-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GuRxHPQJle7YVCXkLBzUH0txbaYFXbPLWg42+kz7CxElEY5BECYSqDuW1cAuvMuH GChpMXn79NfZEEIliz0bvg== 0001047469-98-010229.txt : 19980319 0001047469-98-010229.hdr.sgml : 19980319 ACCESSION NUMBER: 0001047469-98-010229 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 19980317 SROS: AMEX GROUP MEMBERS: AMERICAN PAGING, INC. GROUP MEMBERS: API MERGER CORP GROUP MEMBERS: TELEPHONE & DATA SYSTEMS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC CENTRAL INDEX KEY: 0000096966 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 362669023 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-14157 FILM NUMBER: 98567771 BUSINESS ADDRESS: STREET 1: 8401 GREENWAY BLVD STREET 2: PO BOX 628010 CITY: MIDDLETON STATE: WI ZIP: 535628010 BUSINESS PHONE: 3126301900 MAIL ADDRESS: STREET 1: 30 NORTH LASALLE STREET SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS DATE OF NAME CHANGE: 19741118 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC DATE OF NAME CHANGE: 19740509 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC CENTRAL INDEX KEY: 0000096966 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 362669023 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 8401 GREENWAY BLVD STREET 2: PO BOX 628010 CITY: MIDDLETON STATE: WI ZIP: 535628010 BUSINESS PHONE: 3126301900 MAIL ADDRESS: STREET 1: 30 NORTH LASALLE STREET SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS DATE OF NAME CHANGE: 19741118 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC DATE OF NAME CHANGE: 19740509 SC 13E3/A 1 SC 13E3/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 13E-3 (AMENDMENT NO. 1) RULE 13E-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 13e-3 (Section 240.13e-3) THEREUNDER) --------------------- AMERICAN PAGING, INC. (Name of the Issuer) AMERICAN PAGING, INC. API MERGER CORP. TELEPHONE AND DATA SYSTEMS, INC. (Name of Person(s) Filing Statement) COMMON SHARES, PAR VALUE $1.00 PER SHARE (Title of Class of Securities) 02882K10 (CUSIP NUMBER OF CLASS OF SECURITIES) --------------------- LeRoy T. Carlson, Jr. (312) 630-1900 President and Chief Executive Officer Telephone and Data Systems, Inc. 30 N. LaSalle Street, Suite 4000, Chicago, Illinois 60602 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) --------------------- WITH COPY TO: James G. Archer (212) 906-2000 Sidley & Austin 875 Third Avenue New York, New York 10022 - ------------------------ This statement is filed in connection with (check the appropriate box): a. / / The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. / / The filing of a registration statement under the Securities Act of 1933. c. /x/ A tender offer d. / / None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Amendment No. 1 to the Rule 13e-3 Transaction Statement on Schedule 13E-3 (this "Amendment") relates to the offer by API Merger Corp., a Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), to purchase all outstanding Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company), at a price of $2.50 per share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated February 18, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal (which together with the Offer to Purchase constitute the "Offer"). All capitalized terms used in this Amendment without definition have the meanings attributed to them in the Schedule 13E-3. ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION Items 6(a), (c) and (d) are hereby amended and supplemented as follows: The information set forth under "THE TENDER OFFER--9. Financing of the Offer and the Merger" of the Offer to Purchase is hereby amended and restated to read in its entirety as follows: The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $10 million. TDS will ensure that Purchaser has sufficient funds to acquire all of the outstanding Common Shares pursuant to the Offer and the Merger. TDS will provide such funds from its working capital or from existing credit facilities. No decision has been made concerning which of the existing credit facilities, if any, will be utilized. Such decision will be made on such dates as funds are required to consummate the Offer and the Merger and to pay related fees and expenses. ITEM 8. FAIRNESS OF THE TRANSACTION Item 8(b) is hereby amended and supplemented to add the following information: In reaching its determinations that the Merger Agreement and the transactions contemplated thereby were fair to the Public Shareholders, the Special Committee reviewed with its financial advisor, PaineWebber, the historical market prices and trading activity for the Common Shares and compared such data with comparable data of specified Paging Comparable Companies. As further described in the Offer to Purchase under SPECIAL FACTORS -- Opinion of the Financial Advisor to the Special Committee", based upon a comparison of multiples of total enterprise value (as defined therein) to various measures of earnings and units in service, PaineWebber applied the relevant Paging Comparable Companies' multiples to various measures of the Company's latest twelve months revenues and derived an implied range of equity values for the Company of $0.00 to $2.50 per 1 Common Share. As also described therein, PaineWebber analyzed premiums paid to non-control shareholders in publicly-disclosed business combinations for the period January 1, 1994 through February 6, 1998 and, based on closing stock prices one day, one week and four weeks prior to the December 23, 1997 announcement by TDS of its offer to acquire the Common Shares, derived fully diluted equity values of $2.24 to $2.56 per Common Share. Although historical trading values for the Company's Common Shares ranged from $10.00 to $4.63 in 1996 and from $5.13 to $1.31 in 1997, both the Special Committee and the Board believed that such historical trading performance was not a reliable indicator of current value of the Common Shares in light of the declining financial performance of the Company, its current financial condition, questionable ability to obtain further financing and poor prospects. The Special Committee did not consider net book values or liquidation value to be relevant measures of value. As shown by its consolidated financial statements, the Company's liabilities exceeded its assets at each of December 31, 1996 and 1997, and book values at all relevant dates have been increasingly negative. With regard to liquidation values, neither the Special Committee nor the Board believed that sale of the Company on a piece-meal or liquidation basis would yield values as great as that available from combination with a strategic partner. As noted above, the Special Committee sought and received confirmation from TDS that it was not willing to consider a transaction which would allow the Public Shareholders to continue to participate in the paging business by retaining an interest in the TSR Wireless venture. Item 8(c) is hereby amended and supplemented to add the following information: The Board, including the Special Committee, believes that the Offer and the Merger are procedurally fair despite the fact that the Merger is not structured to require the approval of a majority of the Public