actual
knowledge that any of the conditions to lending contained in
Subsections 7.1b, 7.1c and 7.1d hereof had not been met. Loans
made by the Lenders pursuant to the preceding sentence shall
initially bear interest at the Base Rate Option (unless and
until converted to another Interest Rate Option hereunder) and
shall be deemed to have been properly requested in accordance
with Section 2.4(a) without regard to any of the requirements
of that provision. PNC Bank shall provide notice to the
Administrative Agent (which may be telephonic or written
notice by letter, facsimile or telex) that such Loans are to
be made under this Subsection 2.1g. Upon receipt of such
notice, the Administrative Agent shall provide prompt notice
to the Lenders (which may be telephonic or written notice by
letter, facsimile or telex) that such Loans are to be made
under this Subsection 2.1g, and of the apportionment among the
Lenders, and the Lenders shall be unconditionally obligated to
fund such Loans (whether or not the conditions specified in
Section 2.4(a) are then satisfied) by the time and on the day
PNC Bank so requests, which shall not be earlier than 3:00
p.m. Eastern time on the Business Day next after
-6-
<PAGE> 7
the date the Lenders receive such notice from the
Administrative Agent.
(ii) If at any time the aggregate
outstanding principal amount of Loans made by PNC Bank under
the Revolving Credit Commitment exceeds an amount equal to PNC
Bank's Commitment less its Swing Loan Commitment, or if any
request by the Borrower for Loans would cause the aggregate
outstanding principal amount of the Loans made by PNC Bank
under the Revolving Credit Commitment to exceed an amount
equal to PNC Bank's Commitment less its Swing Loan Commitment,
then (A) the outstanding Swing Loans shall be reduced by a
Dollar amount necessary so that Loans under the Revolving
Credit Commitment can be made by PNC Bank in an aggregate
outstanding principal amount in excess of an amount equal to
PNC Bank's Commitment less its Swing Loan Commitment, and (B)
the Dollar amount of Swing Loans so reduced shall be
automatically converted by PNC Bank to Loans made by it under
the Revolving Credit Commitment.
(iii) So long as PNC Bank elects to make
Swing Loans, PNC Bank shall, after receipt by it of a request
for a Swing Loan pursuant to Section 2.4b, fund such Swing
Loan to the Borrower by funding the account of the Borrower
maintained at PNC Bank or by PNC Bank making a wire transfer
into an account of the Borrower designated by the Borrower in
such request.
SECTION 1.03 AMENDMENTS TO SECTION 2.2 OF ORIGINAL CREDIT
AGREEMENT.
(a) Subsection 2.2a of the Original Credit Agreement is hereby
amended and restated in its entirety to read as follows:
2.2a INTEREST RATES. During the term hereof the Borrower, in
accordance with the provisions of this Section 2.2, shall have
the option of electing from time to time one or more of the
Interest Rate Options set forth below to be applied by the
Lenders to the Loans outstanding hereunder; PROVIDED, HOWEVER,
that only the Swing Loan Rate shall apply to the Swing Loans,
and PROVIDED, FURTHER, that if PNC Bank demands repayment of
the Swing Loans pursuant to Subsection 2.1g and the Lenders
are required to make Loans in the amount of their Ratable
Share of the Swing Loans, such Loans shall bear interest at
the Base Rate Option, until converted to another Interest Rate
Option:
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<PAGE> 8
(i) BASE RATE AND EURO-RATE OPTIONS.
Interest (A) under the Base Rate Option shall accrue at a rate
per annum equal to the sum of (1) the Base Rate plus (2) the
Applicable Margin, as set forth below, and (B) under the
Euro-Rate Option shall accrue at a rate per annum equal to the
sum of (1) the Euro-Rate plus (2) the Applicable Margin, as
set forth below. In all cases the Applicable Margin shall
fluctuate in accordance with the Total Indebtedness to
Adjusted Annualized Operating Cash Flow Ratio, as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TOTAL INDEBTEDNESS TO ADJUSTED ANNUALIZED APPLICABLE MARGIN
OPERATING CASH FLOW RATIO AS OF THE LAST
DAY OF THE IMMEDIATELY PRECEDING FISCAL
QUARTER
- -----------------------------------------------------------------------------------------------------------
BASE RATE EURO-RATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than 10.00:1.00 1.500% 2.500%
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 10.00:1.00 but 1.250% 2.250%
greater than 8.00:1.00
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 8.00:1.00 but greater 1.000% 2.000%
than 7.00:1.00
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 7.00:1.00 but greater .750% 1.750%
than 6.00:1.00
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 6.00:1.00 but greater .500% 1.500%
than 5.00:1.00
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 5.00:1.00 but greater .250% 1.250%
than 4.00:1.00
- -----------------------------------------------------------------------------------------------------------
Less than or equal to 4.00:1.00 0.000% 1.000%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(b) Subsection 2.2b(i) of the Original Credit Agreement is
hereby amended and restated in its entirety to read as follows:
(i) CHANGES IN TOTAL INDEBTEDNESS TO ADJUSTED
ANNUALIZED OPERATING CASH FLOW RATIO. Interest rate
adjustments resulting from changes in the Total Indebtedness
to Adjusted Annualized Operating Cash Flow Ratio shall be made
without notice to the Borrower, based on such ratio as of the
end of the most recently completed Fiscal Quarter. All
adjustments shall be determined when the Borrower's quarterly
financial statements
-8-
<PAGE> 9
and Compliance Certificate indicating such adjustment to be
warranted have been delivered to the Administrative Agent
pursuant to Section 5.2, and such adjustments will be
effective on the third Business Day following the date on
which such statements and Compliance Certificate were
delivered.
(c) Subsection 2.2h of the Original Credit Agreement is hereby
amended and restated in its entirety to read as follows:
2.2h INTEREST PAYMENT DATES. Interest due on all outstanding
Base Rate Loans and Swing Loans shall be payable quarterly in
arrears on the last day of each calendar quarter for the
calendar quarter just ended. The first payment of interest
under the Base Rate Option shall be due on December 31, 1996
and shall be for the actual number of days elapsed between the
Closing Date and such date. Interest due on all outstanding
Euro-Rate Loans shall be payable on the last day of each
Euro-Rate Interest Period and, for Euro-Rate Interest Periods
of six months or more, also quarterly in arrears on the last
day of each successive three-month period following the first
day of such Euro-Rate Interest Period. All accrued and unpaid
interest on the Loans and the Swing Loans shall be due and
payable on the Maturity Date and, after any maturity of the
Revolving Credit Notes, the Swing Note or the Obligations,
whether by acceleration or otherwise, on demand until all
amounts due hereunder are paid in full.
(d) Subsection 2.2i of the Original Credit Agreement is hereby
amended and restated in its entirety to read as follows:
2.2i CALCULATION OF INTEREST. Interest under the Base Rate
Option and under the Swing Loan Rate shall be calculated on
the basis of the actual number of days elapsed, using a year
of 365 or 366 days, as the case may be. Interest under the
Euro-Rate Option shall be calculated on the basis of the
actual number of days elapsed, using a year of 360 days.
Interest for any period shall be calculated from and including
the first day thereof to but not including the last day
thereof.
SECTION 1.04 AMENDMENT TO SECTION 2.4 OF ORIGINAL CREDIT
AGREEMENT. Section 2.4 of the Original Credit Agreement is hereby amended and
restated in its entirety to read as follows:
2.4 REQUESTS FOR LOANS, INTEREST RATE OPTIONS AND CONVERSIONS.
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<PAGE> 10
(a) REVOLVING CREDIT LOANS. Each request for
a Loan and for the election, renewal or conversion to or of an
Interest Rate Option shall be made to the Administrative Agent
orally or in writing by an Authorized Officer no later than
12:00 noon (Eastern time) (i) at least one (1) Business Day
prior thereto, with respect to Base Rate Loans and (ii) at
least three (3) Business Days prior thereto, with respect to
Euro-Rate Loans. Any oral request for a Loan shall be followed
immediately by the Borrower's written confirmation of such
request, executed by an Authorized Officer, which confirmation
must set forth the amount and date of the Loan, the Interest
Rate Option selected and, if applicable, the Euro-Rate
Interest Period being selected. All written requests and
confirmations shall be in the form of Exhibit "B". A request
from the Borrower pursuant to this Section 2.4 with respect to
a Euro-Rate Loan shall irrevocably commit the Borrower to
accept such Euro-Rate Loan on the date specified in such
request. The Administrative Agent shall notify the Lenders of
each request for a Base Rate Loan or a Euro-Rate Loan as soon
as practicable, but not later than 12:00 noon (Eastern time)
on the date on which such Loan is to be made. Each Lender
shall make its Commitment Percentage of such Loan available to
the Borrower in immediately available funds at the principal
office of the Administrative Agent prior to 1:00 p.m. (Eastern
time) on the date such Loan is to be made.
(b) SWING LOANS. Except as otherwise
provided herein, the Borrower may from time to time prior to
the Maturity Date request PNC Bank to make Swing Loans by
delivering to PNC Bank not later than 12:00 o'clock noon
Eastern time on the proposed borrowing date a duly completed
request therefor or a request by telephone immediately
confirmed in writing by letter, facsimile or telex. Each Swing
Loan Request shall be irrevocable and shall specify the
proposed borrowing date and the principal amount of such Swing
Loan, which shall be in the amounts specified in Section 2.1d
hereof.
SECTION 1.05 AMENDMENT TO SECTION 2.5 OF ORIGINAL CREDIT
AGREEMENT. Section 2.5 of the Original Credit Agreement is hereby amended and
restated in its entirety to read as follows:
2.5 METHOD OF DISBURSEMENTS AND PAYMENTS. All Loans (except
for Swing Loans, which shall be disbursed according to
Subsection 2.1g(i)) shall be made by the
-10-
<PAGE> 11
Administrative Agent funding the account of the Borrower
maintained at the Administrative Agent, if any, or by the
Administrative Agent making a wire transfer into an account of
the Borrower designated by the Borrower or as otherwise
directed by the Borrower to the Administrative Agent in
writing. All payments of principal, interest, Fees, costs and
other amounts due hereunder and under the other Loan Documents
relating to the Loans and the Revolving Credit Commitment
shall be made by the Borrower to the Administrative Agent at
the Administrative Agent's principal office at 909 Fannin,
Suite 1700, Houston, Texas 77010 not later than 2:00 p.m.
