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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated
October 11, 1996 among Applied Cellular Technology, Inc., a
Missouri corporation ("Applied Cellular"), ACT Communication,
Inc., a Delaware corporation and a wholly owned subsidiary of
Applied Cellular ("Acquisition Corp." or the "Surviving
Corporation", and with Applied Cellular, collectively the
"Purchasers), Advanced Telecomm Holdings, Inc., a Delaware
corporation ("ATI" and with Acquisition Corp., collectively the
"Constituent Corporations"), ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇, individuals residing in the Commonwealth of Pennsylvania
and the sole shareholders of ATI (collectively the "ATI
Shareholders").
A. ATI is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital
stock consisting of 10,000 shares of common stock, $1.00 par
value per share ("ATI Common Stock"), of which 1,000 shares are
issued and outstanding.
B. Acquisition Corp. is a corporation duly organized and
existing under the laws of the state of Delaware and has
authorized capital stock consisting of ten thousand shares of
common stock, $0.00l par value per share ("Acquisition Common
Stock"), of which 1000 shares are issued and outstanding.
C. Applied Cellular is a corporation duly organized and
existing under the laws of the state of Missouri and has
authorized capital stock consisting of (i) 20,000,000 shares of
common stock, $ 0.001 par value per share ("Technology Common
Stock"), of which 3,312,463 shares are issued and outstanding
and (ii) 1,000,000 shares of preferred stock, $10.00 par value
("Technology Preferred Stock"), of which 9,000 shares are issued
and outstanding.
D. The ATI Shareholders own all the issued and outstanding
(i) stock of Advanced Telecomm of Nevada, Inc., a Nevada
corporation, Advanced Telecomm of Washington, DC, Inc., a
Pennsylvania corporation, Advanced Telecomm of Maryland, Inc., a
Pennsylvania corporation and Advanced Telecomm of ▇▇▇▇▇▇, Inc.
and (ii) shares of equitable interests of Advanced Telecomm of
Pittsburgh, a Pennsylvania business trust (each of the foregoing
companies, a "Subsidiary" and collectively the "Subsidiaries").
E. All of the issued and outstanding shares of ATI Common
Stock is owned by the ATI Shareholders.
F. All of the issued and outstanding shares of Acquisition
Common Stock is owned by Applied Cellular.
G. The respective Boards of Directors of ATI, Acquisition
Corp. and Applied Cellular each have adopted resolutions
approving this Agreement and Plan of Merger (this "Agreement")
and deem it advisable and generally to the welfare and advantage
of each, and of
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the shareholders of each, that ATI merge with and into
Acquisition Corp. under and pursuant to the Delaware General
Corporation Law, as amended (the "Delaware Corporation Law").
NOW THEREFORE, it is agreed that ATI shall be, as of the
Effective Date of the Merger referred to in Section 10.1, merged
with and into Acquisition Corp., which shall be the Surviving
Corporation (the "Merger"), and that the terms and conditions of
the Merger and the mode of carrying it into effect shall be as
follows:
ARTICLE I
ACQUISITION CORP. TO SUCCEED TO PROPERTIES AND OBLIGATIONS OF ATI
1.1 Succession. At the Effective Date of the Merger,
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ATI shall be merged with and into Acquisition Corp., the separate
existence of ATI shall cease and Acquisition Corp. shall continue
in existence as the Surviving Corporation and, without other
transfer or assumption, shall succeed to and possess all the
estate, properties, rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all of
the liabilities, obligations, debts, restrictions, disabilities
and duties, of each of the Constituent Corporations, all without
further act or deed, as provided in Section 259 of the Delaware
Corporation Law.
1.2 Further Assurances. If at any time the Surviving
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Corporation shall consider or be advised that any further
assignments, conveyances or assurances are necessary or desirable
to carry out the provisions hereof, the proper officers and
directors of the Constituent Corporations as of the Effective
Date of the Merger shall execute and deliver any and all proper
deeds, assignments and assurances, and do all things necessary or
proper to carry out the provisions hereof.
ARTICLE II
CERTIFICATE OF INCORPORATION, BY-LAWS,
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
2.1 Certificate of Incorporation and By-Laws. The
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Certificate of Incorporation and By-Laws of Acquisition Corp.
shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until changed as therein provided or as
provided by the Delaware Corporation Law.
2.2 Directors and Officers. The number of persons who
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shall constitute the Board of Directors of Acquisition Corp. on
and after the Effective Date shall at all times be five, two of
which will be the ATI Shareholders or persons designated by them
(such persons, the "ATI Members") and three of which shall be the
persons who constitute the Board of Directors of the Surviving
Corporation on the Effective Date (such three persons the "AC
Members"). The AC Members shall hold office thereafter until
removed as provided by the By-Laws or by law or until their
successors shall have been elected and qualified. Applied
Cellular agrees that so long
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as it shall have any obligations to the ATI Shareholders under this
Agreement that it will vote its shares of Acquisition Common in a manner to
ensure that there will be two ATI Members on the Board at all such times.
[If an Event of Default shall have occurred, the ATI Shareholders shall
have the right to remove any or all of the AC Members, and to
fill the vacancy or vacancies created thereby with persons that
they shall designate.] The officers of Acquisition Corp. in
office on the Effective Date shall be the officers of the
Surviving Corporation, holding the offices in the Surviving
Corporation which they hold in Acquisition Corp. on such date,
until their successors are elected or appointed in accordance
with the By-Laws of the Surviving Corporation and shall have been
duly qualified.
2.3 Vacancies. If, on the Effective Date, a vacancy
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shall exist in the Board of Directors or in any of the offices of
the Surviving Corporation by reason of death or inability to act,
or for any other reason, such vacancy may be filled in the manner
provided in the By-Laws of the Surviving Corporation, subject to
the provisions of Section 2.2.
ARTICLE II
COVENANTS AND AGREEMENTS
3. Covenants and Agreements of Purchasers and ATI.
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The Purchasers, the ATI Shareholders and ATI hereby covenant to
and agree with each other as follows:
3.1 Shareholders' Action.
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(a) As soon as practicable after the date hereof, ATI
shall call a meeting of the ATI Shareholders for the purpose of
acting on the adoption of this Agreement. Immediately prior to
the Effective date of the Merger, the ATI Shareholders shall
exchange all their respective shares of the capital stock of each
of the Subsidiaries for One Thousand (1,000) shares of ATI Common
Stock (the "Exchange Transaction").
(b) As soon as practicable after the date hereof,
Applied Cellular, as sole stockholder of Acquisition Corp., shall
adopt this Agreement and shall take all other action necessary or
appropriate to consummate the transactions contemplated hereby.
3.2 Preparation Required for Merger. ATI, the ATI
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Shareholders and the Purchaser shall each use their best efforts
to bring about the fulfillment of the conditions precedent
contained in this Agreement required to be performed by each of
them.
3.3 Delivery of Consideration.
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(a) On the Effective Date, Applied Cellular shall
cause to be delivered to the ATI Shareholders (i) One Hundred
Thousand (100,000) shares of Technology Preferred Stock having
the rights, preferences and privileges described on Exhibit A to
this Agreement (the "Merger Preferred Shares") (ii) One Million
Six Hundred Eighteen Thousand One Hundred
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Eighty (1,618,180) shares of Technology Common Stock (the "Merger Common
Shares"), and (iii) warrants evidencing the right to purchase One Million
(1,000,000) shares of Technology Common Stock (the "Conversion
Shares") in the form of Exhibit B to this Agreement (collectively
the "Warrants"). On the Effective Date of the Merger, Applied
Cellular will execute and deliver to the ATI Shareholders a
Registration Rights Agreement with respect to the Merger Common
Shares and the Conversion Shares in the form of Exhibit C to this
Agreement (the "Registration Rights Agreement").
(b) On the Effective Date of the Merger, Applied
Cellular agrees to execute and deliver to ▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇▇ Associates ("Consultant") a three-year consulting
agreement pursuant to which the Consultant will agree to perform
certain consulting services for Applied Cellular in exchange for
consulting fees of Twenty Thousand Dollars ($20,000) a month,
payable on the fifteenth day of each month beginning on October
15, 1996 and continuing thereafter through and including
September 15, 1999 (the "Consulting Fees") in the form of Exhibit
D to this Agreement.
3.4 Earnout Provisions.
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(a) On or before April 30, 2002, Applied Cellular will
deliver to the ATI Shareholders an aggregate additional
consideration ("Additional Consideration") equal to three (3)
times the average annual EBDIT (as defined in Section 3.4(c) for
the five year periods commencing on October 1, 1996 and ending on
September 30, 2001 (the "Payout Period"); provided however, that
(i) if the average annual EBDIT is less than $2 million, the ATI
Shareholders shall not be entitled to receive any additional
consideration and (ii) the amount payable to the ATI Shareholders
as Additional Consideration shall not exceed $15 million.
(b) As used in this Section 3.4, the term the
"Company" shall include the Surviving Corporation, ATI and the
Subsidiaries as well as any business or businesses conducted by
either Purchaser, which represent a succession to and a
continuation of the businesses presently conducted by ATI and the
Subsidiaries, as the same may be expanded as provided in Section
3.4(c) or 3.5.
(c) As used in this Section 3.4 and in Section
11.1(c), the term "EBDIT" shall mean the earnings of the Company,
before depreciation, interest and taxes, computed on the accrual
basis of accounting in accordance with generally accepted
accounting principles consistently applied (and consistent with
the accounting principles applied by the Subsidiaries in respect
of the prior fiscal years) except that the following provisions
shall govern the computation of EBDIT for purposes of this
Section 3.4:
(i) Any extraordinary nonrecurring items of income,
gain, loss or expense shall be excluded from
such computation.