Shareholders. In reaching this conclusion, the Board and the Special Committee took account of the other factors relevant to procedural fairness as described above, including the composition of the Special Committee, its retention of independent legal and financial advisors, its deliberations and the active arm's length bargaining between the Special Committee and TDS. In light of the presence of such factors, the Special Committee and the Board believed that procedural fairness had been achieved without requiring approval of a majority of the Public Shareholders as an additional condition. Moreover, the Board and the Special Committee believed that the current serious financial situation of the Company, and the significant doubts about its ability to fund its ongoing operations as a stand-alone entity, made it unwise to create a further condition which might prevent the Company from proceeding with the transaction with TSR Paging as described in the Asset Contribution Agreement. As noted in the Offer to Purchase under "SPECIAL FACTORS--Position of TDS and Purchaser Regarding Fairness of the Offer and the Merger", TDS considered the factors enumerated by the Special Committee in supporting its recommendation to the Board of the Company, including its conclusion that the Offer and Merger was procedurally fair despite 2 the fact that the Merger is not structured to require the approval of a majority of the Public Shareholders. In reaching this conclusion, TDS and the Purchaser took account of the other factors relevant to procedural fairness as described under "SPECIAL FACTORS--Fairness of the Offer and the Merger" of the Offer to Purchase, which information is hereby incorporated herein by reference. Neither TDS nor the Purchaser believes that the achievement of fairness required approval of a majority of the Public Shareholders, particularly in light of the fact that, in the view of the Board of Directors of TDS, as described in the Offer to Purchase, the value of the Company does not exceed its outstanding indebtedness and the likelihood that the Company would not be able to continue as a stand-alone entity should the transaction with TSR Paging not occur. ITEM 10. INTEREST IN SECURITIES OF THE ISSUER. Item 10 is hereby amended and supplemented as follows: The information set forth under "SPECIAL FACTORS--Beneficial Ownership of the Securities of the Company--Security Ownership of the Company by TDS, Purchaser and Certain Beneficial Owners" of the Offer to Purchase is hereby supplemented and amended by adding the following: A Schedule 13D was filed with the Commission by Gabelli Funds, Inc. ("GFI"), Gabelli Associates Fund ("Gabelli Associates"), and Gabelli Associates Limited ("GAL") and Mario J. Gabelli with respect to 409,300 Common Shares which represents approximately 5.4 percent of the outstanding Common Shares. Pursuant to such Schedule 13D, GFI has sole voting and dispositive power with respect to 271,100 Common Shares, Gabelli Associates has sole voting and dispositive power with respect to 130,200 Common Shares and GAL has sole voting and dispositive power with respect to 8,000 Common Shares. ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S SECURITIES Item 11 is hereby amended and supplemented as follows: The information set forth under "THE TENDER OFFER--8. Certain Information Concerning Purchaser, TDS and The Voting Trust" of the Offer to Purchase is hereby incorporated herein by reference. The information set forth under "THE TENDER OFFER--8. Certain Information Concerning Purchaser, TDS and The Voting Trust" of the Offer to Purchase is hereby amended and supplemented by adding the following information: The Voting Trust holds TDS Series A Common Shares and was created under an Agreement, dated June 30, 1989, as amended (the "Voting Trust Agreement"), to facilitate 3 long-standing relationships among the trust's certificate holders. The five trustees of The Voting Trust (the "Trustees") hold and vote the TDS Series A Common Shares in accordance with the terms of The Voting Trust Agreement. Under the terms of The Voting Trust Agreement, the Trustees, except as otherwise specifically provided, possess and are entitled to exercise all of the rights and powers of owners of the TDS Series A Common Shares deposited in The Voting Trust. Except as otherwise provided in the Trust Agreement with respect to certain transactions, such Series A Common Shares are to be voted as a unit in accordance with the six-vote majority of the Trustees. A "six-vote majority" requires the affirmative vote by the Trustees holding no fewer than six votes. Four of the Trustees, who are currently directors of TDS, have two votes each, and the remaining Trustee has one vote. Pursuant to the terms of The Voting Trust Agreement, the Trustees are instructed to use their best judgment to select suitable directors. TDS has a twelve person Board of Directors and four of the five Trustees are directors of TDS; however, The Voting Trust Agreement does not require the Trustees to elect any specified persons as directors. As a result of the TDS Series A Common Shares held in The Voting Trust representing 51.4% of the voting power of the combined TDS Common Shares and the TDS Series A Common Shares and four of its Trustees serving as directors on the Board of Directors of TDS, The Voting Trust may be deemed to control TDS and indirectly the Company. ITEM 16. ADDITIONAL INFORMATION Item 16 is hereby amended and supplemented as follows: The information set forth in the first paragraph under "THE TENDER OFFER--12. Certain Conditions of the Offer" of the Offer to Purchase is hereby amended and restated in its entirety as follows: 12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term or provision of the Offer or the Merger Agreement, Purchaser shall not be required to accept for payment or pay for any Common Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of, and payment for Common Shares tendered if (i) immediately prior to the expiration of the Offer the Asset Contribution Agreement Condition is not satisfied or (ii) at any time on or after February 11, 1998 and prior to the expiration of the Offer and prior to the acceptance of the Common Shares, any of the following events or facts shall have occurred: 4 ITEM 17. MATERIAL TO BE FILED AS EXHIBITS. Item 17 is hereby supplemented and amended by adding the following exhibits which were previously incorporated by reference: (b)(1) Opinion of PaineWebber Incorporated, dated February 10, 1998 (attached as Schedule III to Exhibit (d)(1)). (c)(1) Agreement and Plan of Merger, dated as of February 11, 1998, among TDS, Purchaser and the Company. (c) (2) Asset Contribution Agreement, dated as of December 22, 1997, among TDS, TSR Paging, Inc. and TSR Wireless LLC. (c)(3) Option Agreement, dated as of December 22, 1997, between TDS and TSR Wireless LLC. (c)(4) Restated Certificate of Incorporation, as amended, of the Company. (c)(5) The Voting Trust Agreement, dated as of June 30, 1989, with respect to TDS Series A Common Shares. (c)(6) Exchange Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(7) Revolving Credit Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(8) Amendment