(Eastern time) on the due date. All payments of principal,
interest, Fees, costs and other amounts due hereunder and
under the other Loan Documents relating to the Swing Loans
shall be made by the Borrower to PNC Bank at PNC Bank's office
at 1600 Market Street, 21st Floor, Philadelphia, Pennsylvania
19103 no later than 2:00 p.m. (Eastern time) on the due date.
All such Loans and Swing Loans and payments thereof shall be
immediately good funds when either transferred by the
Administrative Agent or PNC Bank, as the case may be, to the
Borrower, or when delivered by the Borrower to the
Administrative Agent or PNC Bank, as the case may be.
SECTION 1.06 AMENDMENT TO SECTION 2.5 OF ORIGINAL CREDIT
AGREEMENT. Section 1.05 of the Original Credit Agreement is hereby amended and
restated in its entirety to read as follows:
2.6 LOAN ACCOUNTS. Each Lender shall open and maintain on its
books a Loan Account in the Borrower's name with respect to
Loans and Swing Loans made, repayments, prepayments, the
computation and payment of interest and other amounts due and
sums paid to such Lender hereunder and under the other Loan
Documents. Except in the case of manifest error in
computation, such records shall be presumed correct as to the
amount at any time due to such Lender from the Borrower. The
failure of any Lender to make an entry in its Loan Account
shall not abrogate the Borrower's duty to repay the
Obligations owned to such Lender.
SECTION 1.07 AMENDMENT TO SUBSECTION 2.7A OF ORIGINAL CREDIT
AGREEMENT. Subsection 2.7a of the Original Credit Agreement is hereby amended
and restated in its entirety to read as follows:
2.7a COMMITMENT FEE. (i) The Borrower shall pay to the
Administrative Agent, for the Pro Rata benefit of the Lenders,
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<PAGE> 12
on the last day of each calendar quarter during the term of
the Revolving Credit Commitment for the calendar quarter just
ended and on the Maturity Date, a Commitment Fee calculated on
the basis of the actual number of days elapsed, using a year
of 365 or 366 days, as the case may be, at the following
rates:
<TABLE>
<S> <C>
At all times when the ratio of 0.375%
Total Indebtedness to Adjusted
Annualized Operating Cash Flow
is greater than or equal to 6.00 to 1.00
At all times when the ratio of 0.250%
Total Indebtedness to Adjusted
Annualized Operating Cash Flow
is less than 6.00 to 1.00
</TABLE>
computed on the average daily (computed at the opening of
business) unused amount of the Revolving Credit Commitment;
PROVIDED, HOWEVER, that the Borrower shall not pay the
Commitment Fee with respect to PNC Bank's Swing Loan
Commitment. The first payment of the Commitment Fee shall be
due on December 31, 1996 and shall be for the actual number of
days elapsed between the Closing Date and such date.
(ii) Commitment fee adjustments resulting from
changes in the Total Indebtedness to Adjusted Annualized
Operating Cash Flow Ratio shall be made without notice to the
Borrower, based on such ratio as of the end of the most
recently completed Fiscal Quarter. All adjustments shall be
determined when the Borrower's quarterly financial statements
and Compliance Certificate indicating such adjustment to be
warranted have been delivered to the Administrative Agent
pursuant to Section 5.2, and such adjustments will be
effective on the third Business Day following the date on
which such statements and Compliance Certificate were
delivered.
SECTION 1.08 AMENDMENT TO SUBSECTION 8.1A. Subsection 8.1a of
the Original Credit Agreement is hereby amended and restated to read as follows:
8.1a NONPAYMENT OF BORROWER'S OBLIGATIONS. The Borrower shall
default (i) in any payment or required prepayment of principal
of the Loans or the Swing Loans when due or any scheduled
Revolving Credit Commitment reduction when due, or (ii) in the
payment of interest on any Loans or Swing Loans when
-12-
<PAGE> 13
due, or in the payment of any of the Fees, expenses or other
amounts due hereunder or under any of the other Loan Documents
when due, and such default in payment of interest, Fees,
expenses or other amounts shall have continued for a period of
five (5) Business Days after such due date.
SECTION 1.09 AMENDMENTS TO SECTION 8.2. Subsections 8.2a and
8.2b of the Original Credit Agreement are hereby amended and restated to read as
follows:
8.2a EVENTS OF DEFAULT UNDER SECTIONS 8.1C AND 8.1D. Upon the
occurrence of an Event of Default set forth in Sections 8.1c
and 8.1d, the Revolving Credit Commitment shall automatically
terminate and automatically the Revolving Credit Notes, the
Swing Loan Note, interest accrued thereon, all other
Obligations of the Borrower and all obligations, if any, of
any Subsidiary of the Borrower or Wireless under any Loan
Document to the Lenders and the Agents shall all become
immediately due and payable, without the necessity of demand,
presentation, protest, notice of dishonor or notice of
default, all of which are hereby expressly waived and deemed
to be waived by the Borrower, any Subsidiary of the Borrower
or Wireless. Thereafter, the Lenders shall have no further
obligation to make any additional Loans hereunder and PNC Bank
shall have no further obligation to make any additional Swing
Loans hereunder. In addition, during any 60-day period
described in Section 8.1c(i), the Lenders shall not have any
obligation to make any additional Loans (except in accordance
with Subsection 2.1g(i) hereof) and PNC Bank shall not have
any obligation to make any additional Swing Loans hereunder.
8.2b REMAINING EVENTS OF DEFAULT. Upon the occurrence and
during the continuance of any Event of Default set forth in
Sections 8.1a, 8.1b, 8.1e, 8.1f, 8.1g, 8.1h, 8.1i, 8.1j, 8.1k,
8.1l or 8.1m, the Required Lenders may, at their option,
declare the Revolving Credit Commitment terminated and the
Revolving Credit Notes, the Swing Note, interest accrued
thereon, all other Obligations of the Borrower and all
obligations, if any, of any Subsidiary of the Borrower or
Wireless under any Loan Document to the Lenders and the Agents
to be due and payable, without the necessity of demand,
presentation, protest, notice of dishonor or notice of
default, all of which are hereby expressly waived and deemed
to be waived by the Borrower, any Subsidiary of the Borrower
or Wireless. Thereafter, the Lenders shall have no further
obligation to make any additional Loans hereunder (except
-13-
<PAGE> 14
in accordance with Subsection 2.1g(i) hereof), and PNC Bank
shall have no further obligation to make any additional Swing
Loans hereunder.
SECTION 1.10 AMENDMENT TO SECTION 10.1. Section 10.1 of the
Original Credit Agreement is hereby amended by adding the following paragraph
(iv) immediately following paragraph (iii):
(iv) The foregoing provisions of this
Section 10.1 notwithstanding, PNC Bank and the Borrower may,
without the consent or approval of any Lender or any Agent,
take the following actions with respect to the Swing Loans and
the Swing Loan Commitment:
(A) Adjust the Swing Loan Rate; and
(B) Make changes to the methods of
payments of and disbursements of Swing Loans.
SECTION 1.11 AMENDMENTS TO EXHIBITS. The Original Credit
Agreement is hereby amended to include EXHIBIT "A" which is attached to this
Second Amendment.
SECTION 1.12 NO OTHER AMENDMENTS OR WAIVERS. The amendments to
the Original Credit Agreement set forth above do not either implicitly or
explicitly alter, waive or amend, except as expressly provided in this Second
Amendment, the provisions of the Original Credit Agreement. The amendments set
forth above do not waive, now or in the future, compliance with any other
covenant, term or condition to be performed or complied with nor do they impair
any rights or remedies of the Lenders or the Agents under the Original Credit
Agreement or any other Loan Document with respect to any such violation. Nothing
in this Second Amendment shall be deemed or construed to be a waiver or release
of, or a limitation upon, the Agents' or the Lenders' exercise of any of their
respective rights and remedies under the Original Credit Agreement and the other
Loan Documents, whether arising as a consequence of any Events of Default which
may now exist or otherwise, and all such rights and remedies are hereby
expressly reserved.
ARTICLE II
BORROWER'S SUPPLEMENTAL REPRESENTATIONS
---------------------------------------
SECTION 2.01. INCORPORATION BY REFERENCE. As an inducement to
the Lenders and the Agents to enter into this Second Amendment, the Borrower
hereby repeats herein for the
-14-
<PAGE> 15
benefit of the Lenders and the Agents the representations and warranties made by
the Borrower in Article 4 of the Original Credit Agreement, as amended hereby,
except that for purposes hereof such representations and warranties shall be
deemed to extend to and cover this Second Amendment and the Swing Loan Note.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
SECTION 3.01 CONDITIONS PRECEDENT. Each of the following shall
be a condition precedent to the effectiveness of this Second Amendment:
(i) The Documentation Agent shall have received, on or before
the Amendment Effective Date (as hereinafter defined), the following items,
each, unless otherwise indicated, dated on or before the Amendment Effective
Date and in form and substance satisfactory to the Documentation Agent and its
special counsel, Tucker Arensberg, P.C.:
(A) Counterpart originals of this Second Amendment
duly executed by the Borrower, each Lender and each Agent;
(B) The Swing Loan Note, duly executed by the
Borrower; and
(C) A certified copy of the corporate action of the
Borrower authorizing the execution and delivery of and the performance under
this Second Amendment and the Swing Loan Note.
For purposes of this Second Amendment the term "Amendment
Effective Date" means the date on which the Documentation Agent and its counsel
have determined that each of the conditions set forth in this Section 3.01 has
been satisfied by the Borrower or waived by the Lenders.
-15-
<PAGE> 16
ARTICLE IV
GENERAL PROVISIONS
------------------
SECTION 4.01 RATIFICATION OF TERMS. Except as expressly
amended by this Second Amendment, the Original Credit Agreement and each and
every representation, warranty, covenant, term and condition contained therein
is specifically ratified and confirmed by the Borrower.
SECTION 4.02 REFERENCES. All notices, communications,
agreements, certificates, documents or other instruments executed and delivered
after the execution and delivery of this Second Amendment in connection with the
Original Credit Agreement, any of the other Loan Documents or the transactions
contemplated thereby may refer to the Original Credit Agreement without making
specific reference to this Second Amendment, but nevertheless all such
references shall include this Second Amendment unless the context requires
otherwise. From and after the Amendment Effective Date, all references in the
Original Credit Agreement and each of the other Loan Documents to the
"Agreement" shall be deemed to be references to the Original Credit Agreement as
amended hereby.