(ii) Any loss, charge or expense (A) not related to
the ordinary business operations of the
Company, or (B) paid, incurred, or charged in
connection with the expansion of the business
operations presently conducted by the
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Subsidiaries as a result of the making of
acquisitions or the opening and staffing of new
offices, or any income or revenues directly
derived therefrom, shall be excluded from such
computation, unless ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
Lo ▇▇▇▇▇▇ ("Seller's Representatives") initiate
consent in writing to the transaction giving
rise to, or the payment of such loss, charge or
expense.
(iii) Any loss, charge or expense related to the
ordinary business operations of the Company by
either Purchaser or any of their affiliates and
not covered by the provisions of subparagraph
(ii) above shall be excluded from such
computation unless Seller's Representatives
initiate or consent in writing to the
transaction giving rise to, or the payment or
assumption of the obligation to pay, such loss,
charge or expense.
(iv) Any charge or expense for the amortization of
goodwill arising out of the fact that ATI has
been merged into Acquisition Corp., pursuant
hereto or otherwise, or that the consideration
paid by the Purchasers is in excess of the net
worth thereof, shall be excluded from such
computation.
(v) In the event of an election with respect to the
Division pursuant to Section 338 of the
Internal Revenue Code of 1986, as amended, such
computation shall be made as though no such
election had been made.
(vi) Any payments, charges or expenses for
allocation of home office, executive, general
and administrative expenses or other payments,
charges or expenses of either Purchaser and/or
their affiliates shall be excluded from such
computation.
(vii) The deduction for salary paid or payable to
each of ATI's Shareholders shall be limited to
$72,000 per annum, regardless of the amount
actually paid, and there shall be no deduction
for any other compensation paid or payable to
either of them.
(viii) To the extent consistent with generally
accepted accounting principles, all available
accounting elections (including, without
limitation, the capitalizing of charges and the
setting up of reserves) shall be made in such a
manner as to reflect the highest possible
earnings of the Company.
(ix) Such computation (including, without
limitation, the reflection of intercompany
transactions) shall be made as though ATI had
not been merged with Acquisition Corp. and the
Company were a single corporation with all of
the capital stock of the Company owned by
persons who are neither directly nor indirectly
related to or affiliated with either Purchaser
or any of their affiliates.
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(x) Any and all expenses paid or incurred by the
Company (other than those expressly permitted
by the above provisions) which would not have
been so paid or incurred if not for the Merger
and the other transactions contemplated by this
Agreement shall be excluded from such
computation.
(xi) Any and all equipment lease or other lease
expenses incurred by the Company shall be
capitalized.
(xii) Except as otherwise expressly provided above,
all amounts determined in accordance with
subparagraphs (i) through (x) of this Section
3.4 shall be determined in accordance with
generally accepted accounting principles
consistently applied.
(d) During the Payout Period the ATI Shareholders
shall have free and unrestricted access to the financial books
and records of the Company.
(e) As soon as may be practicable after December
31, 2001, but not later than April 30, 2002, Purchaser will
deliver to Seller a statement setting forth in reasonable detail
its calculation of the average annual EBDIT of the Company during
the Payout Period and the amount of any Additional Consideration
to be paid to Seller pursuant to this Section 3.4, which
statement shall be accompanied by payment to the ATI
Shareholders, by wire transfer of federal funds to accounts
designated by them (or to such other accounts as they may
designate), of the Additional Consideration as shown thereon. If
within 30 days after delivery of such statement the ATI
Shareholders have not given written notice to Applied Cellular
disputing such statement and indicating the basis of such
dispute, then neither Purchaser shall thereafter have any further
liability to Seller under this Section 3.4. In the event the ATI
Shareholders give Applied Cellular such notice of dispute within
such 30 day period, the ATI Shareholders and the Purchasers will
use their best efforts to settle the dispute within 30 days after
the giving of such notice. Any dispute unresolved after such 30-
day period shall be submitted to a national public accounting
firm satisfactory to the ATI Shareholders and to Applied
Cellular, or, in the absence of agreement on such firm, to a
panel of three public accounting firms, one designated by Applied
Cellular, one designated by the ATI Shareholders and one jointly
designated by the other two firms. The decision of such
accounting firm or such panel of accounting firms, as the case
may be, with respect to such dispute shall be final and binding
on the parties hereto. The Purchasers shall make any further
payments to the ATI Shareholders required in order to comply with
such decision within 10 days after such decision is rendered.
The fees and expenses of such accounting firm or panel of such
accounting firms will be equally divided between the Purchasers
and the ATI Shareholders unless the ATI Shareholders shall be
determined entitled to further payments of Additional
Consideration, in which case the Purchasers shall be responsible
for all such costs and expenses.
3.5 Operations of the Surviving Corporation Following the
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Effective Date.
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(a) Each of Seller's Representatives shall, from
the Effective Date until the end of the Payout Period (or until
such earlier time as they shall have voluntarily resigned or
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their employment has been terminated for good cause in which case
the ATI Shareholders shall name a successor or successors), be a
director and a principal executive officer of the Surviving
Corporation, and Applied Cellular shall cause each of them to be
so elected. Subject to the ultimate control and responsibility
of the Board of Directors of the Surviving Corporation and of
Applied Cellular as majority stockholder, during the Payout
Period Seller's Representatives shall have the right to manage
the business and affairs of the Company and shall direct the
formulation and execution of both short- and long-term corporate
plans, including, without limitation, the hiring, retention or
termination of employees, the setting of compensation and fringe
benefits of employees other than themselves, the expansion of the
business and the making of commitments for capital expenditures.
Applied Cellular shall cooperate with Seller's Representatives in
maintaining and increasing the Company's profitability, but this
Agreement shall not be construed as a commitment on the part of
Applied Cellular to invest in or make available to the Company
any particular amount of additional capital, or to incur any
particular expense or obligation on behalf of the Company,
whether or not Purchaser is to be reimbursed by the Company for
any such expense or obligation, other than to the extent of an
amount equal to the assets and funds available to the Company
immediately prior to the Closing, as the same may be adjusted by
the amount of any increase or decrease thereof by reason of the
operations of the Company from and after the Closing.
(b) From and after the Effective Date until such
time as all of the obligations of Applied Cellular to the ATI
Shareholders under this Agreement are fully performed and paid,
Applied Cellular agrees that it will not permit the Surviving
Corporation to do or effect any of the following without the
written consent of the ATI Shareholders:
(i) to create, incur or assume any indebtedness
except:
(a) indebtedness existing on or prior to the
Effective Date ("Prior Indebtedness"),
extensions, renewals and replacements
thereof;
(b) indebtedness secured by a purchase money
mortgage or security interest ("Purchase
Money Indebtedness"); and
(c) accounts payable arising from
transactions in the ordinary course of
business of the Surviving Corporation.
(ii) to create, incur, assume or suffer to exist any
lien against any of the assets of the Surviving
Corporation, except:
(a) liens which secure Prior Indebtedness;
and
(b) liens which secure Purchase Money
Indebtedness.
(iii) to pay dividends or make other advances or
distributions of any kind to its shareholders
(except that the Surviving Corporation may
advance to Applied Cellular from time to time
an amount of cash equal to (a) the
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dividends payable on the Merger Preferred Shares and (b)
federal and other income taxes payable by Applied
Cellular with respect to the earnings of ATI.
(iv) to merge with or into or consolidate with any
other person;.
3.6 Expenses. Whether or not the transactions
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contemplated by this Agreement are consummated, the Purchasers
shall each pay all fees and expenses incurred by the Purchasers,
the ATI Shareholders, and ATI incident to the negotiation,
preparation, execution and carrying out of this Agreement.
3.7 Conduct of Business. The ATI Shareholders and ATI
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agree that, at all times after the date hereof and prior to the
Effective Date, ATI and each of the Subsidiaries, except as
otherwise from time to time consented to by the Purchasers or as
otherwise provided herein:
(i) shall operate their business only in the usual,
regular and ordinary manner and, to the extent
consistent with past practices, use their best
efforts to preserve their present business
operations intact, keep available the services
of their present officers and employees and
preserve their present relationships with
persons having business dealings with them; and
(ii) shall not declare, pay or set aside for payment
any dividend or other distribution (whether in
cash, stock or property) in respect of any of
their capital stock, except as set forth on
Schedule 3.7.
3.8 ATI Employees. The ATI Shareholders will each be
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part-time employees of Acquisition Corp. after the Merger upon
such terms as Acquisition Corp. and the ATI Shareholders shall
agree.
3.9 Pledge Agreement. As security for the full and
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faithful performance of Applied Cellular's obligations to the ATI
Shareholders under this Agreement, to redeem, and pay dividends
on, the Merger Preferred Shares Applied Cellular agrees to
execute and deliver on the Effective Date, a Pledge Agreement in
the form of Exhibit E (the "Pledge Agreement").
ARTICLE IV
CONVERSION OF SHARES
4.1 Conversion of ATI Common Stock. At the Effective
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Date of the Merger, all ATI Common Stock outstanding immediately
prior to the Effective Date shall by virtue of the Merger be
converted into the right to receive from the Purchasers the
Merger Preferred Shares, the Merger Common Shares, the Warrants,
and the Additional Consideration. On the Effective Date of the
Merger, the ATI Shareholders shall surrender to the Surviving
Corporation the certificates representing ATI Common Stock.
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4.2 Conversion of Acquisition Common Stock. At the
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Effective Date of the Merger, each share of Acquisition Common
Stock outstanding immediately prior to the Effective Date shall
by virtue of the Merger be converted into one share of Common
Stock of the Surviving Corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLIED CELLULAR AND
ACQUISITION CORP.
5. Representations and Warranties of Applied Cellular
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and Acquisition Corp. Applied Cellular and Acquisition Corp.
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hereby jointly and severally represent and warrant to ATI as
follows:
5.1 Organization, Power. Applied Cellular and
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Acquisition Corp. are corporations duly organized, validly
existing and in good standing under the laws of the states of
Missouri and Delaware, respectively and has each all requisite
corporate power and authority to enter into this Agreement, to
perform its obligations under this Agreement and to consummate
the Merger.