to Revolving Credit Agreement, dated March 5, 1997 and effective January 1, 1997, between the Company and TDS. (c)(9) Amendment to Revolving Credit Agreement, dated January 13, 1998, between the Company and TDS. (c)(10) Intercompany Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(11) Registration Rights Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(12) Employee Benefit Plans Agreement, dated as of January 1, 1994, between the Company and TDS. 5 (c)(13) Amendment to Revolving Credit Agreement, dated February 27, 1995, between the Company and TDS. (c)(14) Amendment to Revolving Credit Agreement, dated August 10, 1995, between the Company and TDS. (c)(15) Amendment to Revolving Credit Agreement, dated December 31, 1995, between the Company and TDS. (c)(16) Amendment to Revolving Credit Agreement, dated April 15, 1996, between the Company and TDS. (c)(17) Amendment to Revolving Credit Agreement, dated August 2, 1996, between the Company and TDS. (c)(18) Amendment to Revolving Credit Agreement, dated November 13, 1996, between the Company and TDS. (c)(19) Amendment, dated as of November 20, 1992, to the Voting Trust Agreement with respect to the TDS Series A Common Shares. (c)(20) Amendment, dated as of May 9, 1991, to the Voting Trust with respect to the TDS Series A Common Shares. (d)(1) Form of Offer to Purchase, dated February 18, 1998. (d)(2) Form of Letter of Transmittal. (d)(3) Form of Letter from Credit Suisse First Boston Corporation to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (d)(4) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to clients. (d)(5) Form of Notice of Guaranteed Delivery. (d)(6) Form of Guidelines for certification of Taxpayer Identification Number on substitute form W-9. (d)(7) Summary Advertisement as published in the Wall Street Journal on February 18, 1998. (d)(8) Form of Joint Press Release dated February 18, 1998 issued by the Company and TDS. (d)(9) Letter to Company Shareholders, dated February 18, 1998. (e) Summary of Stockholder Appraisal Rights and Section 262 of the Delaware General Corporation Law (attached as Schedule IV to Exhibit (d)(1)). 6 SIGNATURES After due inquiry and to the best of my knowledge and belief, each of the undersigned certifies that the information set forth in this Amendment is true, complete and correct. Dated: March 17, 1998 API MERGER CORP. By: /s/ LeRoy T. Carlson, Jr. ------------------------------------ Name: LeRoy T. Carlson, Jr. Title: President TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. ------------------------------------ Name: LeRoy T. Carlson, Jr. Title: President Signature Page to Amendment No. 1 to Schedule 13E-3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment is true, complete and correct. Dated: March 17, 1998 AMERICAN PAGING, INC. By: /s/ Terrence T. Sullivan ------------------------------------- Name: Terrence T. Sullivan Title: President Signature Page for Amendment No. 1 to Schedule 13E-3 EXHIBIT INDEX Exhibit No. Exhibit Description - ----------- ------------------- (c)(1) Agreement and Plan of Merger, dated as of February 11, 1998, among TDS, Purchaser and the Company. (c)(2) Asset Contribution Agreement, dated as of December 22, 1997, among TDS, TSR Paging, Inc. and TSR Wireless LLC. (c)(3) Option Agreement, dated as of December 22, 1997, between TDS and TSR Wireless LLC. (c)(4) Restated Certificate of Incorporation, as amended, of the Company. (c)(5) The Voting Trust Agreement, dated as of June 30, 1989, with respect to TDS Series A Common Shares. (c)(6) Exchange Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(7) Revolving Credit Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(8) Amendment to Revolving Credit Agreement, dated March 5, 1997 and effective January 1, 1997, between the Company and TDS. (c)(9) Amendment to Revolving Credit Agreement, dated January 13, 1998, between the Company and TDS. (c)(10) Intercompany Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(11) Registration Rights Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(12) Employee Benefit Plans Agreement, dated as of January 1, 1994, between the Company and TDS. (c)(13) Amendment to Revolving Credit Agreement, dated February 27, 1995, between the Company and TDS. (c)(14) Amendment to Revolving Credit Agreement, dated August 10, 1995, between the Company and TDS. (c)(15) Amendment to Revolving Credit Agreement, dated December 31, 1995, between the Company and TDS. (c)(16) Amendment to Revolving Credit Agreement, dated April 15, 1996, between the Company and TDS. (c)(17) Amendment to Revolving Credit Agreement, dated August 2, 1996, between the Company and TDS. (c)(18) Amendment to Revolving Credit Agreement, dated November 13, 1996, between the Company and TDS. (c)(19) Amendment, dated as of November 20, 1992, to the Voting Trust Agreement with respect to the TDS Series A Common Shares. (c)(20) Amendment, dated as of May 9, 1991, to the Voting Trust with respect to the TDS Series A Common Shares. (d)(1) Form of Offer to Purchase, dated February 18, 1998. (d)(2) Form of Letter of Transmittal. (d)(3) Form of Letter from Credit Suisse First Boston Corporation to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (d)(4) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to clients. (d)(5) Form of Notice of Guaranteed Delivery. (d)(6) Form of Guidelines for certification of Taxpayer Identification Number on substitute form W-9. (d)(7) Summary Advertisement as published in the Wall Street Journal on February 18, 1998. (d)(8) Form of Joint Press Release dated February 18, 1998 issued by the Company and TDS. (d)(9) Letter to Company Shareholders, dated February 18, 1998. EX-99.(C)(1) 2 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER among TELEPHONE AND DATA SYSTEMS, INC., API MERGER CORP. and AMERICAN PAGING, INC. Dated as of February 11, 1998 TABLE OF CONTENTS PAGE ---- ARTICLE I THE TENDER OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.2 API Action . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.1 Effective Time of the Merger . . . . . . . . . . . . . . . . 5 Section 2.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . . 6 Section 2.4 Certificate of Incorporation and By-Laws . . . . . . . . . . 6 Section 2.5 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . 7 Section 3.1 Conversion of Capital Stock. . . . . . . . . . . . . . . . . 7 Section 3.2 Surrender and Payment. . . . . . . . . . . . . . . . . . . . 8 Section 3.3 No Further Ownership Rights in API Common Shares . . . . . . 9 Section 3.4 Closing of API Transfer Books. . . . . . . . . . . . . . . . 9 Section 3.5 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3.6 Lost, Stolen or Destroyed Certificates . . . . . . . . . . .10 Section 3.7 Further Assurances . . . . . . . . . . . . . . . . . . . . .10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF API. . . . . . . . . . . . . . .11 Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . .11 Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . .11 Section 4.