SECTION 4.03 INCORPORATION INTO AGREEMENT. This Second
Amendment is deemed incorporated into the Agreement. To the extent that any term
or provision of this Second Amendment is or may be deemed expressly inconsistent
with any term or provision of the Agreement, the terms and provisions hereof
shall control.
SECTION 4.04 COUNTERPARTS. This Second Amendment may be
executed in any number of separate counterparts, each of which, when so executed
and delivered, shall be regarded as an original, and all such counterparts shall
together constitute one and the same instrument.
SECTION 4.05 CAPITALIZED TERMS. Except for proper nouns and as
otherwise defined herein, capitalized terms used herein as defined terms shall
have the meanings ascribed to them in the Original Credit Agreement, as amended
hereby.
SECTION 4.06 COSTS AND EXPENSES. The Borrower will pay all
costs and expenses of the Documentation Agent (including, without limitation,
the reasonable fees and the disbursements of the Documentation Agent's special
counsel, Tucker Arensberg, P.C.) in connection with the preparation, execution
and delivery of this Second Amendment and the other documents, instruments and
certificates delivered in connection herewith.
-16-
<PAGE> 17
SECTION 4.07 GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF
LAW, EXCEPTING APPLICABLE FEDERAL LAW AND EXCEPT ONLY TO THE EXTENT PRECLUDED BY
THE MANDATORY APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
SECTION 4.08 HEADINGS. The headings of the sections in this
Second Amendment are for purposes of reference only and shall not be deemed to
be a part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto, with the intent to be
legally bound hereby, have caused this Second Amendment to Credit Agreement to
be duly executed by their respective proper and duly authorized officers as a
document under seal, as of the day and year first above written.
ATTEST/WITNESS: SYGNET COMMUNICATIONS, INC.
By: (SEAL)
- --------------------------------- -------------------------------
Name: Name:
Title: Title:
TORONTO DOMINION (TEXAS), INC.,
in its capacity as Administrative Agent
By: (SEAL)
---------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
in its capacities as Documentation Agent and
Collateral Agent and as a Lender
By: (SEAL)
--------------------------------
Name:
Title:
THE TORONTO-DOMINION BANK
By: (SEAL)
--------------------------------
Name:
Title:
-18
<PAGE> 19
CIBC, INC.
By: (SEAL)
--------------------------------
Name:
Title:
CORESTATES BANK, N.A.
By: (SEAL)
--------------------------------
Name:
Title:
FLEET NATIONAL BANK
By: (SEAL)
------------------------------
Name:
Title:
CREDIT LYONNAIS
By: (SEAL)
-----------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
MARYLAND
By: (SEAL)
-----------------------------
Name:
Title:
-19-
<PAGE> 20
UNION BANK OF CALIFORNIA, N.A.
By: (SEAL)
-----------------------------
Name:
Title:
BANK OF MONTREAL, CHICAGO BRANCH
By: (SEAL)
-----------------------------
Name:
Title:
ROYAL BANK OF CANADA
By: (SEAL)
-----------------------------
Name:
Title:
NATIONAL CITY BANK,
successor-in-interest to
National City Bank Northeast
By: (SEAL)
-----------------------------
Name:
Title:
-20
<PAGE> 21
MERITA BANK LTD - NEW YORK BRANCH
By: (SEAL)
-----------------------------
Name:
Title:
By: (SEAL)
-----------------------------
Name:
Title:
THE MAHONING NATIONAL BANK OF
YOUNGSTOWN
By: (SEAL)
-----------------------------
Name:
Title:
-21-
<PAGE> 1
Exhibit 10.25a
AMENDMENT TO STOCKHOLDERS AGREEMENT
-----------------------------------
NOW COME 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"), and, as of the 16th day of
December, 1997, make the following amendments to the Stockholders Agreement
dated as of June 20, 1997 by and among each of them.
WHEREAS, the Stockholders Agreement requires that each transferee of
Stock from either of the Williamsons agrees to become a signatory to
the Stockholders Agreement and to be bound by all of the terms of the
Stockholders Agreement as a Stockholder; and,
WHEREAS, the Stockholders Agreement is ambiguous as to whether the
transferee becomes bound by the Stockholders Agreement for all Stock
owned by him or only for that Stock transferred to him by the
Williamsons after the effective date of the Stockholders Agreement;
and,
WHEREAS, the parties to the Stockholders Agreement desire to clarify
the above ambiguity.
IT IS, THEREFORE, AGREED that the sections of the Stockholders
Agreement set forth below be, and hereby are, amended as follows:
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 (a) the Williamsons and (b) each other person, firm,
corporation, or other entity (other than an Investor) to whom the Williamsons or
another Original Stockholder transfers Stock on or after June 20, 1997, but said
transferee (other than the Williamsons) shall be deemed to be an Original
Stockholder only for those shares of Stock transferred to the transferee by the
Williamsons or another Original Stockholder on or after June 20, 1997 and all
shares of Stock issued as a dividend or distribution thereon. As used herein,
"INVESTORS" means (a) Boston Ventures and (b) each other person, firm,
corporation, or other entity 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.
<PAGE> 2
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 for all shares of Stock transferred to the transferee subsequent to
the execution of this Agreement and all shares of Stock issued as a dividend or
distribution thereon. The Company shall not, from and after any transfer of any
share of Stock made in violation of this Agreement, transfer any such shares of
Stock on its books; treat as the owner of such shares of Stock any person or
entity to which any such shares of Stock have been transferred; or accord the
right to vote such Stock or pay dividends on such Stock to any person or entity
to which any such shares of Stock have been transferred.
WITNESS our signatures this ____ day of December, 1997.
SYGNET WIRELESS, INC. BOSTON VENTURES LIMITED PARTNERSHIP V
By: By:
-------------------------------- --------------------------------
Its: Its:
-------------------------------- --------------------------------
- ----------------------------------- ----------------------------------
J.D. Williamson, II Warren P. Williamson, III
<PAGE> 1
Exhibit 10.31
SYGNET WIRELESS, INC.
1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. The purpose of the Amended 1996 Stock Option Plan for
Non-Employee Directors is to increase the proprietary interest of Non-Employee
Directors in Sygnet Wireless, Inc. by granting Non-Employee Directors
non-qualified options to purchase shares of Class A common stock of the
Corporation and thereby to promote long-term shareholder value.
2. ADMINISTRATION
(a) APPOINTMENT OF COMMITTEE. The Plan shall be administered
by a committee of the Corporation consisting of at least three executives of the
Corporation. The Committee shall be appointed by and hold office at the pleasure
of the Board. Grants of Options under the Plan shall be automatic as provided in
Section 4. The Committee shall have full authority to interpret the plan, to
promulgate such rules and regulations with respect to the Plan as it deems
desirable, and to make all other determinations necessary or appropriate for the
administration of the Plan. All such determinations shall be final and binding
upon all persons having an interest in the Plan.
(b) COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH. Members
of the Committee shall not receive any compensation for their services as
members, but all expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Corporation. The Committee may
employ attorneys, consultants, accountants, or other persons. The Committee, the
Corporation, and its officers and directors shall be entitled to rely upon the
advice, opinions, and valuations of any such persons. All action taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon the Optionee, the Corporation, and all other persons
having an interest in the Plan. No members of the Committee shall be personally
liable for any action, determination, or interpretation made in good faith with
respect to the Plan. All members of the Committee shall be fully protected and
indemnified by the Corporation in respect to any such action, determination, or
interpretation.
(c) DEFINITIONS. The terms defined in this subsection,
whenever used and capitalized in this document, shall, unless the context
clearly requires otherwise, have the following respective meanings:
i) BOARD: the Board of Directors of the Corporation.
ii) COMMITTEE: the committee of the Corporation
charged with the duty of administering the Plan pursuant to Section 2(a) of the
Plan.
iii) COMMON STOCK: Class A Common Stock, no par
value, of the Corporation.
iv) CORPORATION: Sygnet Wireless, Inc.
<PAGE> 2
v) DESIGNEE: a person or entity designated by the
Non-Employee Director pursuant to Section 4(j) of the Plan to be the recipient
of any Options granted hereunder.
vi) NON-EMPLOYEE DIRECTOR: a member of the Board who
is not an employee of the Corporation or any of its subsidiaries at the date of
each grant.
vii) OPTION: any options granted pursuant to the
Plan.
viii) OPTION PRICE: the exercise price per Share as
defined in Section 4(b) of the Plan.
ix) OPTIONED SHARES: any Shares issued pursuant to
Options granted pursuant to the Plan.
x) OPTIONEE: collectively, the Non-Employee Director
and his Designee or Designees, if any.
xi) PLAN: this amended 1996 Stock Option Plan for
Non-Employee Directors.
xii) SHARES: shares of Common Stock.
3. PARTICIPATION. All Non-Employee Directors shall be eligible to
participate in the Plan.
4. AWARDS UNDER THE PLAN. The number of Shares available for grants
under the Plan shall not exceed 250,000 Shares, subject to adjustment as
provided in Section 5.
(a) GRANT OF OPTIONS.On the first trading day coinciding with
or immediately following the initial election of a Non-Employee Director to the
Board, the Corporation shall automatically grant the Optionee an Option for
4,000 Shares, all of which shall vest six months following the date of grant.
Furthermore, on the first trading day coinciding with or immediately following
the annual shareholders meeting of Corporation, the Corporation shall grant each
Optionee an Option to acquire 2,000 Shares, half of which shall vest six months
following the date of grant and the balance one year after the date of grant,
provided that such Optionee shall have then satisfied the rules and regulations
with respect to the Plan adopted by the Committee. The written agreement
evidencing each Option shall be dated as of the applicable date of grant. Each
Optionee accepting an Option shall execute and return a copy of the agreement to
the Corporation. Any Optioned Shares may consist, in whole or in part, of
authorized and unissued Shares or of Shares in the Corporation's treasury. All
Options granted under the Plan shall be non-qualified options not entitled to
special tax treatment under Section 422 of the Internal Revenue Code of 1986, as
amended.
(b) OPTION EXERCISE PRICE. The Option Price of the Option
shall be 100% of the Fair Market Value of a Share on the business day
immediately preceding the date of
2
<PAGE> 3
grant. "Fair Market Value" as of any date shall be the last reported sale price,
regular way, of the Shares on any day or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in either case on the principal national securities exchange on
which the Shares are listed or, if the Shares are not listed on a national
securities exchange and are listed on the NASDAQ Stock Market, the sale price
determined in the same fashion or, if the Shares are not so listed on any of the
foregoing, the average of the bid and asked prices on such day as furnished by
dealers in the Shares in the over-the-counter market. If there is no established
trading market for the shares, then Fair Market Value shall be the appraised
value as determined by the Committee. All calculations of the current market
price shall be made to the nearest cent.