5.2 Authority Relative to Agreement. The execution,
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delivery and performance of this Agreement and consummation of
the transactions contemplated hereby have been duly and
effectively approved by all necessary corporate action on the
part of each of the Purchasers, and this Agreement constitutes
the legal, valid and binding obligation of each of them
enforceable in accordance with its terms.
5.3 Authorized Capitalization. The authorized capital
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stock of Applied Cellular consists of (i) 20,000,000 shares of
Technology Common Stock, of which 3,312,463 shares are issued and
outstanding as of the date hereof and (ii) 1,000,000 shares of
Technology Preferred Stock. All such outstanding shares are duly
authorized, validly issued, fully paid and non-assessable. The
authorized capital stock of Acquisition Corp. consists of 10,000
shares of Acquisition Common Stock of which 1,000 shares are
issued and outstanding as of the date hereof. All such
outstanding shares are duly authorized, validly issued, fully
paid and non-assessable. All of the issued and outstanding
capital stock or other securities of each Purchaser have been
issued in accordance with all applicable law, including all
federal and state securities laws. The Merger Preferred Shares,
the Merger Common Shares, the Warrants, and any Conversion Shares
will, when issued, be duly authorized, validly issued, fully paid
and non-assessable, and will have been issued in accordance with
all applicable law, including all federal and state securities
laws.
5.4 Effect of Agreement. The execution, delivery and
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performance of this Agreement and consummation of the
transactions contemplated hereby do not require the consent,
waiver, approval, license or authorization of any person or
public authority (other than the approval of the shareholder of
Acquisition Corp.), which approval has been duly obtained, do not
violate,
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with or without the giving of notice and/or the passage
of time, any provision of law applicable to Acquisition Corp. or
Applied Cellular and do not conflict with or result in a breach
or termination of any provision of, or constitute a default
under, or result in the creation of any lien, charge or
encumbrance upon any of the property, assets or capital stock of
either Acquisition Corp. or Applied Cellular pursuant to, any
corporate charter, by-laws, mortgage, deed of trust, indenture or
other agreement or instrument to which either of them is a
party, or other order, judgment, decree, statute, regulation or
any other restriction of any kind or character, to which either
of them is a party or by which either of them or any of their
assets may be bound.
5.5 Options, Warrants, Rights and Understandings.
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Neither of the Purchasers has any outstanding or authorized, and
is not a party to, any options warrants, calls, rights,
commitments, arrangements, or understandings of any character
relating to the issuance of any shares of its capital stock, or
any securities convertible into or evidencing rights to acquire
any shares of its capital stock, except as specified in Schedule
5.5 to this Agreement.
5.6 Litigation. There are no actions, suits or
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proceedings to the best of the knowledge of either Purchaser
pending or threatened against either of them or any of their
affiliates that would, individually or collectively, if decided
adversely, have a material adverse effect on either of them or
their prospects for the future or have a material adverse effect
on the value of their respective capital stock or businesses.
Except as specified on Schedule 5.6, there are no currently
effective orders, judgments or decrees of any court or
governmental agency which specifically apply to either Purchaser
or any of their respective assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ATI
6. Representations and Warranties of ATI. The ATI
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Shareholders and ATI hereby represent and warrant to the
Purchasers as follows:
6.1 Organization, Power, Etc. Each of ATI and the
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Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of their respective states of
incorporation or formation, as the case may be, and has all
requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as now being
conducted and each is in good standing in each jurisdiction where
its facilities are located to carry on its business as presently
conducted. ATI has all requisite corporate power and authority
to enter into this Agreement and, has all requisite corporate
power and authority to perform its obligations hereunder and to
consummate the Merger. The copies of the Articles of
Incorporation and By-Laws of ATI, as amended to date, certified
by the Secretary of ATI, which have been delivered by ATI to the
Purchasers are complete and correct.
6.2 Authority Relative to Agreement. The execution,
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delivery and performance of this Agreement by ATI and
consummation by it of the transactions contemplated hereby have
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been duly and effectively approved by all necessary corporate
action and constitute the legal, valid and binding obligation of
ATI enforceable in accordance with its terms.
6.3 Authorized Capitalization. The authorized capital
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stock of ATI consists of 10,000 shares of Common Stock, par
value of $ 1.00 per share, of which 1,000 shares are issued and
outstanding. All of the outstanding shares of ATI Common Stock
are duly authorized, validly issued, fully paid and non-
assessable.
6.4 Options, Warrants, Rights. Except as contemplated
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by this Agreement, neither ATI nor any Subsidiary has any
outstanding or authorized options, warrants, calls, rights,
commitments or any other agreements of any character obligating
it to issue any shares of its capital stock, or any securities
convertible into or evidencing the right to purchase any shares
of its capital stock.
6.5 Subsidiaries. Schedule 6.5 to this Agreement sets
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forth (i) the name and jurisdiction of incorporation of each
Subsidiary, (ii) the jurisdictions in which ATI and each
Subsidiary is qualified to do business. All of the outstanding
shares of capital stock of the Subsidiaries are duly authorized,
validly issued, fully paid and non-assessable. All of the
outstanding shares of capital stock or equity interests, as the
case may be, of the Subsidiaries are owned by the ATI
Shareholders, and on the Effective Date of the Merger, will be
owned by ATI, and are owned free and clear of all claims, liens,
charges and encumbrances of any nature whatsoever; there are no
voting trusts or other agreements or understandings with respect
to the voting of the capital stock of ATI or any Subsidiary; and
there are no outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any character
obligating ATI or any of the Subsidiaries to issue or sell any
shares of capital stock of any of the Subsidiaries. Each of the
Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, (ii) is in good standing as a foreign
corporation in each jurisdiction where necessary to carry on its
business as presently conducted and (iii) has all requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted.
6.6 Employee Benefit Plans. Each employee benefit plan
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as to which ATI or any Subsidiary may have any liability complies
in all material respects with all applicable requirements of law
and regulations and has been operated in compliance with such
laws and regulations, and (i) no Reportable Event (as defined in
the Employee Retirement Income Security Act of 1974, as amended)
has occurred with respect to any such plan, (ii) neither ATI nor
any Subsidiary of ATI has withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to
terminate any such plan.
6.7 Litigation. Except as set forth on Schedule 6.7
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and except for proceedings involving claims for money damages
alone of less than $50,000, there are no actions, suits or
proceedings to the best of the knowledge of the ATI Shareholders
pending or threatened against ATI or any of the Subsidiaries that
would, individually or collectively, if decided adversely, have a
material adverse effect on ATI and the Subsidiaries or have a
material adverse effect on the Merger. Except as specified on
Schedule 6.7, there are no currently effective orders, judgments
11
12
or decrees of any court or governmental agency which specifically
apply to ATI or any of the Subsidiaries or any of their assets.
6.8 Financial Statements. The audited financial
--------------------
statements of the Subsidiaries for fiscal years ended December
31, 1994 and 1995 present fairly the consolidated financial
positions of the Subsidiaries as of the dates and for the periods
indicated and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis.
The interim unaudited monthly financial statements of the
Subsidiaries, prepared by ATI for the months ended June 30 and
July 31 (copies of which have been delivered by ATI to Applied
Cellular), present fairly the consolidated financial position of
the Subsidiaries as of the dates and for the periods indicated
and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis. The
financial statements referred to in this Section 6.9 provide for
all material obligations and liabilities of the Subsidiaries as
of their respective dates for which provision is required under
generally accepted accounting principles to be so made, and as of
their respective dates. The Subsidiaries had no material
obligations or liabilities not reflected or reserved against on
such Financial Statements or in the notes thereto which are
required under generally accepted accounting principles to be so
reflected or reserved against, except such obligations and
liabilities as set forth on Schedule 6.8 or as have been
disclosed in this Agreement delivered to the Purchasers pursuant
to this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF ATI
7. Conditions Precedent to the Obligations of ATI.
----------------------------------------------
All obligations of ATI under this Agreement are subject to and
shall be conditioned upon the satisfaction at or prior to the
Effective Date of each of the following conditions, each of which
may be waived by ATI.
7.1 Compliance with Agreement. The Purchasers shall
-------------------------
have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it
or at or prior to the Effective Date.
7.2 Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of the Purchasers contained in
this Agreement shall have been true in all material respects when
made, and in addition, shall be true in all material respects on
and as of the Effective Date with the same force and effect as
though made on and as of the Effective Date, except as affected
by transactions contemplated hereby and except to the extent that
any such representations and warranties are made as of a
specified date and as to such representations and warranties the
same shall have been true in all material respects as of the
specified date.
7.3 No Litigation. No action, suit, investigation or
-------------
other proceeding shall be pending which seeks to restrain or
prohibit any of the transactions contemplated hereby.
12
13
7.4 Absence of Governmental Action. The United States
------------------------------
Justice Department or any other governmental agency, Federal or
state, shall not have initiated action to prevent or modify the
transactions contemplated by this Agreement.
7.5 Absence of Certain Changes or Events. After the
------------------------------------
date hereof, no event shall have occurred, which ATI shall have
determined in good faith to have materially and adversely
affected, or will materially and adversely affect, the business,
operations, properties, assets, financial condition or prospects
of Applied Cellular or the value of its capital stock.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
8. Conditions Precedent to the Obligations of the
----------------------------------------------
Purchasers. All obligations of the Purchasers under this
----------
Agreement are subject to and shall be conditioned upon the
satisfaction at or prior to the Effective Date of each of the
following conditions, each of which may be waived by the
Purchasers.
8.1 Compliance with Agreement. ATI and the ATI
-------------------------
Shareholders shall have each performed all obligations and
complied with all covenants required by this Agreement to be
performed or complied with by them at or prior to the Effective
Date.