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 4.4 Absence of Certain Changes or Events . . . . . . . . . . . .13 Section 4.5 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 4.6 API Real Property. . . . . . . . . . . . . . . . . . . . . .14 Section 4.7 Contracts and Commitments. . . . . . . . . . . . . . . . . .15 Section 4.8 Customers, Distributors and Suppliers. . . . . . . . . . . .17 Section 4.9 Operation of the API Business. . . . . . . . . . . . . . . .17 Section 4.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . .17 Section 4.11 Absence of Certain Business Practices . . . . . . . . . . .17 Section 4.12 No Conflict or Violation. . . . . . . . . . . . . . . . . .18 Section 4.13 Regulatory Matters. . . . . . . . . . . . . . . . . . . . .18 Section 4.14 Financial Statements; Receivables; Public Filings . . . . .21 Section 4.15 Books and Records . . . . . . . . . . . . . . . . . . . . .21 Section 4.16 Litigation. . . . . . . . . . . . . . . . . . . . . . . . .22 Section 4.17 Compliance with Law . . . . . . . . . . . . . . . . . . . .22 Section 4.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . .22 - i - Section 4.19. No Other Agreements to Sell the API Assets . . . . . . . .22 Section 4.20 Proprietary Rights. . . . . . . . . . . . . . . . . . . . .22 Section 4.21 Environmental Matters . . . . . . . . . . . . . . . . . . .23 Section 4.22 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . .24 Section 4.23 Information in Disclosure Documents . . . . . . . . . . . .25 Section 4.24 Benefit Plans; Labor Matters. . . . . . . . . . . . . . . .25 Section 4.25 Opinion of Financial Advisor. . . . . . . . . . . . . . . .27 Section 4.26 Certain Agreements . . . . . . . . . . . . . . . . . . . .27 ARTICLE V REPRESENTATIONS AND WARRANTIES OF TDS AND PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Section 5.1 Organization; Ownership. . . . . . . . . . . . . . . . . . .28 Section 5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . .28 Section 5.3 Consents and Approvals; No Violations. . . . . . . . . . . .28 Section 5.4 Information in Disclosure Documents. . . . . . . . . . . . .29 Section 5.5 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . .29 ARTICLE VI COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Section 6.1 Conduct of API Business. . . . . . . . . . . . . . . . . . .29 Section 6.2 Reasonable Best Efforts. . . . . . . . . . . . . . . . . . .31 Section 6.3 Access to Information. . . . . . . . . . . . . . . . . . . .32 Section 6.4 Shareholder Approval . . . . . . . . . . . . . . . . . . . .33 Section 6.5 API Option Plans . . . . . . . . . . . . . . . . . . . . . .34 Section 6.6 No Solicitation. . . . . . . . . . . . . . . . . . . . . . .35 Section 6.7 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . .36 Section 6.8 Notification of Certain Matters. . . . . . . . . . . . . . .36 Section 6.9 Public Announcements . . . . . . . . . . . . . . . . . . . .37 Section 6.10 State Takeover Laws . . . . . . . . . . . . . . . . . . . .37 Section 6.11 Indemnification of Officers and Directors . . . . . . . . .37 Section 6.12 Shareholder Litigation. . . . . . . . . . . . . . . . . . .37 ARTICLE VII CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Section 7.1 Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Section 7.2 Conditions to TDS's Obligation to Effect the Merger. . . . .38 ARTICLE VIII TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .38 Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . .38 Section 8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . .40 ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .40 Section 9.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . .40 Section 9.2 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . .41 Section 9.3 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . .41 - ii - PAGE ---- Section 9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .41 Section 9.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . .42 Section 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .43 Section 9.7 Entire Agreement; No Third Party Beneficiaries . . . . . . .43 Section 9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .43 Section 9.9 Specific Performance . . . . . . . . . . . . . . . . . . . .43 Section 9.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . . .43 Section 9.11 Validity. . . . . . . . . . . . . . . . . . . . . . . . . .43 Annex I Definitions Annex II Conditions to the Offer - iii - AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of February 11, 1998 (this "AGREEMENT"), among Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), API Merger Corp., a Delaware corporation and a direct, wholly-owned subsidiary of TDS ("PURCHASER"), and American Paging, Inc., a Delaware corporation ("API"; together with Purchaser, the "CONSTITUENT CORPORATIONS"). W I T N E S S E T H: WHEREAS, the capitalized terms used herein shall have the respective meanings specified or referred to herein or in ANNEX I; WHEREAS the Purchaser owns an aggregate of 12,500,000 Series A Common Shares, par value $1.00 per share (the "SERIES A COMMON SHARES"), of API constituting 100% of the outstanding Series A Common Shares and 4,000,000 Common Shares, par value $1.00 per share (the "COMMON SHARES"), of API constituting approximately 81.9% of the outstanding Common Shares; WHEREAS, TDS has entered into an Asset Contribution Agreement, dated as of December 22, 1997 (the "ASSET CONTRIBUTION AGREEMENT"), with TSR Paging Inc., a Delaware corporation ("TSR"), and TSR Wireless LLC, a Delaware limited liability company ("TSR WIRELESS"); WHEREAS, in accordance with the terms and conditions of the Asset Contribution Agreement, (i) TDS is to propose to negotiate and enter into a merger agreement with API pursuant to which a wholly owned subsidiary of TDS would acquire all of the issued and outstanding stock of API not owned by TDS and (ii) upon consummation of such proposed merger, TDS and TSR would combine their respective paging businesses and TDS would contribute substantially all of the assets and certain, limited liabilities of API to TSR Wireless for a 30% interest (subject to adjustment) in TSR Wireless and TSR would contribute all of its assets and liabilities to TSR Wireless for a 70% interest (subject to adjustment) in TSR Wireless; WHEREAS, in accordance with the terms and conditions of the Asset Contribution Agreement, TDS and Purchaser have proposed to API that Purchaser acquire all of the remaining issued and outstanding Common Shares not owned by Purchaser; WHEREAS, in furtherance thereof, it is proposed that Purchaser will make, in compliance with Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and in compliance with the rules and regulations promulgated thereunder, a cash tender offer (as it may be amended from time to time as permitted hereunder, the "OFFER") to acquire all of the issued and outstanding Common Shares for $2.50 per Common Share (such amount, or any other greater amount per Common Share offered pursuant to the Offer, being hereinafter referred to as the "PER SHARE AMOUNT"), net to the seller in cash, in accordance with the terms and subject to the conditions provided herein and in the Offer Documents (as defined in SECTION 1.1(b)); WHEREAS, based in part on the opinion of PaineWebber, Inc. that the consideration to be received by the holders