(c) TERM OF OPTION. Each Option shall expire ten (10) years
from the date of grant.
(d) EXERCISE OF OPTION. Each Option granted to an Optionee as
a result of a Non-Employee Director's initial election to the Board shall be
exercisable six months after its grant date. Each Option granted to an Optionee
as a result of a Non-Employee Director's reelection to the Board shall be
exercisable one year from its grant date. In either instance, any Options
granted pursuant to the Plan shall be exercisable only if the Optionee has, at
the time the Options are to be exercised, satisfied all of the rules and
regulations adopted by the Committee with respect to the Plan.
(e) MANNER OF EXERCISE. An exercisable Option, or any
exercisable portion thereof, may be exercised solely by delivery to the
Secretary of the Corporation at his or her office of all of the following:
i) Notice in writing, which notice shall comply with
all applicable rules established by the Committee, signed by the Optionee or
other person then entitled to exercise an Option or portion thereof, stating
that the Option, or portion thereof, is exercised;
ii) Such representations and documents as the
Committee, in its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Federal Securities Act of 1933,
as amended ("Federal Securities Act"), and any other Federal or state securities
laws or regulations. The Committee may, in its absolute discretion, also take
whatever action it deems appropriate to effect such compliance, including
without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and
iii) Full cash payment of the Option Price for the
Optioned Shares with respect to which such Option or portion is thereby
exercised and which are to be delivered to him or her pursuant to such exercise.
At any time the shares are tradeable in an established securities market, such
payment need not accompany the written notice of exercise if the Optionee,
either (a) in the notice of exercise directs that the stock certificate or
certificates for the Optioned Shares as to which the Option is exercised be
delivered to a broker-dealer registered with the Securities and Exchange
Commission that is a member of the New York Stock Exchange or any
3
<PAGE> 4
other broker-dealer acceptable to the Committee, as the agent for the Optionee,
which broker-dealer delivers to the Corporation its unconditional and
irrevocable undertaking that, at the time such stock certificate or certificates
are delivered, such broker-dealer will pay to the Corporation an amount in cash
equal to such payment, plus the amount ("withholding amount") of all federal,
state and/or local taxes of any kind which the Corporation is required to
withhold with respect to the exercise of the Option or (b) furnish with said
notice (i) Shares (endorsed in favor of the Corporation) having a Fair Market
Value equal to the amount of such payment or (ii) instructions that the
Corporation withhold from the Optioned Shares to be delivered a number of
Optioned Shares having a fair market value equal to the Option Price, plus (in
each case), if the Board shall approve, the withholding amount.
(f) CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The
Corporation shall not be required to issue or deliver any certificate or
certificates for Optioned Shares prior to fulfillment of all of the following
conditions:
i) The completion of any registration or other
qualification of such Shares under any Federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any other
governmental regulatory body, which the Corporation shall, in its absolute
discretion, deem necessary or advisable;
ii) The obtaining of any approval or other clearance
from any state or federal governmental agency which the Corporation shall, in
its absolute discretion, determine to be necessary or advisable;
iii) The provision for any income tax withholding
which the Corporation shall, in its absolute discretion, determine to be
necessary or advisable; and
iv) The lapse of such reasonable period of time
following the exercise of the Option as the Corporation may determine, in its
absolute discretion, from time to time to be necessary or advisable for reasons
of administrative convenience.
(g) RIGHTS AS STOCKHOLDERS. An Optionee shall not be, nor have
any of the rights of, a stockholder of the Corporation with respect to any
shares of Common Stock that may be purchased upon the exercise of any option or
portion thereof unless and until certificates representing such shares have been
issued by the Corporation.
(h) NON-TRANSFERABILITY. All Options awarded pursuant to this
Plan shall be non-assignable and non-transferable other than by will or the laws
of descent and distribution. An Optionee shall forfeit any Option assigned or
transferred, voluntarily or involuntarily, other than as permitted under this
subsection. An Option may be exercised during the Optionee's lifetime only by
the Optionee or his or her guardian or legal representative.
(i) FORFEITURE. If a Non-Employee Director ceases to be a
Director for any reason, any non-vested Options and any non-vested portion of
Options granted as a consequence of the Non-Employee Director's election or
reelection to the Board shall forfeit and shall never
4
<PAGE> 5
be exercisable.
(j) DESIGNATION OF OPTION RECIPIENT. A Non-Employee Director
who is serving on the Board as a representative of a specific shareholder
pursuant to a written agreement between the Corporation and one or more
shareholders may, prior to the time that an Option is granted to him, designate
the shareholder that he is representing as the recipient of said Option. The
rights of and rules and regulations applicable to the Designee arising from or
relating to his ownership of the Option shall be the same as those of and
applicable to the designating Non-Employee Director. Notice of any designation
and any amendment or cancellation thereof shall be made by written instruction
to the Secretary of the Corporation prior to the time the Option is granted.
5. ADJUSTMENTS. In the event of a stock dividend or stock split, or
combination or other reduction in the number of issued Shares, a merger,
consolidation, reorganization, recapitalization, sale or exchange of
substantially all assets or dissolution of the Corporation, appropriate
adjustments shall be made in the Shares and number of Shares subject to and
authorized by this Plan and the Option prices specified, in order to prevent
dilution or enlargement of the rights of the Optionee under the Plan.
6. AMENDMENT OF THE PLAN. The Board may suspend or terminate the Plan
or any portion thereof at any time, and the Board or the Committee may amend the
Plan from time to time as may be deemed to be in the best interests of the
Corporation; provided, however, that no such amendment, alteration or
discontinuation shall be made (a) that would impair the rights of an Optionee
with respect to Options theretofore awarded, without such person's consent, or
(b) without the approval of the stockholders if such approval is necessary to
comply with any legal, tax or regulatory requirement, including any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Securities Exchange Act of 1934, as amended.
7. MISCELLANEOUS PROVISIONS. Neither the Plan nor any action taken
hereunder shall be construed as giving any Optionee any right to be nominated
for election or re-election to the Board.
8. EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall be effective
immediately. No awards shall be made hereunder after December 31, 2010.
5
<PAGE> 1
Exhibit 10.32
PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT is made as of the 8th day of June, 1998, by and
between Sygnet Communications, Inc., an Ohio corporation ("Buyer"), and Pinellas
Communications, a Florida general partnership ("Seller") (Buyer and Seller
sometimes hereinafter each a "Party" and collectively the "Parties").
RECITALS
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A. The Federal Communications Commission ("FCC") on June 3, 1997,
issued Radio Station Authorization File No. 10808-CL-P-613-A-89 to Seller for
the operation of a non-wireline cellular telephone system in the Rural Service
Area known as Market No. 613, Pennsylvania 2 McKean comprising the Counties of
McKean, Elk and Cameron, Pennsylvania (the "RSA").
B. Buyer operates a non-wireline cellular telephone system facility
(the "System") in the RSA under interim operating authority from the FCC.
C. Buyer desires to acquire Radio Station Authorization File No.
10808-CL-P-613-A-89 together with any and all amendments, modifications and
renewals thereto (the "License"), and all assets, if any, owned or used by
Seller in connection with the License (other than assets owned by or leased from
Buyer), from Seller on the terms and conditions set forth in this Agreement.
D. The License may not be assigned to Buyer by Seller without the prior
consent of the Federal Communications Commission ("FCC").
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement and for other
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
<PAGE> 2
1. SALE OF LICENSE AND ASSETS; LIABILITIES. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as hereinafter defined)
Seller shall sell, assign, convey and deliver to Buyer, and Buyer shall purchase
from Seller, all of Seller's right, title and interests in and to the License,
and any and all assets and property and associated rights and interests, real,
personal, and mixed, tangible and intangible, of whatever kind, owned or used by
Seller in connection with the License (the "Assets"), free and clear of any and
all debts, liabilities, obligations, taxes, liens, charges, encumbrances,
pledges, mortgages, security interests or claims whatsoever ("Liens"). Buyer
shall not be liable for any duties, responsibilities, liabilities, or
obligations of Seller of any nature whatsoever, whether presently existing or
arising hereafter.
2. PURCHASE PRICE.
(a) AMOUNT. The total price to be paid to Seller by Buyer for
the License and the Assets, payable as hereafter provided, shall be Six Million
and 00/100 Dollars ($6,000,000.00) (the "Purchase Price").
(b) MANNER AND TIME OF PAYMENT OF PURCHASE PRICE.
Simultaneously with the execution of this Agreement, Buyer has delivered
Twenty-Five Thousand and 00/100 Dollars ($25,000) (the "Escrow Fund") to PNC
Bank, National Association ("Escrow Agent") as Buyer's earnest money deposit to
be held and applied pursuant to the terms of an escrow agreement to be entered
into on the date hereof by Buyer, Seller and Escrow Agent. At the Closing, (i)
upon the joint written instructions of Buyer and Seller, Escrow Agent shall pay
the Escrow Fund to Seller and any and all interest earned thereon to Buyer; and
(ii) Buyer shall deliver the balance of the Purchase Price to Seller by wire
transfer in immediately available funds in accordance with Seller's instructions
to such account or accounts as Seller shall designate to Buyer in writing.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as follows:
(a) EXISTENCE AND QUALIFICATION OF SELLER. Seller is a
partnership duly formed, validly existing and in good standing under the laws of
the State of Florida and has the partnership power and authority to own and use
its properties and to transact the business in which it is engaged. Seller is
qualified to do business in the Commonwealth of Pennsylvania.
(b) TITLE TO LICENSE. Seller applied for and obtained the
License in compliance with the Communications Act of 1934, as amended, and the
rules and regulations of the FCC promulgated thereunder. Seller now holds, and
on the Closing Date (as hereinafter defined) will hold, the License, which has
been validly issued to Seller by order of the FCC and which shall have become a
Final Order (as hereinafter defined), free and clear of any and all Liens.
Subject to obtaining those consents and approvals listed on SCHEDULE 3(F)
hereto, Seller has all right, power, authority and capacity to assign the
License to Buyer and, at the Closing, Seller will transfer to Buyer good and
marketable title to the License, free and clear of any and all Liens. No person
other than Seller has a legal or beneficial ownership interest in the License or
the proceeds of the purchase and sale contemplated hereby. Neither Seller nor
its partners is now, and except for the agreements between Buyer and Seller
relating to the management and operation of the System under the License prior
to Closing contemplated under Article 5(d) hereof, will at Closing be, a party
to or bound by any contract, agreement or understanding relating to the License
or the construction, ownership, operation or management of a cellular telephone
system in the RSA.