8.2 Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of ATI contained in this Agreement
shall have been true in all material respects when made, and in
addition, shall be true in all material respects on and as of the
Effective Date with the same force and effect as though made on
and as of the Effective Date, except as affected by transactions
contemplated hereby and except to the extent that any such
representations and warranties are made as of a specified date
and as to such representations and warranties the same shall have
been true in all material respects as of the specified date.
8.3 No Litigation. No action, suit, investigation or
-------------
other proceeding shall be pending which seeks to restrain or
prohibit any of the transactions contemplated hereby.
8.4 Absence of Governmental Action. The United States
------------------------------
Justice Department or any other governmental agency, Federal or
state, shall not have initiated action to prevent or modify the
transactions contemplated by this Agreement.
8.5 Absence of Certain Changes or Events. After the
------------------------------------
date hereof, ATI shall have taken no action, and no event shall
have occurred, which Applied Cellular shall have determined in
good faith to have materially and adversely affected, or will
materially and adversely affect, the business, operations,
properties, assets, financial condition or prospects of ATI and
the Subsidiaries taken as a whole.
13
14
8.6 Capital Stock of the Subsidiaries. The ATI
---------------------------------
Shareholders and ATI shall have consummated the Exchange
Transaction.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Optional Termination. This Agreement may be
--------------------
terminated and abandoned at any time prior to the Effective Date:
(i) by mutual written consent of ATI and Applied Cellular;
and
(ii) by ATI or Applied Cellular, if the Effective Date shall
not have occurred on or prior to October 31, 1996,
unless failure of such occurrence shall be due to the
failure of the party seeking to terminate this
Agreement to perform or observe its covenants,
agreements and conditions set forth herein to be
performed or observed by such party at or before the
Effective Date.
9.2 Effect of Abandonment. In the event the Merger is
---------------------
terminated and abandoned pursuant to Section 9.1, this Agreement
shall forthwith become wholly void and of no force and effect
except as to Section 3.6 hereof, and there shall be no liability
on the part of any of the parties hereto or any of their
respective directors, officers, shareholders or controlling
persons or any other person, firm or corporation as a result of
this Agreement.
9.3 Notice of Abandonment. Any party hereto may
---------------------
exercise its right of abandonment under this Article IX only by
delivering written notice to that effect to the other party,
provided that such notice shall be received by the party to whom
notice is given prior to the Effective Date.
9.4 Amendment. Before the Effective Date, the
---------
respective Boards of Directors of ATI and Acquisition Corp. may
authorize one or more amendments of this Agreement before or
after adoption by shareholders of ATI and Acquisition Corp.
14
15
ARTICLE X
EFFECTIVE DATE
10.1 Effective Date of Merger. If this Agreement is not
------------------------
abandoned pursuant to the provisions of Article IX hereof, either
this Agreement or duly executed certificates of merger shall be
filed in accordance with the Delaware Corporation Law after all
the conditions set forth in Articles VII and VIII have been
satisfied or waived. The Merger shall become effective at the
time this Agreement or a certificate of merger has been so filed,
such time being herein called the "Effective Date" of the Merger.
Notwithstanding the foregoing, for all purposes other than
compliance with Delaware Corporate Law statutory merger
provisions, all profits and losses of ATI shall be allocated as
if the Merger had been effective on September 1, 1996.
ARTICLE XI
ACQUISITION SHARES
11.1 Put Option
----------
(a) From and after January 1, 2001 until January 1,
2002, the ATI Shareholders shall have the right to sell to
Applied Cellular up to Six Hundred Eighteen Thousand One Hundred
Eighty(618,180) Shares of the Merger Shares (the "Option
Shares"), and Applied Cellular shall purchase such Shares upon
the terms and conditions set forth in this Section 11.1 (the "Put
Option").
(b) The Put Option shall be exercised by giving
written notice to Applied Cellular specifying the number of
Option Shares as the case may be, to be sold by the ATI
Shareholder exercising the Put Option ("Holder"). In the event
any Holder elects to exercise any Put Option as to only a portion
of such Holder's Option Shares, the Holder may subsequently
exercise the Put Options as to the remaining Option Shares or a
portion thereof at such time or times as such Holder may
determine.
(c) The purchase price for each Option Share sold by
any Holder pursuant to the Put Option shall be (ii) an amount
equal to (x) 80% of the average annual EBDIT for the two (2)
years period commencing on January 1, 2000 and ending on December
31, 2001 divided by (y) 618,180.
(d) The Put Option shall only be exercisable by the
ATI Shareholders, Shares on the Effective Date ("Nominees") and
the heirs of any ATI Shareholder (an "Heir"); in no event shall
any Put Option be exercisable by any person or entity that is not
an ATI Shareholder or an Heir; provided however that the Put
Option may be exercised by a trust which has been, or may be, set
up by an ATI Shareholder or Nominee for the benefit of an ATI
Shareholder, Nominee or Heir.
15
16
11.2 Adjustment of Shares. In the event of any change
--------------------
in the outstanding Technology Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or other like change in capital
structure of the Applied Cellular (i) on or before the Effective
Date of the Merger, the number of Merger Common Shares to be
delivered to the ATI Shareholders or (ii) after the Effective
Date, the number of Conversion Shares and Option Shares, shall in
each case be equitably adjusted to prevent dilution or
enlargement of rights under this Agreement to reflect such
change.
ARTICLE XII
DEFAULT
(a) The following shall each constitute an event of
default (an "Event of Default") by Applied Cellular:
(i) Applied Cellular shall fail to pay the dividends
payable on the Merger Preferred Shares within
one hundred twenty (120) days after such payment
is due.
(ii) Applied Cellular shall fail to redeem the Merger
Preferred Shares on or before October 1, 1999
(iii) Applied Cellular ceases to function as a going
concern or to conduct its operations in the
ordinary course of its business; makes an
assignment for the benefit of or enters into any
arrangement with its creditors; becomes
insolvent or takes advantage of any bankruptcy,
insolvency or similar law; or suffers an
involuntary petition in bankruptcy, an
application for liquidation or judicial
management (whether provisional, voluntary or
otherwise) or the appointment of a receiver, to
be filed against it and such petition or
application is not dismissed within ten days
after the filing of such petition or
application.
(b) If an Event of Default shall occur, then in
addition to any other remedies the Shareholders may have at law
or in equity, the Shareholders shall have the right to exercise
all remedies available to them under the Pledge Agreement:
16
17
ARTICLE XIII
MISCELLANEOUS
13.1 Execution in Counterparts. For the convenience of
-------------------------
the parties and to facilitate filing, this Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same document.
13.2 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed
to have been duly given and received (a) upon delivery, if
personally delivered, (b) on the tenth day after being deposited
with the U.S. Postal Service, if sent by certified or registered
mail, return receipt requested, (c) on the next day after being
deposited with a reliable overnight delivery service or (d) upon
receipt of an answerback, if transmitted by telefax, postage
prepaid in all cases other than telefax, addressed to the other
party at the following addresses, or telefax numbers in the case
of a telefax (or at such other address or telefax number as shall
be given in writing by any party to the others):
(a) If to the Purchasers, to:
Applied Cellular Technology, Inc.
▇▇▇▇▇ River Professional Center
▇▇▇▇▇▇▇ ▇▇▇ & ▇▇, ▇▇▇▇▇ ▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ Sale
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to ATI, to:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇▇
17
18
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
13.3 Applicable Law. This Agreement and the legal
--------------
relations among the parties hereto shall be governed by and
construed in accordance with the laws of the state of Delaware.
13.4 Non-Survival of Representation and Warranties. All
---------------------------------------------
representations and warranties of the parties contained in this
Agreement and those contained in any officer's certificates
delivered pursuant hereto shall terminate and be of no further
force and effect from and after October 1, 1998, the Effective
Date or from and after such earlier date on which the Merger is
abandoned or terminated pursuant to Article IX hereof.
18
19
IN WITNESS WHEREOF, this Agreement and Plan of Merger has
been approved by resolution duly adopted by the Board of
Directors of each of the corporate parties hereto, has been
executed by duly authorized officers of each of the corporate
parties hereto and by each of the ATI Shareholders, and has been
attested by the Secretary or an Assistant Secretary of each of
the corporate parties hereto, and each of the corporate parties
hereto has caused its corporate seal to be hereunder affixed, all
as of the date first above written.
ATTEST: APPLIED CELLULAR TECHNOLOGY, INC.
/s/
----------------------------------- By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: President
---------------------------
ATTEST: ACT COMMUNICATION, INC.
/s/
----------------------------------- By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: President
ATTEST: ATI HOLDINGS, INC.
/s/
----------------------------------- By /s/ ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇
-------------------------------
Title: President
WITNESS: ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇
/s/ /s/ ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇
----------------------------------- ---------------------------------
WITNESS: ▇▇▇▇▇ ▇▇▇▇▇
/s/ /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------- ---------------------------------
20
EXHIBIT A
---------
RIGHTS, PRIVILEGES AND PREFERENCES OF MERGER PREFERRED SHARES
(1) Dividends. The holders of record of Second Series
---------
Preferred Stock (hereinafter sometimes referred to as the "Second
Series Preferred") shall receive dividends in cash which the
Board of Directors shall declare, at the rate of $8.00 per share,
per annum, and no more, payable in equal quarterly payments of
$2.00 per share on the first day of each October, January, April
and July of each calendar year, commencing on the first such date
after the issuance of the Second Series Preferred; provided,
however, that the dividend payable on October 1, 1996 shall
accrue and be payable on January 1, 1997. Such cash dividends
shall be cumulative whether or not in any annual period there is
surplus or earnings legally available therefor. The first
dividend payable on each share of Second Series Preferred shall
accrue and be cumulative from the date of issuance of such share.