for the Common Shares (other than TDS and Purchaser) pursuant to each of the Offer and the Merger is fair to such holders from a financial point of view, a special committee of the Board of Directors of API, consisting of the independent directors of the Board of Directors that are not directors, officers or employees of TDS or otherwise affiliated with TDS and are not officers or employees of API (the "API SPECIAL COMMITTEE"), has recommended, with the assistance of its independent financial and legal advisors, to the Board of Directors of API that the Offer and the Merger be approved by the Board of Directors of API; WHEREAS, the respective Boards of TDS, Purchaser and API have determined that it is in the best interests of their respective stockholders for the Purchaser to acquire all of the remaining issued and outstanding Common Shares; WHEREAS, the Board of Directors of API has, by unanimous vote of all directors present and voting, approved the making of the Offer and resolved and agreed to recommend that the holders of the Common Shares tender their Common Shares pursuant to the Offer; and WHEREAS, also in furtherance of such acquisition, the Board of Directors of each of TDS, Purchaser and API have each approved the merger (the "Merger") of Purchaser with and into API in accordance with the General Corporation Law of the State of Delaware (the "DGCL") following the consummation of the Offer and upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: -2- ARTICLE I THE TENDER OFFER Section 1.1 THE OFFER. (a) Provided that this Agreement has not been terminated in accordance with SECTION 8.1 and none of the events or facts set forth in ANNEX II hereto shall have occurred or be existing, Purchaser will commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to commence the Offer and accept for payment, and pay for, any Common Shares tendered pursuant to the Offer will be subject to (i) the condition (the "MINIMUM CONDITION") that at least the number of Common Shares that when added to the Common Shares already owned by TDS and Purchaser shall constitute not less than 90% (or such other amount which would allow the Merger to be effected without a meeting of the Company's shareholders in accordance with Section 253 of the Delaware Law) of the issued and outstanding Common Shares shall have been validly tendered and not withdrawn prior to the expiration of the Offer, (ii) the condition that the Asset Contribution Agreement be in full force and effect and not terminated in accordance with the terms thereof and all the conditions set forth in Articles XI and XII thereof shall have been satisfied or waived (the "ASSET CONTRIBUTION AGREEMENT CONDITION") and (iii) the satisfaction of the conditions set forth in ANNEX II hereto (any of which may be waived by Purchaser in its sole discretion) and to the terms and conditions of this Agreement. Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of API (unless API takes any action permitted to be taken pursuant to the second sentence of SECTION 6.6(b)), Purchaser shall not (i) reduce the number of Common Shares subject to the Offer, (ii) reduce the Per Share Amount, (iii) modify or add to the conditions set forth in ANNEX II (other than to waive any conditions to the extent permitted by this Agreement), (iv) except as specifically provided in this SECTION 1.1(a), extend the Offer or (v) change the form of consideration payable in the Offer. Notwithstanding the foregoing, Purchaser may, without the consent of API, (i) extend the Offer if at the scheduled expiration date of the Offer any of the conditions to Purchaser's obligation to purchase the Common Shares shall not be satisfied until such time as such conditions are satisfied or waived, (ii) extend the Offer for any period required by any order, decree or ruling of, or any rule, regulation, interpretation or position of, any Governmental Authority applicable to the Offer and/or (iii) extend the Offer for any reason for a period of not more than 10 business days beyond the latest expiration date that would otherwise be permitted under clause (i) or (ii) of this sentence; PROVIDED, HOWEVER, in the event that all conditions set forth in ANNEX II shall have been satisfied other than the Minimum Condition, the Purchaser may extend the term of the Offer for a period or periods aggregating not more than 20 business days after the later of (x) the initial expiration date of the Offer and (y) the date on which all the other conditions set forth in ANNEX -3- II shall be satisfied after which time the Purchaser shall waive the Minimum Condition. The Offer will be made by means of an offer to purchase (the "OFFER TO PURCHASE") and related letter of transmittal containing the terms set forth in this Agreement and the conditions set forth in ANNEX II hereto. Subject to the terms of the Offer and this Agreement and the satisfaction or waiver of all the conditions of the Offer set forth in ANNEX II hereto as of the final expiration date of the Offer, Purchaser will accept for payment and pay for all Common Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such expiration date. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. (b) On the date of commencement of the Offer, Purchaser will file with the SEC (i) a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer and (ii) a Rule 13e-3 Transaction Statement on Schedule 13E-3 (together with all amendments and supplements thereto, the "SCHEDULE 13E-3") with respect to the Offer and other transactions contemplated hereby. The Schedule 14D-1 and the Schedule 13E-3 will contain or will incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and summary advertisement (which Schedule 14D-1, Schedule 13E-3, the Offer to Purchase and such other documents pursuant to which the Offer will be made, together with any supplements or amendments thereto, are referred to herein collectively as the "OFFER DOCUMENTS"). TDS and Purchaser will disseminate the Offer to Purchase, the related letter of transmittal and other Offer Documents to holders of Common Shares. Each of TDS, Purchaser and API will promptly correct any information provided by it for use in the Offer Documents that becomes false or misleading in any material respect, and each of TDS and Purchaser will take all steps necessary to cause the Schedule 14D-1 and Schedule 13E-3 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Common Shares, in each case as and to the extent required by applicable law. Purchaser will provide API and its counsel in writing with any comments Purchaser or its counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. Section 1.2 API ACTION. (a) API hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of API, at a meeting duly called and held, acting on the unanimous recommendation of the API Special Committee, has (i) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interest of the Company's shareholders, (ii) unanimously approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and (iii) unanimously resolved to recommend acceptance of the Offer and approval and -4- adoption of this Agreement and the Merger by its shareholders. API further represents and warrants that