(c) TITLE TO ASSETS. Seller now has, and on the Closing Date
will transfer to Buyer, good and marketable title to the Assets, free and clear
of any and all Liens.
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(d) AUTHORIZATION AND BINDING OBLIGATION OF SELLER. Seller has
the partnership power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements, documents and
instruments to be delivered by Seller pursuant to this Agreement (the "Seller
Documents") and to consummate the transactions contemplated hereby and thereby,
and to hold and transfer the License and the Assets. Seller has taken, or will
by the Closing Date have taken, all action required by law, its Partnership
Agreement and otherwise, to authorize the execution, delivery and performance of
this Agreement and the Seller Documents and the consummation of the transactions
contemplated hereby and thereby. This Agreement has been, and the Seller
Documents will be on the Closing Date, executed and delivered by Seller and each
(when executed and delivered) will constitute the valid, legal and binding
obligation of Seller, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and the
application of general principles of equity (including entitlement to specific
performance).
(e) NO BREACH OR VIOLATION. The execution and delivery of this
Agreement and the Seller Documents by Seller does not, and the consummation and
performance by Seller of the transactions contemplated hereby and thereby will
not: (i) either alone or with the giving of notice or the passage of time, or
both, conflict with, result in a breach or violation by Seller of, or constitute
a default by Seller under, Seller's Partnership Agreement, or any agreement,
instrument or license to which Seller or its partners are a party or by which
Seller or its partners, the License or the Assets are bound; (ii) create or
impose any Lien on or against the License or the Assets; or (iii) conflict with
or result in a violation of any statute, ordinance, rule, regulation or order,
which breach, violation, default, Lien or conflict would, individually or in the
aggregate, have a material
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<PAGE> 5
adverse effect on the License or the Assets, or on Seller's ability to perform
its obligations under this Agreement or the Seller Documents.
(f) APPROVALS AND CONSENTS. The only persons (including but
not limited to governmental authorities and agencies, creditors of Seller and
parties to any other instrument or agreement to which Seller is party or by
which Seller is bound) whose approval or consent to the execution, delivery or
performance of this Agreement and the Seller Documents by Seller is legally or
contractually required or is necessary to validly assign the License and the
Assets to Buyer are specified in SCHEDULE 3(F) hereto.
(g) LITIGATION. Except as specified in SCHEDULE 3(G), there is
no judgment, award, order, writ, injunction, arbitration decision or decree, and
there is no litigation, proceeding or investigation pending, or to Seller's
knowledge, threatened against Seller or its partners or relating to the License
or the Assets in any federal, state or local court, or before any administrative
agency or arbitrator or before any other tribunal duly authorized to resolve
disputes that, individually or in the aggregate, could have a material adverse
effect on the License or the Assets, or which seeks to enjoin or prohibit, or
otherwise questions the validity of, any action taken or to be taken pursuant to
or in connection with this Agreement or that could have a material adverse
affect on Seller's ability to perform its obligations under this Agreement or
the Seller Documents.
(h) COMPLIANCE WITH LAWS. Seller is in compliance with all
applicable statutes, rules and regulations relating to the License or the
Assets. Neither Seller nor its partners is in default with respect to any
judgment, order, injunction or decree of any court, administrative agency or
other governmental authority or any other tribunal duly authorized to resolve
disputes, which relates in any material respect to the transactions contemplated
hereby.
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<PAGE> 6
(i) BANKRUPTCY. No insolvency proceedings of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Seller or its partners (other than as a creditor), the License or the Assets,
are pending, or to Seller's knowledge, threatened, and neither Seller nor its
partners has made any assignment for the benefit of creditors or taken any
action in contemplation of such insolvency proceedings.
(j) DISCLOSURE. No representation, warranty, schedule or
statement of Seller contained in this Agreement or the Seller 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 or therein not
misleading in light of the circumstances under which such statements were made.
Other than facts generally applicable to the cellular telephone industry, there
are no facts known to Seller that have not been set forth in this Agreement or
any schedule hereto that, individually or in the aggregate, materially adversely
affect, or which in the future may materially adversely affect, the License or
the Assets, or the ability of Seller to consummate the transactions contemplated
hereby.
(k) BROKERS. Except for Daniels & Associates, no finder,
broker, agent, or other person, acting pursuant to the express or implied
authority of Seller is or may be entitled to a commission, fee or other
compensation or obligation in connection with the negotiation or consummation of
this Agreement or the transactions contemplated hereby. Seller will be solely
responsible for any and all commissions, fees or other compensation or
obligations owing to Daniels & Associates.
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<PAGE> 7
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that:
(a) ORGANIZATION AND QUALIFICATION OF BUYER. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio and has the corporate power and authority to own and
use its properties and to transact the business in which it is engaged. Buyer is
qualified to do business as a foreign corporation in the Commonwealth of
Pennsylvania.
(b) AUTHORIZATION AND BINDING OBLIGATION OF BUYER. Buyer has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements, documents and
instruments to be delivered by Buyer pursuant to this Agreement (the "Buyer
Documents") and the transactions contemplated hereby and thereby, and has taken,
or will by the Closing Date have taken, all action required by law, its Articles
of Incorporation, its Code of Regulations and otherwise, to authorize the
execution, delivery and performance of this Agreement and the Buyer Documents
and the consummation of the transactions contemplated hereby and thereby. This
Agreement has been, and the Buyer Documents will be on the Closing Date, duly
executed and delivered by Buyer and each (when executed and delivered) will
constitute the valid, legal and binding obligation of Buyer, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and the application of general principles
of equity (including entitlement to specific performance).
(c) NO BREACH OR VIOLATION. The execution and delivery of this
Agreement and the Buyer Documents by Buyer does not, and the consummation and
performance by Buyer of the transactions contemplated hereby and thereby will
not: (i) either alone or with the giving of notice
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<PAGE> 8
or the passage of time, or both, conflict with, result in a breach or violation
by Buyer of, or constitute a default by Buyer under, Buyer's Articles of
Incorporation, Code of Regulations or any material agreement, instrument or
license to which Buyer is a party or by which Buyer is bound; or (ii) conflict
with or result in a violation of any statute, ordinance, rule, regulation or
order to which Buyer is a party or by which Buyer is bound, which would,
individually or in the aggregate, have a material adverse effect on the ability
of Buyer to perform its obligations under this Agreement.
(d) LITIGATION. Buyer is not subject to any judgment, award,
order, writ, injunction, arbitration decision or decree that could materially
adversely affect Buyer's ability to perform its obligations hereunder, and there
is no litigation, proceeding or investigation pending, or to Buyer's knowledge,
threatened against Buyer in any federal, state or local court, or before any
administrative agency or arbitrator or before any other tribunal duly authorized
to resolve disputes that seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken pursuant to or in connection with
this Agreement or that could materially adversely affect Buyer's ability to
perform its obligations under this Agreement or the Buyer Documents.
(e) COMPLIANCE WITH LAWS. Buyer is in material compliance with
all applicable statutes, rules and regulations of any governmental body or court
that could have a material adverse effect on Buyer's ability to perform its
obligations under this Agreement. Buyer is not in default with respect to any
judgment, order, injunction or decree of any court, administrative agency or
other governmental authority or any other tribunal duly authorized to resolve
disputes, that relates in any material respect to the transactions contemplated
hereby.
(f) FCC QUALIFICATIONS. Buyer is fully qualified, legally,
financially and otherwise, under the Communications Act of 1934, as amended, and
the rules and regulations of the FCC promulgated thereunder to be the assignee
of the License.
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<PAGE> 9
(g) BANKRUPTCY. No insolvency proceedings of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Buyer (other than as a creditor) are pending, or to Buyer's knowledge,
threatened, and Buyer has not made any assignment for the benefit of creditors
or taken any action in contemplation of such insolvency proceedings.
(h) APPROVALS AND CONSENTS. The only persons (including but
not limited to governmental authorities and agencies, creditors of Buyer and
parties to any other instrument or agreement to which Buyer is party or by which
Buyer is bound) whose approval or consent to the execution, delivery or
performance of this Agreement by Buyer is legally or contractually required or
is necessary for Buyer to perform its obligations hereunder or to validly assign
the License and the Assets to Buyer are specified in SCHEDULE 4(H) hereto.
5. COVENANTS.
(a) LICENSE MODIFICATION; ASSIGNMENT APPLICATION. Within
fourteen (14) days after execution of this Agreement, Seller will file an
application with the FCC to modify the License to allow Seller to use the System
to satisfy the requirement that at least one cell site in the RSA be operational
by December 3, 1998 (the "License Modification"), and will use its best efforts
to obtain prompt FCC approval of such application. Within fourteen (14) days
after the FCC's approval of such modification application, Seller and Buyer
shall file an application with the FCC for assignment of the License to Buyer
(the "Assignment Application") and each will use its respective best efforts to
prosecute the Assignment Application. Seller shall pay any FCC filing fee
required for the License Modification. Buyer and Seller shall share equally any
FCC filing fee required for the Assignment Application. All other expenses
associated with the preparation and
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<PAGE> 10
filing of the Assignment Application shall be borne solely by the party who
shall have incurred the same.
(b) LITIGATION COSTS. Seller shall be solely responsible for
and shall pay all litigation costs and settlement payments arising from the
proceedings in the FCC's CC Docket No. 91-142, including without limitation any
and all costs in connection with reconsideration of the FCC's grant of the
License to Seller. Seller shall bear its separate legal expenses in connection
with the application for the FCC's consent to the grant of the Assignment
Application and the consent becoming a Final Order. Buyer shall bear its
separate legal expenses in connection with the application for the FCC's consent
to the grant of the Assignment Application and the consent becoming a Final
Order.
(c) CONFIDENTIALITY. Each Party shall keep confidential all
information obtained by it with respect to the other Party in connection with
this Agreement and if the transactions contemplated hereby are not consummated
for any reason, each Party shall return to the other Party, without retaining a
copy thereof, any schedules, documents or other written information obtained
from such other party in connection with this Agreement and the transactions
contemplated hereby; provided, however, that either Party may, only to the
extent reasonably necessary, disclose such information as may be relevant in
connection with any litigation or other dispute resolution proceeding relating
to a claim of breach hereunder by Seller or Buyer.