If, as of any such quarterly payment date, full dividends upon
the Second Series Preferred at the aforesaid rate have not been
paid, or set aside for payment, the amount of the deficiency
shall be paid (with interest), or set aside for payment, before
any amount is set aside for or applied to the purchase,
redemption or other acquisition for value of any Common Stock or
other capital stock and before any dividend (other than a
dividend in shares of Common Stock or other capital stock) is
paid or declared, or any other distribution is ordered or made,
upon any Common Stock or other capital stock.
(2) Mandatory Redemption. The Second Series Preferred
--------------------
shall be redeemed by the corporation at such time and from time
to time as the corporation shall issue any shares of Common
Stock, other capital stock of the corporation, or any other
security which gives the holder thereof the right to acquire
shares of Common Stock, or other capital stock of the corporation
(any of the foregoing a "Security") in exchange for cash or other
cash equivalent. Two-thirds of the cash or other cash equivalent
paid by the purchasers of any Security shall be utilized by the
corporation solely for the purpose of redemption of the Second
Series Preferred. If and to the extent the Second Series
Preferred has not been redeemed by the corporation by the third
anniversary of the initial issuance of the Second Series
Preferred, each holder of Second Series Preferred Stock shall
have the right to require the corporation to redeem such holder's
Second Series Preferred by paying therefor, with shares of
Acquisition Common Stock (as defined in that certain Agreement
and Plan of Merger dated October 11, 1996 (the "Merger
Agreement") among the corporation, ACT Communications, Inc. a
Delaware corporation and a wholly owned subsidiary of the
corporation, Advanced Telecomm Holdings, Inc., a Delaware
corporation, ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, individuals
residing in the Commonwealth of Pennsylvania and the sole
shareholders of Advanced Telecomm Holdings, Inc.) For purposes
of redemption of the Second Series Preferred, each share of
Acquisition Common Stock shall be valued at Ten Thousand Dollars
( $10,000). All shares of Second Series Preferred redeemed,
purchased or otherwise acquired by the corporation shall be
retired and shall be restored to the status of authorized and
unissued shares.
(3) Liquidation. In the event of any voluntary
-----------
liquidation, dissolution or winding up of the corporation, the
holders of record of the Second Series Preferred shall be
entitled to be
21
paid $100.00 in respect of each share of Second Series
Preferred, or in the event of the involuntary liquidation,
dissolution or winding up of the corporation, the holders of
record of Second Series Preferred shall be entitled to be paid
$100.00 in respect of each share of Second Series Preferred,
plus, in each case, an amount equal to all dividends in arrears
and accrued thereon to the date of such liquidation, dissolution
or winding up (whether or not surplus or earnings are legally
available for dividends) and no more, before any amount shall be
paid to the holders (i) of Common Stock or (ii) any other Series
of Preferred Stock, except First Series Preferred Stock issued
prior to October 10, 1996 (the "First Series Shares"). The
Second Series Preferred shall rank on a parity with the First
Series Shares with regard to distributions on the liquidation,
dissolution or winding up of the corporation.
(4) Common Stock. Whenever reference is made to Common
------------
Stock, Common Stock shall mean all shares now or hereafter
authorized of the class of the capital stock of this corporation
presently authorized and designated as Common Stock and stock of
any other class into which such shares may hereafter have been
changed.
(5) Voting Rights. If, and only if an Event of Default
-------------
(as defined in the Merger Agreement) shall have occurred, each
share of Second Series Preferred shall be entitled to twenty
votes at all shareholders meetings for all corporate purposes.
(6) No Preemptive Rights. No holder of Second Series
--------------------
Preferred shall have a preemptive or preferential right to
subscribe for or to purchase shares of stock of the corporation,
whether now or hereafter authorized, or any securities
convertible into, or warrants or other rights to purchase or
subscribe to, any such stock.
22
EXHIBIT B
---------
APPLIED CELLULAR TECHNOLOGY, INC.
WARRANT CERTIFICATE
-------------------
(ATI SERIES)
For Purchase of Shares of Common Stock
of
Applied Cellular Technology, Inc.
October ----, 1996
This certifies that, for value received and subject to the terms and
conditions set forth in this Warrant Certificate (this "Warrant"), ▇▇▇▇▇ ▇▇▇▇▇
[same warrant for ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇] or his registered assigns, is entitled,
upon the due exercise of this Warrant in accordance with Paragraph 2, to
purchase from Applied Cellular Technology, Inc. (the "Company") 500,000 shares
of the Company's Common Stock, par value [$.001] per share, (the "Common
Stock"), upon presentation and surrender of this Warrant, together with a
completed and executed Election to Purchase in the form annexed as Schedule I,
at the principal office of the Company or at such other office as shall have
been designated by the Company by notice pursuant to this Warrant, and upon
payment therefor to the Company of an amount equal to purchase price (the
"Purchase Price") for each share of Common Stock (determined in accordance with
Paragraph 1 of this Warrant) acquired pursuant to such exercise by cash or by
certified check or bank draft, in lawful money of the United States of America.
This Warrant is subject to the following terms and conditions:
23
1. Purchase Price.
--------------
The initial Purchase Price for each share of Common Stock which may be
purchased by the holder of this Warrant upon the exercise of this Warrant, in
whole or in part, shall be Five Dollars and Thirty One Cents ($5.31), subject
to adjustment as provided below.
(a) Before any holder of this Warrant shall be entitled to exercise
this Warrant into Common Stock such holder shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Transfer
Agent, if any, or otherwise at the principal office of the Company, and
shall give written notice to the Company at said office of such election
to exercise the same and shall state in writing therein the name or names
in which such holder wishes the certificate or certificates for Common
Stock to be issued. The Company will, as soon as practicable thereafter,
issue and deliver at said office to such holder of this Warrant, or to its
nominee or nominees, certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. This Warrant shall
be deemed to have been exercised as of the date of the surrender of such
shares for exercise as provided above, and the person or persons entitled
to receive the Common Stock issuable upon such exercise shall be treated
for all purposes as the record holder or holders of such Common Stock on
such date.
(b) In case of any capital reorganization or any reclassification of
the capital Common Stock of the Company or in case of the consolidation or
merger of the Company with or into another corporation or the conveyance
of all or substantially all of the assets of the Company to another
corporation, this Warrant shall thereafter be exercisable for the number
of shares of Common Stock or other securities or property to which a
holder of the number of shares of Common Stock of the Company deliverable
upon exercise of this Warrant shall have been entitled upon such
reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined in good faith
by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests
thereafter of the holders of this Warrant, to the end that the provisions
set forth herein (including provisions with respect to changes in and other
adjustments of the exercise rate) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of Common Stock or
other property thereafter deliverable upon the exercise of this Warrant.
(c) In case the Board of Directors of the Company shall propose any of
the following actions,
(i) declaration of a dividend (or any other distribution) payable upon
its Common Stock
2
24
(ii) authorization of the granting to the holders of its Common Stock
of rights to subscribe for or purchase any shares of Common Stock
of any class or to receive any other rights;
(iii) any capital reorganization of the Company, reclassification of
the capital Common Stock of the Company, consolidation or merger
of the Company with or into another corporation, or sale or
conveyance of all or substantially all of the property and
assets of the Company to a purchaser; or
(iv) the dissolution, liquidation or winding up of the Company;
then, and in any such case, the Company shall cause to be mailed to the
Transfer Agent, if any, for this Warrant and to the holders of record of
this Warrant at-least ten days prior to the date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights, or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution or rights are to be determined,
or (y) the date on which such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up
is to take place, and the date, if any, to be fixed as of which holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(d) The Company shall at all times reserve and keep available, free of
preemptive rights, out of its authorized but unissued Common Stock or out
of shares of Common Stock held in its Treasury, solely for the purpose of
effecting the exercise of the this Warrant, the full number of shares of
Common Stock deliverable upon the exercise of this Warrant. The Company
shall from time to time, in accordance with the laws of the State of
Delaware, increase the authorized amount of its Common Stock if at any time
the authorized number of shares of Common Stock remaining unissued shall
not be sufficient to permit the exercise of this Warrant.
(e) The Company will pay any and all issue taxes that may be payable in
respect of any issue or delivery of shares of Common Stock on exercise of
this Warrant pursuant hereto. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock in a name other than that
in which this Warrant so exercised were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue
has paid to the Company the amount of any such tax, or has established to
the satisfaction of the Company, that such tax has been paid.
3
25
2. Exercise Period. This rights evidenced by this Warrant may be exercised
---------------
at any time, and from time to time, beginning on the date hereof until
5:00 P.M., EDT, October 1, 2001.
3. Warrant Register. The Company shall at all times while this Warrant
----------------
remains outstanding and exercisable keep and maintain at its principal office
a register in which the registration, transfer, exchange and exercise of this
Warrant shall be provided for. The Company shall not at any time close
such register so as to prevent or delay the exercise or transfer of this
Warrant.
4. Covenants of the Company. The Company covenants and agrees that all
------------------------
shares of Common Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all preemptive rights of
any shareholder and all taxes, liens and charges with respect to the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue). The Company will not, by amendment to its Certificate of
Incorporation or through any reorganization, reclassification, consolidation,
merger, sale of assets, dissolution, issue or sale of securities or other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith carry out
all such terms and take all such action as may be necessary or appropriate in
order to protect the rights of the holder of this Warrant.
5. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall
---------------------------------------------
become lost, stolen, mutilated or destroyed, the Company shall, on such
terms as it may in its discretion impose (including terms providing for
appropriate indemnification of the Company by the holder of this Warrant),
issue a new warrant of like denomination, tenor, and date as the warrant so
lost, stolen, mutilated or destroyed. Any such new warrant shall constitute
an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed warrant shall be at any time
enforceable by anyone.
4
26
6. Applicable Law. The validity, interpretation and prformance of this
--------------
Warrant shall be governed by the laws of the State of Delaware.