PaineWebber, Inc. has delivered to the API Special Committee its written opinion that the consideration to be received by API's shareholders pursuant to the Offer and the Merger is fair to such shareholders from a financial point of view, and a complete and correct copy of such opinion has been delivered by API to TDS and Purchaser. (b) On the date of the commencement of the Offer, API will file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, together with all amendments and supplements thereto, the "SCHEDULE 14D-9") containing the recommendations described in SECTION 1.2(a) above and will disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. Each of API, TDS and Purchaser will promptly correct any information provided by it for use in the Schedule 14D-9 that becomes false or misleading in any material respect, and API will further take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to API's shareholders, in each case as and to the extent required by applicable law. API will provide TDS and Purchaser and their counsel in writing with any comments API or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. API and its counsel will provide TDS and Purchaser and their counsel with a reasonable opportunity to participate in all communications with the SEC and its staff, including any meetings and telephone conferences relating to the Schedule 14D-9, the Offer, the Merger or this Agreement. (c) API will (i) promptly furnish TDS and Purchaser with mailing labels containing the names and addresses of all record holders of Common Shares as of a recent date and of those persons becoming record holders after such date, together with copies of all security position listings and computer files and all other information in API's control regarding the beneficial owners of Common Shares that TDS or Purchaser may reasonably request and (ii) furnish to TDS or Purchaser such other information and assistance as TDS or Purchaser or their agents may reasonably request in expeditiously communicating the Offer to holders of Common Shares. ARTICLE II THE MERGER Section 2.1 EFFECTIVE TIME OF THE MERGER. (a) Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, at the Effective Time Purchaser shall be merged with and into API whereupon the separate existence of Purchaser shall cease and API shall -5- continue as the surviving corporation (the "SURVIVING CORPORATION") and succeeding to and assuming all the rights and obligations of Purchaser in accordance with the DGCL. (b) Upon the terms and subject to the conditions hereof, a certificate of merger or other appropriate documents (the "CERTIFICATE OF MERGER") will be duly prepared and executed by API and Purchaser and thereafter delivered to the Secretary of State of the State of Delaware (the "Delaware Secretary") for filing as provided in the DGCL as soon as practicable on the Closing Date. The Merger will become effective upon the filing of the Certificate of Merger with the Delaware Secretary or at such other later date or time as Purchaser and API shall agree and as specified in the Certificate of Merger (the time the Merger becomes effective being the "EFFECTIVE TIME"). Section 2.2 CLOSING. Unless this Agreement is terminated and the transactions contemplated herein abandoned pursuant to SECTION 8.1, the closing of the Merger (the "CLOSING") will take place on a date and time to be specified by the parties, which date will be no later than the second business day following the satisfaction or, if permissible, waiver of each of the conditions set forth in Article VII (the "CLOSING DATE"), at the offices of Sidley & Austin, 875 Third Avenue, New York, New York 10022, unless another date or place is agreed to by the parties hereto. Section 2.3 EFFECTS OF THE MERGER. The Merger will have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of API and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of API and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. Section 2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) At the Effective Time the Certificate of Incorporation of Purchaser previously delivered to API shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation. (b) The By-Laws of Purchaser, as in effect immediately prior to the Effective Time, will be the By-Laws of the Surviving Corporation until amended in accordance therewith and with applicable law. Section 2.5 DIRECTORS. The directors of Purchaser at the Effective Time will be the directors of the Surviving Corporation, each to hold office from the Effective Time in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is duly elected and qualified. -6- Section 2.6 OFFICERS. The officers of API at the Effective Time will be the officers of the Surviving Corporation, each to hold office from the Effective Time in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is duly appointed and qualified. ARTICLE III CONVERSION OF SECURITIES Section 3.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of TDS, Purchaser, API or the holder of any of the following securities: (a) Each Common Share issued and outstanding immediately prior to the Effective Time (other than any Common Shares to be cancelled pursuant to SECTION 3.1(b) and any Dissenting Shares shall be cancelled and shall be converted automatically into the right to receive an amount equal to the Per Share Amount in cash (the "Merger Consideration") payable, without interest, to the holder of such Common Share, less any applicable withholding taxes, upon surrender, in the manner provided in SECTION 3.2, of the certificate that formerly evidenced such Common Share; (b) Each Common Share held in the treasury of API and each Common Share owned by Purchaser, TDS or any direct or indirect wholly owned subsidiary of TDS or API immediately prior to the Effective Time shall be cancelled without any conversion thereof and will cease to exist and no shares of capital stock of the Surviving Corporation or other consideration will be delivered in exchange therefor; (c) Each Series A Common Share of API shall be cancelled without any conversion thereof and will cease to exist and no shares of capital stock of the Surviving Corporation or other consideration will be delivered in exchange therefor; and (d) Each share of common stock of the Purchaser, par value $1.00 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $1.00 per share, of the Surviving Corporation. (e) Notwithstanding any provision of this Agreement to the contrary, Common Shares that are outstanding immediately prior to the Effective Time and which are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such Common Shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration, unless such shareholder fails to perfect or withdraws or loses its -7- right to appraisal. Such shareholders shall be entitled to receive payment of the appraised value of such Common Shares held by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Common Shares under such Section 262 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in SECTION 3.2 of the certificate or certificates that formerly evidenced such Common Shares. API shall give TDS (i) prompt notice of any demands for appraisal