(d) CONDUCT PENDING CLOSING. Seller covenants that from the
date hereof to the Closing (i) it will use its best efforts to obtain all
necessary consents and approvals from all appropriate government authorities,
bodies, agencies and persons, to the assignment of the License and the Assets to
Buyer; (ii) it will not sell, assign, transfer or convey the License or the
Assets, or any interest therein; and (iii) it will not permit the License to
lapse or be canceled by the FCC,
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<PAGE> 11
including, without limitation, by reason of Seller's failure to cause at least
one cell site in the RSA to be operational by December 3, 1998. Within five (5)
days after the FCC's approval of the License Modification, Seller agrees to
enter into a Management Agreement and a Facilities Lease Agreement with Buyer
for the operation of the System under the License substantially in the forms
attached hereto as EXHIBIT A and EXHIBIT B, respectively. Seller agrees, from
the date hereof to the Closing, upon Buyer's request (i) to consent to any and
all extensions of service contours from Buyer's adjacent cellular systems into
the RSA, and (ii) to promptly request FCC authorizations for additional cell
cites to be located in the RSA.
6. CLOSING.
(a) CLOSING DATE. The consummation of the purchase and sale of
the License and the Assets contemplated hereby (the "Closing") shall take place
at the offices of Buyer or at such other place as the parties shall mutually
agree within ten (10) days following the date on which the FCC's consent to the
grant of the Assignment Application has become a Final Order (the "Closing
Date"); provided, however, that Buyer may elect to consummate the purchase and
sale of the License at any time after the date of the FCC's consent to the grant
of the Assignment Application and prior to the date on which such consent has
become a Final Order. In such event, the Closing Date shall be within 10 days
following the date on which Buyer notifies Seller of its election as aforesaid.
As used herein, the term "Final Order" shall mean an action by the FCC, which
action is not reversed, stayed, enjoined or set aside, and with respect to which
no timely request for stay, reconsideration, review, rehearing or a notice of
appeal is pending, and as to which the time for filing any such request,
petition, or notice of appeal, or for review by the FCC on its own motion, has
expired.
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(b) SELLER'S DELIVERIES AT CLOSING. At the Closing, Seller
will deliver to Buyer the following instruments, certificates, documents and
opinions in form and substance reasonably satisfactory, in each instance, to
Buyer:
(i) INSTRUMENTS OF TRANSFER. Such assignments and
other instruments of transfer containing the warranties set forth
herein as shall be effective to convey, assign, transfer and deliver to
Buyer all of Seller's right, title and interest in and to the License
and the Assets, free and clear of any Liens.
(ii) SELLER'S GENERAL PARTNER'S CERTIFICATE. A
certificate signed by a general partner of Seller and attested to by
another general partner of Seller, dated as of the Closing Date,
representing and certifying to Buyer as to: the signatures and
authority of those persons executing and delivering this Agreement and
the Seller Documents on behalf of Seller; copies of resolutions of the
partners of Seller authorizing the transactions contemplated hereby;
and the truth and accuracy in all material respects of the
representations and warranties of Seller contained in this Agreement on
and as of the Closing Date with the same effect as if then made.
(iii) OPINION OF COUNSEL. An opinion of Seller's
counsel, substantially in the form attached hereto as EXHIBIT C, dated
as of the Closing Date.
(iv) OPINION OF FCC COUNSEL. An opinion of Seller's
FCC counsel, substantially in the form attached hereto as EXHIBIT D,
dated as of the Closing Date.
(c) BUYER'S DELIVERIES AT THE CLOSING. At the Closing, Buyer
will deliver to Seller the following instruments, certificates, documents and
opinions, in form and substance reasonably satisfactory, in each instance, to
Seller:
(i) PAYMENT. The Purchase Price.
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<PAGE> 13
(ii) BUYER'S OFFICERS' CERTIFICATE. A certificate
signed by an officer of Buyer and attested to by its Secretary or
Assistant Secretary, dated as of the Closing Date, representing and
certifying to Seller as to: the signatures and incumbency of those
persons executing and delivering this Agreement and the Buyer Documents
on behalf of Buyer; copies of resolutions of the Board of Directors of
Buyer authorizing the transactions contemplated hereby; and the truth
and accuracy in all material respects of the representations and
warranties of Buyer contained in this Agreement on and as of the
Closing Date with the same effect as if then made.
7. CONDITIONS TO BUYER'S OBLIGATIONS ON CLOSING. Buyer's obligations to
be performed under this Agreement on Closing are subject to each of the
following conditions, any of which (except the consent and approval of the FCC)
may be waived in writing by Buyer:
(a) CONSENTS AND APPROVALS. All of the consents and approvals
described in SCHEDULE 3(f) hereto shall have been obtained by Seller and a
copy(ies) thereof shall have been delivered to Buyer, the FCC's grant of the
License to Seller shall have become a Final Order (unless waived by Buyer) and
the FCC's consent to the grant of the Assignment Application shall have issued
and become a Final Order (unless waived by Buyer).
(b) NO DEFAULT. As of the Closing Date, Seller shall not be in
violation or default under any provision of any applicable order, decree,
ordinance, statute, rule, regulation or other material document to which Seller
is a party or by which Seller is bound, in any manner which would materially and
adversely affect the License or the Assets, or the ability of Seller to
consummate the transactions contemplated by this Agreement.
(c) PERFORMANCE BY SELLER. Seller shall have performed all
covenants and agreements required by this Agreement to be performed by it at or
prior to the Closing.
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(d) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Seller shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if then made.
(e) PROCEEDINGS. No action or proceedings shall be pending or
threatened, on or prior to the Closing Date: to set aside or modify the FCC's
grant of the License to Seller, the authorization of the FCC for the assignment
of the License to Buyer, or any approval or consent required hereunder; or to
enjoin or prevent the consummation of the transactions contemplated hereby.
(f) DELIVERIES. Seller shall have delivered to Buyer each of
the documents or items described in Article 6(b) of this Agreement.
8. CONDITIONS TO SELLER'S OBLIGATIONS ON CLOSING. Seller's obligations
to be performed under this Agreement on Closing are subject to each of the
following conditions, any of which (except the consent and approval of the FCC)
may be waived in writing by Seller:
(a) PERFORMANCE BY BUYER. Buyer shall have performed all
covenants and agreements required by this Agreement to be performed by it at or
prior to the Closing.
(b) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Buyer shall be true and correct in all material respects on and as
of the Closing Date with the same effect as if then made.
(c) PROCEEDINGS. No action or proceedings shall be pending or
threatened, on or prior to the Closing Date: to set aside or modify the FCC's
grant of the License to Seller, the authorization of the FCC for the assignment
of the License to Buyer, or any approval or consent required hereunder; or to
enjoin or prevent the consummation of the transactions contemplated hereby.
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<PAGE> 15
(d) CONSENTS AND APPROVALS. All of the consents and approvals
described in SCHEDULE 4(h) required to be obtained by Buyer shall have been
obtained by Buyer and a copy(ies) thereof shall have been delivered to Seller.
(e) NO DEFAULT. As of the Closing Date, Buyer shall not be in
violation or default under any provision of any applicable order, decree,
ordinance, statute, rule, regulation or other material document to which Buyer
is a party or by which Buyer is bound, in any manner which would materially and
adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement.
(f) DELIVERIES. Buyer shall have delivered to Seller each of
the documents or items described in Article 6(c) hereof.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, stipulations and agreements made by any Party to the
other contained in this Agreement (which term includes any schedule hereto and
any certificate, instrument or other document or agreement executed in
connection with this Agreement) shall survive the Closing hereunder and any
inspection by any person.
10. TERMINATION.
(a) This Agreement may be terminated:
(i) by mutual agreement of Buyer and Seller at any
time prior to Closing;
(ii) by Buyer or Seller if the other materially
defaults under or materially breaches any representation, warranty or
covenant contained in this Agreement, provided that such default or
breach is not cured by the Party charged therewith within fifteen (15)
calendar days after receipt of notice by such Party from the other
Party with respect thereto;
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(iii) by Buyer or Seller upon denial by Final Order
of the FCC of the grant of the License to Seller or of the Assignment
Application; or
(iv) by Buyer if, by June 1, 2000, the grant of the
License to Seller has not become a Final Order, or FCC consent to the
Assignment Application has not been granted and become a Final Order.
(b) If Seller shall fail or refuse to consummate the
transaction contemplated by this Agreement on or prior to the Closing Date and
the conditions set forth in Articles 8(a) through 8(e) of this Agreement shall
have been satisfied, then, in addition to any other remedies available to it,
Buyer may, at its option, invoke any equitable remedies it may have to enforce
assignment of the License and the Assets to Buyer by Seller hereunder, including
without limitation, an action or suit for specific performance. In the event of
an action by Buyer to obtain specific performance of the terms of this
Agreement, Seller hereby waives the defense that there is an adequate remedy at
law. If this Agreement is terminated and Buyer is not in material default under
or material breach of any of its representations, warranties or covenants
contained in this Agreement, the Escrow Fund shall be returned to Buyer.
(c) If Buyer shall fail or refuse to consummate the
transaction set forth in this Agreement on or prior to the Closing Date and the
conditions set forth in Articles 7(a) through 7(e) of this Agreement shall have
been satisfied, then Seller shall receive the Escrow Fund as liquidated damages
in full settlement of any claims against Buyer in connection with this Agreement
and damages of any nature or kind that Seller may suffer or allege to suffer as
a result thereof. It is understood and agreed that the amount of liquidated
damages represents Buyer's and Seller's reasonable estimate of actual damages
and does not constitute a penalty. Recovery of liquidated damages under this
Article 10(c) shall be the sole and exclusive remedy of Seller against Buyer for
-16-
<PAGE> 17
any breach of or failure to consummate this Agreement and shall be applicable
regardless of the actual amount of damages sustained.
11. INDEMNIFICATION.
(a) INDEMNITY.
(i) Each Party (the "Indemnitor") will indemnify,
defend and hold harmless each other Party, its affiliates, officers,
directors, partners, agents and employees (the "Indemnitee(s)") from
all actions, suits, proceedings, demands, liabilities, claims, losses,
damages, assessments, judgments, costs and expenses (including without
limitation attorneys' fees) ("Costs") resulting from or arising as a
result of any of the following:
(1) Any breach of any representation or
warranty of Indemnitor contained in this Agreement or any
schedule hereto or in any certificate, instrument or other
document or agreement executed by Indemnitor in connection
with this Agreement; or
(2) Any failure of the Indemnitor or any of
its affiliates to perform or observe or to have performed or
observed in full, any covenant, agreement or condition to be
performed or observed by Indemnitor or its affiliates, under
this Agreement.