7. Successors and Assigns. This Warrant and the rights evidenced hereby
----------------------
shall inure to the benefit of and be binding upon the Company and the
holder hereof, their respective successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered by its President and attested by its Secretary as of the
date first written above.
ATTEST: APPLIED CELLULAR TECHNOLOGY, INC.
---------------------------------- By-------------------------------
Secretary President
5
27
SCHEDULE I
[Subscription Form to be Executed Upon Exercise of Warrant]
The undersigned registered holder of the within Warrant, hereby (1)
subscribes for -------- shares which the undersigned is entitled to purchase
under the terms of the within Warrant, (2) makes the full cash payment therefor
called for by the within Warrant, and (3) directs that the shares issuable upon
exercise of said Warrant be issued as follows:
---------------------------------
(Name)
---------------------------------
(Address)
---------------------------------
(Signature)
Dated:
6
28
SCHEDULE II
[Assignment]
(To be executed by the registered holder to effect a transfer of the within
Warrant)
FOR VALUE RECEIVED -------------------------------------------hereby sells,
assigns, and transfers unto-------------------------------of-------------------
-----------------------------, the right to purchase ---- shares evidenced by
the within Warrant, and does hereby irrevocably constitute and appoint---------
-------------------- to transfer such right on the books of the Company, with
full power of substitution.
Dated:-----------------, 19--.
----------------------------------
Signature
7
29
EXHIBIT C
---------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
made this 16th day of October, 1996 by and among Applied Cellular
Technology, Inc., a Missouri corporation (the "Company") and
▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, individuals residing in the
Commonwealth of Pennsylvania (collectively, the "ATI
Shareholders").
Preamble
A. Pursuant to that certain AGREEMENT AND PLAN OF MERGER
dated October 11, 1996 among the Company, ACT Communications,
Inc., a Delaware corporation and a wholly owned subsidiary of
Applied, Advanced Telecomm Holdings, Inc., a Delaware corporation
("ATI"), and the ATI Shareholders (the "Merger Agreement"), the
ATI Shareholders are to receive (i) shares of the Company's
Common Stock ("Common Stock"), (ii) certain warrants to purchase
Common Stock and (iii) certain other rights to obtain shares.
B. The execution and delivery of this Agreement is a
condition precedent to the consummation of the transactions
contemplated by the Merger Agreement.
Now therefore, in consideration of the mutual covenants and
agreements of this Agreement and the Merger Agreement, and
intending to be legally bound by this Agreement, the parties to
this Agreement agree as follows.
1. Definitions. All capitalized terms not otherwise
------------
defined in this Agreement shall have the meanings ascribed to
them in the Merger Agreement.
2. Restrictions and Registration Statement. The
---------------------------------------
Merger Common Shares and any Common Stock issued upon exercise of
the Warrants or the First Put Option (collectively the "Option
Shares", and with the Merger Common Shares, the "ATI Shares")
shall be restricted and subject to all transfer restrictions
imposed by applicable federal and state securities laws. The
Company shall have the right to affix a legend so stating on all
certificates for the ATI Shares. The Company will include the
Merger Common Shares and all Option Shares (whether or not the
Warrants and/or the First Put Option shall have been exercised)
in any registration statement or statements filed with the
Securities and Exchange Commission (the "SEC") by the Company
from and after the Effective Date.
3. Costs. The Company shall bear all of the cost,
-----
fees and expenses involved in the preparation and filing of the
statements and documents described in Section 1 above (the
"Registration Expenses"); provided, however, each ATI Shareholder
shall pay his proportionate share of all transfer taxes and
brokerage commissions which are incurred as a result of the sale
of any of the ATI Shares.
30
4. Demand Registrations.
--------------------
(a) Requests for Registration. The ATI
-------------------------
Shareholders shall be entitled to request registration under the
Securities Act of 1933 (the "Securities Act") of all or a portion
of the ATI Shares ("Demand Registrations") at any time,
--------------------
subject to the terms and conditions of this Agreement.
(b) Long-Form Demand Registration. Subject to
-----------------------------
Section 4(a) above, and the other terms and conditions of this
Agreement, the ATI Shareholders shall be entitled to request
three Demand Registrations on Form S-1 or any similar long form
("Long-Form Demand Registrations").
------------------------------
(c) Short-Form Registration. Subject to Section
-----------------------
4(a) above and the other terms and conditions of this Agreement,
the ATI Shareholders shall be entitled to request an unlimited
number of Demand Registrations on Form S-2 or S-3, or any similar
short form (a "Short Form Demand Registration").
------------------------------
(d) Other Conditions. The Company shall not be
----------------
obligated to effect any Demand Registration requested pursuant to
Section 4(b) or (c) above within six months after the effective
date of any prior such Demand Registration. The Company shall
pay all registration expenses of any Demand Registration. A
registration shall not count as one of the permitted Long-Form
Registrations unless at least 75% of the ATI Shares requested to
be included in such registration are registered and sold
thereunder. The Company shall pay all Registration Expenses in
connection with any registration initiated as a Demand
Registration whether or not it has become effective. All Long-
form Demand Registrations shall be underwritten registrations.
All Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short
form.
(e) Notices and Participation. Each request for a
-------------------------
Demand Registration shall be in writing and shall specify the
approximate number of ATI Shares requested to be registered and
the anticipated per share price range for such offering. The
Company shall use its best efforts to include in such
registration all ATI Shares with respect to which the Company has
received written requests for registration thereunder.
(f) Selection of Underwriters. The ATI
-------------------------
Shareholders shall have the right to select the investment
banker(s) and manager(s) to administer the offering made pursuant
to such registration, subject to the Company's approval which
shall not be unreasonably withheld.
5. Piggyback Registrations.
-----------------------
(a) Priority on Registrations. If a Piggyback
-------------------------
Registration is an underwritten registration on behalf of the
Company or its affiliates, and the managing underwriters advise
the Company in writing that in their opinion all or a number of
the securities requested to be included in such registration by
ATI Shareholders exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable
to the Company, the Company
2
31
shall include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the ATI Shares requested to be included in
such registration, and (iii) third, other securities requested and
permitted to be included in such registration.
(b) Other Registrations. If the Company has
-------------------
previously filed a registration statement with respect to ATI
Shares pursuant to Section 3 or this Section 4, and if such
previous registration has not been withdrawn or abandoned, the
Company shall not file or cause to be effected any other
registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Forms S-4 or S-8
or any successor forms), whether on its own behalf or on behalf
of any holder or holders of such securities, until a period of at
least 90 days has elapsed from the effective date of such
previous registration, without the prior consent of ATI
Shareholders.
(c) Notwithstanding anything contained in this
Agreement to the contrary, if any holder of ATI Shares does not
elect to include his ATI Shares in a Piggyback Registration, such
holder of ATI Shares shall not be entitled to request or
participate in any request for any Demand Registration or to
include such holder's ATI Shares in any registration thereunder
for six months after the effective date of said Piggyback
Registration.
6. Registration Procedures.
-----------------------
Whenever the ATI Shareholders have requested that any
ATI Shares be registered pursuant to this Agreement, The Company
shall use its best efforts to effect the registration and the
sale of such ATI Shares in accordance with the intended method of
disposition of this Agreement, and as expeditiously as possible:
(a) prepare and file with the SEC a registration
statement with respect to such ATI Shares and use its best
efforts to cause such registration statement to become effective
(provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company
shall furnish to counsel to ATI Shareholders copies of all such
documents proposed to be filed, which documents shall be subject
to the review and comment of such counsel);
(b) notify the ATI Shareholders of the effectiveness
of each registration statement filed thereunder and prepare and
file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days and comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the ATI Shareholders set forth in such
registration statement;
(c) furnish to the ATI Shareholders such number of
copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as the ATI Shareholders may reasonably request in order
to facilitate the disposition of the ATI Shares;
3
32
(d) use its best efforts to register or qualify such
ATI Shares under such other securities or blue sky laws of such
jurisdictions as the ATI Shareholders reasonably requests and do
any and all other acts and things which may be reasonably
necessary or advisable to enable the ATI Shareholders to
consummate the disposition in such jurisdictions of the ATI
Shares owned by ATI Shareholders (provided that the Company shall
not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this subsection, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(e) notify the ATI Shareholders, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at
the request of the ATI Shareholders, the Company shall prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such ATI Shares, such prospectus
shall not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not
misleading;
(f) cause all such ATI Shares to be listed on each
securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on
the NASD automated quotation system and, if listed on the NASD
automated quotation system, use its best efforts to secure
designation of all such ATI Shares covered by such registration
statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the SEC or, failing that, to
secure NASDAQ authorization for such ATI Shares and, without
limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such ATI
Shares with the NASD;
(g) provide a transfer agent and registrar for all
such ATI Shares not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such
other actions as ATI Shareholders may reasonably request in order
to expedite or facilitate the disposition of such ATI Shares
(including effecting a stock split or a combination of the ATI
Shares);
(i) make available for inspection by the ATI
Shareholders, any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by the ATI Shareholders or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to
supply all information reasonably requested by ATI Shareholders,
underwriter, attorney, accountant or agent in connection with
such registration statement;
4
33
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months
beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of
any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock
included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order;
(l) use its best efforts to cause such ATI Shares
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable the ATI Shareholders to consummate the
disposition of such ATI Shares; and
(m) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort
letters as the ATI Shareholders may reasonably request (provided
that the ATI Shares constitute at least 10% of the securities
covered by such registration statement).
7. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent
permitted by law, the ATI Shareholders against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or
any amendment thereto or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by or on behalf
of the ATI Shareholders expressly for use therein. In connection
with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the
indemnification of the ATI Shareholders.