received by API, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by API and (ii) the opportunity to direct all negotiations and proceedings with respect to demand for appraisal under the DGCL. API shall not, except with the prior written consent of TDS, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. Section 3.2 SURRENDER AND PAYMENT. (a) PAYING AGENT. Prior to the Effective Time, Purchaser shall authorize a commercial bank (or such other person or persons as shall be reasonably acceptable to TDS and API) to act as paying agent (the "PAYING AGENT") for API and agent for the holders of Common Shares in connection with the Merger to receive and pay the funds necessary to make the payments contemplated by SECTION 3.1(a). (b) SURVIVING CORPORATION TO PROVIDE FUNDS. At the Effective Time, TDS shall take all steps necessary to enable and cause the Surviving Corporation to provide to the Paying Agent funds necessary to pay for the Common Shares pursuant to SECTION 3.1(a). The funds held by the Paying Agent pursuant to this SECTION 3.2 shall not be used for any purpose other than payment of the Merger Consideration. (c) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate of Common Shares, other than TDS, API, any Subsidiary of TDS or API and any holder of Dissenting Shares (a certificate or certificates held by such holders are sometimes referred to herein as "CERTIFICATE" or "CERTIFICATES"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon actual delivery of the Certificates to the Paying Agent, and shall be in a form and have such other provisions as TDS may reasonably specify) and (ii) instructions for use in effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by the Surviving Corporation, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash into -8- which the Common Shares theretofore represented by such Certificate shall have been converted pursuant to SECTION 3.1, and the Certificates so surrendered shall forthwith be cancelled. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. If payment is to be made to a person other than the person in whose name the Certificate so surrendered is registered, it shall be a condition of payment that such Certificate shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this SECTION 3.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Common Shares theretofore represented by such Certificate shall have been converted pursuant to SECTION 3.1. (d) RETURN OF FUNDS. At any time following the sixth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Common Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Common Share for any Merger Consideration delivered in respect of such Common Share to a public official pursuant to any abandoned property, escheat or other similar law. Section 3.3 NO FURTHER OWNERSHIP RIGHTS IN API COMMON SHARES. All cash paid upon the surrender of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the Common Shares theretofore represented by such Certificates. Section 3.4 CLOSING OF API TRANSFER BOOKS. At the Effective Time, the stock transfer books of API shall be closed and no registration of transfers of Common Shares or Series A Common Shares shall thereafter be made on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged as provided in this ARTICLE III. Section 3.5 WITHHOLDING. The Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable -9- pursuant to this Agreement to any holder of Common Shares such amounts as the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Surviving Corporation or the Paying Agent, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the holder of the Common Shares in respect of which such deduction and withholding was made by the Surviving Corporation or the Paying Agent. Section 3.6 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and subject to such other conditions as the Board of Directors of the Surviving Corporation may impose, the Surviving Corporation shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof as determined in accordance herewith. When authorizing such issue of the Merger Consideration in exchange therefor, the Board of Directors of the Surviving Corporation (or any authorized officer thereof) may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give the Surviving Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed. Section 3.7 FURTHER ASSURANCES. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Constituent Corporations or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of the Constituent Corporations in the Merger, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of such Constituent Corporations, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such Constituent Corporation and otherwise to carry out the purposes of this Agreement. -10- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF API API represents and warrants to TDS and Purchaser as follows: Section 4.1 ORGANIZATION. (a) API is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Except as set forth on API Disclosure Letter Schedule 4.1, API is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Certificate of Incorporation and Bylaws of API, and all amendments thereto, heretofore delivered to TDS and TSR Wireless are accurate and complete as of the date hereof. API Disclosure Letter Schedule 4.1 lists all jurisdictions in which API is qualified to do business as a foreign corporation. (b) API has all requisite corporate power and authority to own, lease and operate the API Assets and to conduct the API Business as it is presently being conducted. (c) API Disclosure Letter Schedule 4.1 is a correct and complete list of API's Subsidiaries, each of which is a corporation or limited liability company duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation (as applicable) (as identified on API Disclosure Letter Schedule 4.1), and has the requisite corporate or limited liability company power and authority to conduct its business as it is presently being conducted and to own and lease its properties and assets. API Disclosure Letter Schedule 4.1 contains a true, correct and complete list of all jurisdictions in which each Subsidiary is qualified to do business as a foreign corporation or limited liability company. Except as set forth in API Disclosure Letter Schedule 4.1, each of the Subsidiaries is duly qualified to do business as a foreign corporation or limited liability company (as applicable) and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Certificate or Articles of Incorporation and Bylaws or other organizational documents of each Subsidiary of API have been made available to TDS and TSR Paging and are accurate and complete. API owns of record and beneficially all of the issued and outstanding capital stock of each free and clear of any Encumbrances, except as set forth on API Disclosure Letter Schedule 4.1. Section 4.2 CAPITALIZATION. (a) As of the date of this Agreement, the total number of shares of all classes of stock which API is authorized to issue is 160,000,000 shares, consisting of -11- 50,000,000 Common Shares, 50,000,000 Series A Common Shares, 50,000,000 Series B Common Shares, par value $1.00 per share (the "SERIES B COMMON SHARES") and 