(ii) Seller will indemnify, defend and hold Buyer
harmless from any and all Litigation Costs.
(iii) Seller will indemnify, defend and hold Buyer
harmless from any broker's, finder's or agent's fee or commission
claimed by any person as a result of Seller's actions. Buyer will
indemnify, defend and hold Seller harmless from any broker's, finder's
or agent's fee or commission claimed by any person as a result of
Buyer's actions.
-17-
<PAGE> 18
(iv) In no event shall Buyer be liable under this
Agreement, including Article 12(a) hereof, for any amount in excess of
the amount of the Management Fees (as defined in the Management
Agreement attached hereto as Exhibit A to be entered into between the
Parties) accrued at the time that the event giving rise to any claim
shall have arisen.
(b) NOTICE OF CLAIM. Any Indemnitee(s) shall give the
Indemnitor prompt written notice in the event that any claim, demand, action,
suit, assessment or proceeding shall be made, overtly threatened or instituted
against the Indemnitee(s) with respect to which Indemnitee(s) intends to assert
a claim against the Indemnitor. The Indemnitor shall notify the Indemnitee
within thirty (30) days of such notice as to whether or not the Indemnitor
desires to participate in the defense of such matter. Any such notice and
participation shall not prejudice the Indemnitor's right to contest its
obligation to indemnify hereunder. If the Indemnitor so notifies the Indemnitee
of its intent to participate, the Indemnitor shall have the sole right to assume
control over all decisions relating to, and the defense of, with counsel of its
choice, any such claim, demand, action, suit, assessment or proceeding made,
overtly threatened or instituted against the Indemnitee, including but not
limited to all settlements and appeals relating thereto. In the event the
Indemnitor elects to assume the defense of any such matter, each party will
allow the other reasonable access to those books, information and records of the
party as is necessary to the defense of any such matter. In the event the
Indemnitor elects not to assume the defense thereof, it shall fully cooperate
with the Indemnitee in regard thereto, including, without limitation, delivering
copies of all pleadings, documents, reports and correspondence to the
Indemnitee.
13. MISCELLANEOUS.
-18-
<PAGE> 19
(a) EXPENSES. Except as expressly provided in this Agreement,
all expenses incurred by or on behalf of the Parties in connection with the
authorization, preparation and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the Parties in connection with the authorization,
preparation, execution and consummation of this Agreement shall be borne solely
by the Party who shall have incurred the same.
(b) NOTICES. All notices and communications hereunder shall be
in writing and shall be valid and effective five (5) days after being sent by
certified mail postage prepaid, one (1) day after being sent by Federal Express
or other overnight delivery service, or upon receipt if delivered personally or
by telecopier, addressed as follows:
(i) If to Seller:
Pinellas Communications
13595 Monalee Avenue North
Seminole, FL 33776-3036
ATTN: John E. Hoffman
Telecopier #: 813-393-5269
with a copy to:
John P. Bankson, Jr., Esquire
Drinker Biddle & Reath LLP
Suite 900
901 15th Street, N.W.
Washington, DC 20005-2333
Telecopier #: 202-842-8465
(ii) If to Buyer:
Sygnet Communications, Inc.
6550 Seville Drive, Suite B
Canfield, OH 44406
ATTN: Craig T. Sheetz, Vice President,
Chief Financial Officer
Telecopier #: 330-565-9557
-19-
<PAGE> 20
with copies to:
John R. Wilner, Esquire
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Telecopier #: 202-508-6200
(c) WAIVER. Any waiver by any Party of any term, provision or
condition of this Agreement shall be effective only if and to the extent
specified in writing by such Party.
(d) HEADINGS; INTERPRETATION. The article and section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement. Each
reference in this Agreement to an Article, Section, Schedule or Exhibit, unless
otherwise indicated, shall mean an Article or a Section of this Agreement or a
Schedule or Exhibit attached to this Agreement, respectively. References herein
to "days", unless otherwise indicated, are to consecutive calendar days. Both
Parties have participated substantially in the negotiation and drafting of this
Agreement and agree that no ambiguity herein should be construed against the
draftsman.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) ENTIRE AGREEMENT. This Agreement represents the entire
understanding of the Parties, supersedes all other and prior memoranda and
agreements between the Parties and may not be modified or amended, except by a
written instrument executed by each of the Parties designating specifically the
terms and provisions so modified and amended.
(g) BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the Parties, their respective successors and
permitted assigns.
-20-
<PAGE> 21
(h) ASSIGNMENT. This Agreement and all or any part of Buyer's
rights and obligations hereunder may be assigned by Buyer at any time to any one
or more direct or indirect subsidiary(s) of Buyer; or any other entity(s)
controlled by, controlling or under common control with Buyer, or acquiring
direct or indirect control of Buyer or substantially all of Buyer's assets;
provided that Buyer remains obligated to Seller to perform this Agreement unless
released by Seller in writing. Neither this Agreement nor any of Seller's rights
or obligations hereunder may be assigned by Seller without Buyer's prior written
consent.
(i) CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Ohio, without
reference to its choice of law rules. In the event of any litigation matter with
respect to this Agreement, each of the Parties hereby irrevocably consents to
the jurisdiction of any Ohio state court located in Mahoning County, Ohio or the
Federal District Court for the Northern District of Ohio, Eastern Division, in
connection with any action, suit or other proceedings arising out of or relating
to this Agreement or any action taken or omitted hereunder, and waives any claim
of forum non conveniens and any objection as to laying of venue. Each Party
further waives personal service of any summons, complaint or other process and
agrees that the service thereof may be made by certified or registered mail to
such person at such person's address for purposes of notices hereunder.
-21-
<PAGE> 22
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date and year first above written.
"SELLER"
PINELLAS COMMUNICATIONS
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"BUYER"
SYGNET COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-22-
<PAGE> 23
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedules:
1. Schedule 3(f) - Seller's Approvals and Consents
2. Schedule 3(g) - Litigation
3. Schedule 4(h) - Buyer's Approvals and Consents
Exhibits:
1. Exhibit A - Form of Management Agreement
2. Exhibit B - Form of Facilities Lease Agreement
3. Exhibit C - Form of Opinion of Seller's Counsel
4. Exhibit D - Form of Opinion of Seller's FCC Counsel
-23-
<PAGE> 1
Exhibit 10.33
ASSIGNMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of April __, 1998
(the "Effective Date") by and among Sygnet Wireless, Inc, an Ohio corporation
and its wholly owned subsidiary, Sygnet Communications, Inc., with offices
located at 6550 Seville Drive, Suite B, Canfield, Ohio 44406 (hereinafter
collectively referred to as the "Company"); Everett G. Dennison, Gregory T.
Pauley and Scott L. Jones, each residents of the State of Ohio and Timothy J.
Duffy, a resident of the State of Pennsylvania (hereinafter collectively
referred to as the "Location Patent Group") and Sycord, Inc., a Nevada
corporation (hereinafter referred to as "Assignee").
RECITALS
A. Each of the members of the Location Patent Group is an employee of
Sygnet Communications, Inc. and was among the original named inventors in U.S.
Patent No. 5,235,633 ("Patent '633") and certain continuations thereof
identified in EXHIBIT A hereto (hereinafter collectively referred to as the
"Dennison Patent").
B. Each of the members of the Location Patent Group previously assigned
all of his right, title and interest in the Dennison Patent to the Company and
has received from the Company certain consideration in respect of such
assignment and transfer.
C. The Company has made further developments and improvements in
respect of the Dennison Patent and has developed or acquired related
intellectual property in the form of related technology and business plans, all
of which it regards as proprietary (collectively with the Dennison Patent, the
"Technology").
D. Assignee has been formed for the purpose of acquiring all rights,
title and interest in and to the Technology and other related assets, and
Assignee intends to engage in further development in respect thereto, including
the potential commercial exploitation of the Technology.
E. The parties hereto desire that the Company and the Location Patent
Group assign to Assignee and that Assignee purchase all of the right, title and
interest in and to the Technology and said other related assets, and those
liabilities of the Company to the Location Patent Group, all in accordance with
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
<PAGE> 2
1. DEFINED TERMS. For all purposes of this Agreement, the following
terms have the following meanings:
(a) "ASSIGNED ASSETS" means all of each Assignor's right,
title and interest in and to the following, developed or acquired on or prior to
the Effective Date:
(i) the Intellectual Property Rights (defined below);
(ii) all records, files, papers, drawings, plans,
engineering information, computer programs, manuals and data, originals of all
tangible records of Intellectual Property Rights and registrations thereof,
research and development records data, and analyses thereof, other books and
records related to the Technology, whether originals or copies, whether
financial, scientific, technical or otherwise; and
(iii) all filings, authorizations, approvals or
indicia of authority (and any pending applications for any thereof) issued by
any governmental agency, authority or other instrumentality of the United States
or any state or any foreign country or political subdivision thereof relating to
the Technology.
(b) "ASSIGNORS" means the Company and the members of the
Location Patent Group, and "ASSIGNOR" means any one of them.
(c) "DENNISON PATENT" has the meaning provided in Recital A
above.
(d) "INTELLECTUAL PROPERTY RIGHTS" means all intellectual
property rights, whether held by an Assignor as owner or as licensee or
otherwise, associated with, related to, and including the Technology, including
without limitation, Patents (defined below), know-how, unpatented inventions,
trade secrets, secret formulas, business and marketing plans, industrial
property rights, copyrights, trademarks, trade names, logos and service marks
(and all goodwill associated therewith) and all registrations and registration
applications thereof and all technical information, management information
systems, hardware and software, source code, designs, drawings, processes and
quality control data and all similar materials recording or evidencing the
Intellectual Property Rights.
(e) "NET PROFITS" means the cash or current fair market value
of property received by Assignee in consideration for and attributable to the
license, sublicense or sale of the Assigned Assets, less all of Assignee's costs
in acquiring and maintaining the Assigned Assets (including but not limited to
costs and expenses incurred in connection with the prosecution or defense of
claims relating to the Assigned Assets) and expenses incurred by Assignee
related to the commercialization of the Assigned Assets (including but not
limited to development expenses incurred after the Effective Date and
out-of-pocket expenses incurred by Assignee in connection with the negotiation
and documentation of one or more transactions for the license, sublicense or
sale of the Assigned Assets).