(b) In connection with any registration statement in
which the ATI Shareholders are participating, the ATI
Shareholders shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for
use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereto or
5
34
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, buy only to the extent that such untrue
statement or omission is contained in any information or
affidavit so furnished in writing by the ATI Shareholders.
8. Participation in Underwritten Registrations. The
-------------------------------------------
ATI Shareholders may not participate in any registration
thereunder which is underwritten unless the ATI Shareholders (i)
agree to sell their securities on the basis provided in any
underwriting arrangements relating to such registration and (ii)
complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements; provided that
the ATI Shareholders shall not be required to make any
representations or warranties to the Company or the underwriters
other than representations and warranties regarding the ATI
Shareholders and their intended method of distribution.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall
--------------------------
not hereafter enter into any agreement with respect to its
securities which is inconsistent with or violates the rights
granted to the ATI Shareholders set forth in this Agreement or
the Merger Agreement.
(b) Adjustments Affecting ATI Shares. The Company
--------------------------------
shall not take any action, or permit any change to occur, with
respect to its securities which would adversely affect the
ability of the ATI Shareholders to include the ATI Shares in a
registration undertaken pursuant to this Agreement or which would
adversely affect the marketability of such ATI Shares in any such
registration (including, without limitation, effecting a stock
split or a combination of the ATI Shares).
(c) Remedies. The ATI Shareholders shall be
--------
entitled to enforce any rights under this Agreement specifically
to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights
granted by law. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the
provision of this Agreement and that the ATI Shareholders may in
their sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provision
of this Agreement.
6
35
IN WITNESS WHEREOF, this Agreement has been approved by
resolution duly adopted by the Board of Directors of the Company,
has been executed by its duly authorized officers and by each of
the ATI Shareholders, and has been attested by the Secretary or
an Assistant Secretary of the Company, all as of the date first
above written.
ATTEST: APPLIED CELLULAR TECHNOLOGY, INC.
By----------------------------------
----------------------------------- Title:------------------------------
WITNESS: ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇
----------------------------------- ------------------------------------
WITNESS: ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------- ------------------------------------
7
36
EXHIBIT D
---------
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (this "Agreement") is made as
of this 16th day of October, 1996, by and between Applied
Cellular Technology, Inc., a Missouri corporation ("Company") and
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ Associates, a Pennsylvania
partnership ("Consultant").
PREAMBLE:
--------
A. The execution and delivery of this Agreement is a
condition precedent to the consummation of the transactions
contemplated by that certain Merger Agreement dated October 11,
1996 by and among Applied Cellular Technology, Inc., a Missouri
corporation, ACT Communication, Inc., a Delaware corporation and
a wholly owned subsidiary of Applied Cellular ("Acquisition
Corp."), Advanced Telecomm Holdings, Inc., a Delaware
corporation, ▇▇▇▇▇▇▇ ▇. Lo ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, individuals
residing in the Commonwealth of Pennsylvania and the sole
shareholders of Advanced Telecomm Holdings, Inc. (the "Merger
Agreement").
B. The Company wishes to retain the Consultant to
identify potential acquisition candidates ("Acquisition
Candidates") and to negotiate the terms of acquisition
transactions with such Candidates ("Transactions").
NOW, THEREFORE, the Company and the Consultant, each
intending to be legally bound hereby, do mutually covenant and
agree as follows:
1. All capitalized terms otherwise defined in this
Agreement shall have the meaning ascribed to them in the Merger
Agreement.
2. ENGAGEMENT. The Company hereby engages the
----------
Consultant to render acquisition advice (the "Services") to the
Company and its subsidiary, Acquisition Corp., for a three year
period beginning as of the date of this Agreement through
September 30, 1999. The
37
Consultant accepts such engagement and covenants that it will devote such
time, attention, skill, and best efforts to the performance of such sales,
marketing, distribution, and other similar services as shall be requested
by the Company.
3. DESIGNATED AGENT. The Company shall have the
----------------
right to designate initially and from time to time the employees
or agents of the Consultant who shall be personally responsible
for carrying out the Consultant's obligations under this
Agreement. The initial Designated Agents shall be ▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇, who shall remain such until written notice
to the contrary shall be delivered to the Consultant by the
Company. Reference in this Agreement to the Consultant shall
include reference to the Designated Agents.
4. PART-TIME BASIS. Although the Consultant
---------------
shall be available to the Company to give prompt attention to
requests from the Company, the Consultant and the Company agree
that the Consultant shall devote such of its time (i) as it deems
appropriate to identify Acquisition Candidates and (ii) as is
reasonably required to negotiate and close any Transaction.
5. FEES. The Company agrees to pay the
----
Consultant for its services in the manner provided by Section
3.3(b) of the Merger Agreement.
6. EXPENSES. The Consultant shall be reimbursed
--------
for its ordinary, necessary, and reasonable (deductible) business
expenses incurred on behalf of the Company upon presentation of
properly documented expense reports to the Company's President.
7. REPORTS. The Consultant shall report to the
-------
Company's President and shall submit quarterly reports to him.
8. TERMINATION. This Agreement shall commence on
-----------
the date hereof, and shall continue until September 30, 1999.
Thereafter, this Agreement may be extended by the mutual
agreement of the parties.
9. NONCOMPETITION. The Consultant or its
--------------
employees covenant and agree that neither the Consultant nor the
Designated Agents will, during the term of this Agreement,
without the prior written consent of the Company, directly or
indirectly, either for
-2-
38
themselves or for any other person or legal entity, perform acquisition
consulting services for any business which competes with the Company, its
parent, subsidiaries, or affiliates or in any way enter the employ of any
legal entity or any person who competes with the Company or
Acquisition Corp.
10. INDEPENDENT CONTRACTOR. It is expressly
----------------------
understood and agreed between the Company and the Consultant that
the Consultant in entering into this Agreement and carrying out
its obligations hereunder is an independent contractor, is not
and shall not be seemed to be an agent or employee of the
Company, and shall have no power to bind the Company to any
contract or warranty or in any respect whatever, whether by
written or oral statements or by any course or in any other
manner, without the express written consent of the Company, which
consent may not be general but must specifically refer to each
particular instance as to which the Company consents to be so
bound.
11. MISCELLANEOUS. The invalidity or
-------------
unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. This
Agreement embodies the entire Agreement between the parties
hereto and supersedes any and all prior or contemporaneous, oral
or written understandings, negotiations, or communications on
behalf of such parties. This Agreement may be executed in
several counterparts, each of which shall be deemed original, but
all of which together shall constitute one and the same
instrument. The waiver by either party of any breach or
violation of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach or violation
hereof. This Agreement is executed in and shall be governed by
and construed in accordance with the laws of the Commonwealth of
Pennsylvania. This Agreement shall be changed, waived,
discharged, or terminated only by written agreement of both
parties hereto. This Agreement shall inure to the benefit of the
Company and the Consultant, their successors and assigns.
-3-
39
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and their seals to be affixed hereto by
their officers thereunto duly authorized, as of the day and year
first written.
ATTEST: APPLIED CELLULAR TECHNOLOGY,
INC.
----------------------------------- By--------------------------------
President
WITNESS: ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇
ASSOCIATES
----------------------------------- By--------------------------------
General Partner
-4-
40
EXHIBIT E
---------
SHARE PLEDGE AGREEMENT
----------------------
CERTIFICATED SHARES
----------------------------------------------------------------------------
PLEDGOR: APPLIED CELLULAR TECHNOLOGY, INC.
ADDRESS: ▇▇▇▇▇ River Professional Center
▇▇▇▇▇▇▇ ▇▇▇ & ▇▇, ▇▇▇▇▇ ▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------
The undersigned, Applied Cellular Technology, Inc.
("Pledgor"), for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby grants to
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇, individuals each residing in
Allegheny County, Pennsylvania (collectively the "Secured
Parties"), a security interest in the following shares, whether
Pledgor's interest therein be now owned or existing or hereafter
acquired, together with any and all property rights as may derive
from or accrue to the shares whether by natural increases or
otherwise, including without limitation share dividends or
distributions, cash dividends or distributions, conversion rights
and the like, whether now or hereafter declared, paid or made,
and all cash and non-cash proceeds thereof:
Number of Shares
and Class Certificate
and/or Series Issuer Number(s)
------------- ------ ---------
1,000 shares of common stock ACT Communications, Inc. 1
(the "Issuer")
(the foregoing shares, the "Collateral"). Except as otherwise
provided in this Agreement or by the Merger Agreement (as defined
below), Pledgor shall not have the right to receive any dividends
or distributions arising with respect to the Collateral, and all
such dividends or distributions shall be paid to Secured Parties
and shall be applied to the payment and other obligations of
Pledgor and the Issuer under that certain Agreement and Plan of
Merger dated October 11, 1996 among the Company, the Issuer,
Advanced Telecomm Holdings, Inc., a Delaware corporation, and the
Secured Parties (the "Merger Agreement"). So long as no Event of
Default (as defined in the Merger Agreement) exists, Pledgor
shall have the right vote the shares comprising the Collateral,
but Pledgor shall have no right to receive any dividend or
41
distribution in respect of the Collateral paid in stock of the
Issuer or in the stock of corporations other than the Issuer or
paid out of the proceeds of the sale or condemnation of any
property of the Issuer or upon or in the course of dissolution or
liquidation (whether partial or otherwise) or winding up of the
Issuer.
The security interest hereby granted is to secure the
Pledgor's obligations to pay dividends on, and to redeem, the
Merger Preferred Shares (collectively the "Obligations"). All
capitalized terms not otherwise defined in this Agreement shall
have the meaning ascribed to them in the Merger Agreement.
Section 1. General Covenants. Pledgor represents,
-----------------
warrants and covenants as follows:
(a) Pledgor is and shall remain the sole owner and
registered holder of the Collateral.
(b) Except for the security interest granted hereby,
the Collateral is and shall remain free from any and all security
interests, liens, encumbrances, claims and interests.