2
<PAGE> 3
(f) "PATENTS" means Patent '633 and all patents and patent
applications derived from or related to Patent '633, including but not limited
to U.S. Patent No. 5,546,445, and such other U.S. Patent Applications as
identified in EXHIBIT A attached hereto, including any divisions, substitutions,
continuations, continuations-in-part, reissues, reexaminations, renewals or
extensions thereof, and all corresponding foreign patents and patent
applications filed or issued in any country which are based upon or derived from
such patents or patent applications.
(g) "PATENT '633" has the meaning provided in Recital A above.
(h) "TECHNOLOGY" has the meaning provided in Recital C above.
2. ASSIGNMENT. The members of the Location Patent Group have assigned
all of their interest in the Dennison Patent to the Company. Subject to the
terms and conditions set forth in this Agreement, and to the extent not
previously assigned and transferred to the Company by the members of the
Location Patent Group, each of Assignors hereby grants, sells, transfers,
delivers and assigns to Assignee the Assigned Assets. Each of the Assignors
specifically excludes from this assignment all patents issued and applied for in
such Assignor's name that do not involve the Assigned Assets, and expressly
reserves the right to improve, invent, develop, patent, submit for any
application for patent, or other forms of protection, at any time for all past,
present, and future inventions and devices, and to enter into any licenses
and/or assignments or other transactions that do not arise from, relate to or
involve the Assigned Assets.
3. CONSIDERATION. In consideration of the transfer of the Assigned
Assets, Assignee shall:
(a) Contemporaneously with the execution of this Agreement,
pay in cash to the Company the amount of $300,000; and
(b) In the event Assignee is able to commercialize the
Assigned Assets by way of license or commercial sale to an unaffiliated third
party, pay to the Location Patent Group an amount equal to twenty percent (20%)
of the first $1,000,000 of Net Profits realized by Assignee which are
attributable to such Assigned Assets prior to the expiration of Patent '633 and
five percent (5%) of the next $9,000,000 of Net Profits realized by Assignee
which are attributable to such Assigned Assets prior to the expiration of Patent
'633. Each member of the Location Patent Group agrees that the payments required
under this paragraph 3(b) shall be divided equally among them (unless they have
agreed otherwise in writing and provided notice of such agreement in writing to
the Assignee) and may be paid in cash or property with a market value equal to
the amount due to the Location Patent Group at the reasonable discretion of
Assignee.
3
<PAGE> 4
4. LOCATION PATENT GROUP RELATIONSHIP TO SYGNET. Each member of the
Location Patent Group hereby agrees that as of the Effective Date the Company
shall have no further obligation to him relating to the Dennison Patent or
arising from the Patent Group Compensation Agreement dated as of April 30, 1997.
The parties hereto acknowledge and agree that as of the Effective Date, the
Patent Group Compensation Agreement shall terminate and be of no further force
or effect.
5. REPRESENTATIONS AND LIMITATION OF WARRANTIES
(a) To the best of their knowledge, each Assignor represents
to Assignee that it/he is the lawful owner of all right, title and interest in
and to the Assigned Assets being transferred by such Assignor under this
Agreement, free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims. Each of the Assignors
represents to Assignee that it/he is not a party to, nor are any of the Assigned
Assets bound by, any agreement which could have a material adverse effect on the
Assigned Assets or the rights assigned to Assignee under this Agreement. Each of
the Assignors represents to Assignee that to the best of its/his knowledge, no
proprietary technology of any person or entity was used in the design or
development of (or otherwise with respect to) any of the Assigned Assets, and
there is no pending or, to the best knowledge of each of the Assignors,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any of the Assigned Assets
(b) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, EACH OF
THE ASSIGNORS EXPRESSLY DISCLAIMS ANY WARRANTIES OR CONDITIONS, EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE ASSIGNED ASSETS AND THE
FURTHER DEVELOPMENT OF THE ASSIGNED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH IN THIS AGREEMENT, THE ASSIGNORS MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OR CONDITIONS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
VALIDITY OF THE ASSIGNED ASSETS, PATENTED OR UNPATENTED, NON-INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT ANY PATENT WILL ISSUE
BASED ON ANY PATENT APPLICATION WITHIN THE SCOPE OF THIS AGREEMENT.
6. INDEMNIFICATION.
(a) From and after the Effective Date, Assignee shall
indemnify and hold harmless the Company and each member of the Patent Location
Group from and against any and all losses, liabilities, damages, claims,
demands, costs (which costs shall not include the fees and expenses of legal
counsel, if any, retained by such person), obligations, deficiencies and
expenses arising from the Assigned Assets occurring after the Effective Date.
4
<PAGE> 5
(b) A party (the "Indemnitee") that intends to claim
indemnification under this paragraph 6 shall promptly notify Assignee in writing
of any loss, claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and Assignee shall have the
right to assume control of the defense thereof. The indemnity agreement in this
paragraph 6 shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected without the consent
of Assignee, which consent shall not be unreasonably withheld. The failure to
deliver written notice to Assignee within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve Assignee of any liability to the Indemnitee under this
paragraph 6 with respect to said action only. At Assignee's request, the
Indemnitee shall cooperate fully with Assignor and its legal representatives in
the investigation and defense of any action, claim or liability covered by this
indemnification and provide full information and cooperation with respect
thereto. Failure of an Indemnitee to provide such cooperation shall relieve
Assignee of its indemnification obligation for such Indemnitee for said action,
claim, or liability only.
7. REPORTS AND PAYMENTS. After the first commercial sale or license of
the Assigned Assets by Assignee, and for so long as payments to the Location
Patent Group are required under this Agreement, Assignee shall make semi-annual
written reports to the Location Patent Group, stating in each such report the
Net Profits received by Assigned in respect of the Assigned Assets during the
period for which the report relates, and the resulting aggregate payment, if
any, due to the Location Patent Group for such period. The members of the
Location Patent Group shall treat all such reports as confidential information
of Assignee. Simultaneously with the making of such reports, Assignee shall pay
to the members of the Location Patent Group the payment, if any, stated in the
report as being due for such period.
8. CONFIDENTIALITY. Each of the Assignors agree that they will not at
any time, directly or indirectly, for their own benefit or for the benefit of
any third party, disclose or divulge to any third party, or use for any purpose,
any of the Assigned Assets without the prior written consent of the Assignee.
Further, no party to this Agreement shall make or authorize the making of any
public announcements in respect of this Agreement or otherwise communicate with
any news media without prior notification to the other Parties, and all Parties
shall cooperate as to the timing and contents of any such announcement.
9. AMENDMENT. Except as otherwise provided herein, this Agreement may
not be amended, supplemented, or otherwise modified except by an instrument in
writing signed by all parties to this Agreement.
10. WAIVER. No waiver of any term, provision, or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of such term,
provision or condition of this Agreement.
5
<PAGE> 6
11. NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be sent by certified
mail (postage prepaid, return receipt requested), or facsimile transmission with
confirmation sent by certified mail as above, or by courier, such as Federal
Express, DHL, or the like, with confirmation of receipt by signature requested,
directed to the other parties at the mailing addresses first set forth below, or
to such other mailing address as the respective party may from time to time
designate by prior notice in compliance herewith. Any such notice or
communication sent in accordance with the requirements of this paragraph 11
shall be deemed to be fully given upon dispatch, subject to proof of receipt.
12. SUCCESSORS AND ASSIGNS. This Agreement and all or any part of the
Company's and Assignee's rights and obligations hereunder may be assigned at any
time by the Company and Assignee, respectively. This Agreement and all or any
part of the Location Patent Group's rights and obligations hereunder may not be
assigned without prior written consent of Assignee, which consent shall not be
unreasonably withheld. This Agreement shall inure to the benefit of and be
binding upon each party's successors and assigns.
13. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding among the parties as to the subject matter hereof, and
supersedes, integrates and merges all prior discussions, correspondence,
negotiations, understandings or agreements. The parties each represent and
warrant that there are no conditions, definitions, warranties, promises,
agreements, understandings or representations, or remaining obligations, written
or oral, with respect to the subject matter of this Agreement, other than as
expressly provided in this Agreement.
15. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Ohio without reference to choice of law principles, as
to all matters, including, but not limited to, matters of validity,
construction, effect or performance.
16. SEVERABILITY. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be held
invalid or unenforceable under any controlling law, that provision shall be
considered severable and its invalidity shall not affect the remainder of this
Agreement, which shall continue in full force and effect.
17. FURTHER ASSURANCES. Each Assignor agrees to execute all necessary
papers, and to cooperate fully with Assignee to obtain, maintain or enforce for
itself or its licensee or designee, patents, copyrights or other legal
protection for the Assigned Assets.
[Signature page follows]
6
<PAGE> 7
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in triplicate originals effective as of the day and year first written
above.
Assignee Company
SYCORD, INC. SYGNET WIRELESS, INC.
--------------------------------- ------------------------------------
By: By:
Address: Address: 6550-B Seville Drive
---------------------------- Canfield, OH 44406
---------------------------
---------------------------
Patent Location Group:
------------------------------------
Everett G. Dennison
Address: 200 Glenview Drive
Canfield, OH 44406
------------------------------------
Gregory T. Pauley
Address: 7790 Memory Lane
Canfield, OH 44406
------------------------------------
Timothy J. Duffy
Address: 44 Elliot Road
West Middlesex, PA 16159
------------------------------------
Scott L. Jones
Address: 4011 Dover Road
Youngstown, OH 44511
7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000879313
<NAME> SYGNET WIRELESS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 635,537
<SECURITIES> 0
<RECEIVABLES> 12,865,639
<ALLOWANCES> 0
<INVENTORY> 1,636,643
<CURRENT-ASSETS> 15,863,376
<PP&E> 64,264,525
<DEPRECIATION> 0
<TOTAL-ASSETS> 338,015,188
<CURRENT-LIABILITIES> 15,581,493
<BONDS> 310,099,000
0
0
<COMMON> 91,706
<OTHER-SE> 12,242,989
<TOTAL-LIABILITY-AND-EQUITY> 338,015,188
<SALES> 48,250,952
<TOTAL-REVENUES> 48,250,952
<CGS> 10,711,376
<TOTAL-COSTS> 40,489,963
<OTHER-EXPENSES> 276,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,367,681
<INCOME-PRETAX> (6,883,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,883,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,883,435)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