(c) Each share comprising the Collateral is fully paid
and nonassessable.
(d) Pledgor shall not create, permit or suffer to
exist, and shall take such action as is necessary to remove, any
claim to or interest in or lien or encumbrance upon the
Collateral, other than the security interest granted hereby, and
shall defend the right, title and interest of Secured Parties in
and to the Collateral against all claims and demands of all
persons and entities at any time claiming the same or any
interest therein.
Section 2. Substituted and Additional Securities.
-------------------------------------
If during the term of this agreement any share dividend or
distribution, exchange, conversion, reclassification,
readjustment or other change is paid, declared or made with
respect to the Collateral, all new, substituted and additional
securities issued in respect to the Collateral shall be deemed
pledged to Secured Parties under the terms of this agreement in
the same manner as the Collateral originally pledged hereunder.
Section 3. Warrants and Options. If during the
--------------------
term of this agreement subscription warrants or options are
issued in connection with the Collateral or any other securities
at the time pledged to Secured Parties hereunder, such warrants
and options, and all new securities acquired by Pledgor in
connection therewith, shall be immediately assigned to Secured
Parties under the terms of this agreement in the same manner as
the Collateral originally pledged hereunder.
-2-
42
Section 4. Preservation and Disposition of Collateral.
------------------------------------------
(a) Pledgor shall advise Secured Parties promptly, in
writing and in reasonable detail of any material encumbrance upon
or claim asserted against any of the Collateral.
(b) Pledgor shall pay promptly when due all taxes,
assessments, charges or levies upon the Collateral or in respect
to the income or profits therefrom or the transfer or
registration thereof.
Section 5. Delivery of Share Certificates.
------------------------------
Pledgor agrees to immediately deliver possession of the
Collateral to the Secured Parties to hold the Collateral. If
this Agreement covers any additional collateral in the manner set
forth in paragraphs 2 and 3 hereof, the Pledgor shall immediately
transfer and deliver the additional Collateral to the Secured
Parties no later than twenty-one (21) days after the Pledgor
acquires rights to the Collateral.
Section 6. Default. If any Event of Default or
-------
any default in the performance of any covenant contained herein
shall occur and be continuing, Secured Parties may, at their
option and with notice to Pledgor, either:
(a) declare the Payment Obligations immediately due
and payable, in which case,
(i) all payments received by Pledgor under or in
connection with any of the C Collateral shall be held by Pledgor
in trust for Secured Parties, shall be segregated from other
funds of Pledgor and shall forthwith upon receipt by Pledgor be
turned over to Secured Parties in the same form as received by
Pledgor (duly endorsed by Pledgor to Secured Parties, if
required). Any and all such payments so received by Secured
Parties (whether from Pledgor or otherwise) may, in the sole
discretion of Secured Parties, be held by Secured Parties as
collateral security for, and/or then or at any time thereafter be
applied in whole or in part by Secured Parties against, all or
any part of the Payment Obligations, in accordance with the
Merger Agreement. Any balance of such payments held by Secured
Parties and remaining after payment in full of the Payment
Obligations shall be paid over to Pledgor or to whomsoever may be
lawfully entitled to receive the same.
(ii) Immediately and without further notice, Secured
Parties or their nominee shall have the right to exercise all
voting rights with respect to all of the Collateral, all other
corporate rights and all conversion, exchange, subscription or
other rights, privileges or options pertaining thereto as if it
were the absolute owner thereof including, without limitation,
the right to exchange any or all of the Collateral upon the
merger, consolidation, reorganization, recapitalization, or other
readjustment of the Issuer, or upon the exercise by the Issuer of
any right, privilege, or option pertaining to any of the
Collateral, and, in connection therewith, to deliver any of the
Collateral to any committee, depository, transfer agent,
registrar, or other designated agency upon such terms and
conditions as it may determine, all without liability except to
account for property actually received by it.
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43
(iii) Secured Parties and their nominees shall have
the rights and remedies of a secured party under this Agreement,
under any other instrument evidencing the obligations and under
the laws of the Commonwealth of Pennsylvania. Pledgor agrees
that Secured Parties need not give more than twenty (20) days'
notice (which notification shall be deemed given when mailed,
postage prepaid, addressed to Pledgor at Pledgor's address set
forth at the beginning of this agreement) of the time and place
of any public sale or of the time after which a private sale may
take place and that such notice is reasonable notification of
such matters. Pledgor shall have no further liability for any
deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Secured
Parties is entitled; or
--
(b) retain the Collateral, and accept as their sole
remedy, a transfer of the ownership of the Collateral to them or
their designated assigns from Pledgor; provided, however, that
Secured Parties shall have the obligation to effect a transfer to
Pledgor of (i) any Merger Preferred Shares not redeemed as of the
date of such election; (ii) the amount of cash paid to the
Secured Parties in any prior redemption of any of the Merger
Preferred Shares; (iii) the equivalent of any cash or other
consideration paid by Pledgor to effect an acquisition of any
business which was acquired by the Issuer; and (iv) any infusion
by Pledgor of any cash or other consideration into the Issuer.
For purposes of this Section 6(b), Secured Parties may, at their
option, repay the amounts required by items (ii), (iii) and (iv)
above with any shares of Common Stock then owned by them, and for
this purpose alone each such share of Common Stock will be valued
at the greater of (i) its market value as determined by
referenced to the price quoted on any exchange or (ii) Five
Dollars and thirty one cents ($5.31).
All costs and expenses, including reasonable attorney's fees,
incurred by the Secured Parties in collection of the Obligations,
or enforcing their remedies under this Section 6, or effecting
the transfers required by Section 6(b), shall be reimbursed to
them by the Pledgor.
Section 7. Termination. Upon the satisfaction in
-----------
full of the Obligations and the satisfaction of all additional
costs and expenses of Secured Parties as provided herein, this
Share Pledge Agreement shall terminate, and Secured Parties shall
deliver to Pledgor, such of the Collateral as shall not have
been sold or otherwise disposed of pursuant to this Agreement,
and if such Collateral is then registered in Secured Parties'
name, Secured Parties shall also deliver to Pledgor a duly
executed stock power and do all things necessary to cause the
Issuer, transfer agent or registrar of the Collateral to register
such Collateral in Pledgor's name.
Section 8. General. Any provision of this
-------
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Secured Parties
shall not be deemed to have waived any of its rights hereunder or
under any other agreement, instrument or paper signed by Pledgor
unless such waiver be in writing and signed by Secured Parties.
No delay or omission on the part of Secured Parties in exercising
any right shall operate as a waiver of such right or any other
right. Any written demand upon or written notice to Pledgor
shall be effective when deposited in the mails addressed to
Pledgor at the address shown at the beginning of this Agreement.
This Agreement and all rights and obligations
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44
hereunder, including matters of construction, validity and performance,
shall be governed by the laws of the Commonwealth of Pennsylvania
without reference to its choice of law rules. The provisions
hereof shall, as the case may require, bind or inure to the
benefit of, the respective heirs, successors, legal
representatives and assigns of Pledgor and Secured Parties.
IN WITNESS WHEREOF, Pledgor has signed this Agreement
this 16th day of October, 1996.
APPLIED CELLULAR TECHNOLOGY,
INC.
By-------------------------------
President
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SCHEDULE 3.7
PERMITTED ATI DISTRIBUTIONS
Prior to the Effective Date, ATI will make the following distributions:
1. Monthly dividend distributions of $64,000 to its shareholders
(continuation of current dividend practices).
2. Real estate with a book value of approximately $250,000.
3. All receivables due from the ATI shareholders and their affiliates
will be distributed or otherwise canceled. All payables due ATI shareholders
and their affiliates will be canceled.
46
SCHEDULE 6.5
SUBSIDIARIES
Jurisdictions in which
State of the Subsidiary is qualified
Name of Subsidiary Incorporation to do business
-------------------------------------------------- ------------- -----------------------
Advanced Telecomm of ▇▇▇▇▇▇, Inc. Pennsylvania Pennsylvania
Advanced Telecomm of Nevada, Inc. Nevada Nevada
Advanced Telecomm of Maryland, Inc. Pennsylvania Maryland
Advanced Telecomm of Pittsburgh Pennsylvania Pennsylvania
Advanced Telecomm of Washington, D.C., Inc. Pennsylvania Virginia and
Distict of Columbia
47
SCHEDULE 6.7
LITIGATION
To the best of the ATI Shareholders knowledge and belief, there are no
actions, suits or proceedings pending or threatened against ATI or any of the
Subsidiaries that would, individually or collectively, if decided adversely,
have a material adverse effect on ATI and the Subsidiaries or have a material
adverse effect on the Merger other than a third party action brought by a
purchaser of phone equipment from ATI which requests approximately $78 in
liquidated damages plus "punitive" damages. Advice of counsel is that there
is no large concern regarding the "punitive" damages.
Additionally, there are no currently effective orders, judgments or decrees of
any court or governmental agency which specifically apply to ATI or any of the
Subsidiaries or any of their assets.
48
SCHEDULE 6.8
FINANCIAL STATEMENTS
There are no material obligations or liabilities not reflected or reserved
against in the Financial Statements of the Subsidiaries, or in the notes
thereto, which are required under generally accepted accounting principles
to be so reflected or reserved against.
49
SCHEDULE 5.5
Outstanding
Name: Warrants
"I" Warrants
------------
Great Bay 300,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 100,000
▇▇▇▇ ▇▇▇▇ 50,000
"L" Warrants
------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Cape 125,000
"H" Warrants
------------
Great Bay 300,000
▇▇▇▇ ▇▇▇▇ 50,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 100,000
"J" Warrants
------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ 200,000
"K" Warrants
------------
Great Bay 250,000
TOTAL 1,475,000
50
SCHEDULE 5.6
LITIGATION AGAINST PURCHASERS
NONE