10,000,000 shares of Preferred Stock, par value $1.00 per share (the "PREFERRED SHARES"). As of the date hereof, (i) 12,500,000 Series A Common Shares are issued and outstanding, (ii) no Series B Common Shares are issued and outstanding, (iii) no Preferred Shares are issued and outstanding, (iv) 7,645,446 Common Shares are issued and outstanding, (v) no Common Shares are held in the treasury of API, (vi) 150,000 Common Shares are reserved for future issuance pursuant to the TDS Tax-Deferred Savings Plan, (vii) 100,000 Common Shares are reserved for future issuance for sale to employees of API and its subsidiaries under the 1997 Employee Stock Purchase Plan, (viii) 700,000 shares are reserved for future issuance under the 1994 Long Term Incentive Plan, as amended and restated as of April 1, 1996 (with respect to which options to acquire 287,072 Common Shares are issued and outstanding) and (ix) 12,500,000 Common Shares are reserved for issuance upon conversion of the Series A Common Shares. All the outstanding shares of API's capital stock are duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights of third parties in respect thereto. (b) As of the date of this Agreement, (i) no bonds, debentures, notes or other indebtedness having the right to vote under ordinary circumstances (or convertible into securities having such right to vote) ("VOTING DEBT") of API are issued or outstanding, (ii) except as set forth above, and except as provided in the Exchange Agreement, dated January 1, 1994, between API and TDS, and the Registration Rights Agreement, dated January 1, 1994, between API and TDS, there are no existing options, warrants, calls, subscriptions or other rights or other agreements or commitments of any character (collectively, "WARRANTS") relating to the issued or unissued capital stock or Voting Debt of API or obligating API to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interests in, API or securities convertible into or exchangeable for such shares, Voting Debt or equity interests or obligating API to grant, extend or enter into any such Warrant and (iii) there are no outstanding contractual obligations of API to repurchase, redeem or otherwise acquire any shares of capital stock of API or any Warrants. Section 4.3 AUTHORITY. API has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder to consummate the transactions contemplated hereby, subject to, with respect to the Merger, the approval and adoption of this Agreement and the Merger by the affirmative vote of the holders of Common Shares and Series A Common Shares entitled to cast at least a majority of the total number of votes entitled to be cast by holders of Common Shares and Series A Common Shares. The execution and delivery of this Agreement and the consummation of the Merger and of the other transactions contemplated hereby have been duly approved by the Board of Directors of API. No other corporate proceedings on the part of API are necessary to authorize the entering into and the performance of this Agreement and the transactions contemplated hereby, other than, with respect to the Merger, the approval and adoption of this Agreement -12- and the Merger by API's shareholders as described in the preceding sentence and the filing and recordation of appropriate merger documents as required by the DGCL. This Agreement has been duly executed and delivered by API and constitutes a legal, valid and binding obligation of API. The restrictions on business combinations contained in Section 203 of the DGCL are not applicable to the transactions contemplated hereby. Section 4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Interim Balance Sheet Date, except as contemplated by this Agreement, there has not been any: 4.4.1 Material Adverse Change in respect of API, or any of its Subsidiaries, the FCC Licenses and/or the FCC License Applications. 4.4.2 change in accounting methods, principles or practices by API or any of its Subsidiaries, except as required by law or by generally applicable changes instituted in the accounting profession; 4.4.3 material damage, destruction or loss (whether or not covered by insurance) adversely affecting the API Assets or the API Business; 4.4.4 cancellation, individually or the aggregate of any material indebtedness or waiver or release of any material right or claim of API or its Subsidiaries; 4.4.5 cancellation or termination of any material Contract of API or its Subsidiaries or entry into any material Contract by API or its Subsidiaries, other than in respect of the API Excluded Assets; 4.4.6 sale, assignment or transfer of (i) any transmitters and paging terminals of API or its Subsidiaries included in the Interim Balance Sheet of API, whether in use or in storage or (ii) any material portion of the API Assets other than sales of Inventory in the ordinary course of business; 4.4.7 failure to replenish API's inventories and supplies in a normal and customary manner consistent with prior practice and prudent business practices prevailing in the industry, except for reductions in API's and its Subsidiaries' Inventory not exceeding ten percent of such Inventory on the Interim Balance Sheet Date consistent with prudent business practice, or any purchase commitment made by API or its Subsidiaries in excess of the normal, ordinary and usual requirements of its business or at any price in excess of the then current market price or upon terms and conditions more onerous than those usual and customary in the industry, or any change in the selling, pricing, advertising or personnel practices of API and its Subsidiaries inconsistent with their prior practice and prudent business practices prevailing in the industry; -13- 4.4.8 institution of settlement of or agreement to settle any Action relating to the API Business (other than the API Excluded Assets) or the API Assets other than in the ordinary course of business consistent with past practices but not in any case involving amounts in excess of $200,000 in the aggregate; 4.4.9 agreement by API or its Subsidiaries to do, or any action or omission by API or its Subsidiaries which is likely to result in, any of the representations and warranties set forth in the preceding clauses 4.4.1 through 4.4.8 becoming untrue other than as expressly provided for herein. Section 4.5 ASSETS. API and its Subsidiaries have good and marketable title to the API Assets and, upon the consummation of the transactions contemplated by the Asset Contribution Agreement, TSR Wireless will acquire good title to all the API Assets, free and clear of any Encumbrances other than Permitted Encumbrances. The API Assets include all assets necessary for the conduct of the API Business as presently conducted. Section 4.6 API REAL PROPERTY. API and its Subsidiaries do not own any Real Property. API Disclosure Letter Schedule 4.6 also contains a complete and accurate list of all Real Property Leases distinguishing between the stores, transmission sites, office premises and other Real Property Leases. 4.6.1 ACTIONS. There are no pending or, to the knowledge of API, threatened condemnation proceedings or other Actions with respect to any Real Property Leases. 4.6.2 REAL PROPERTY LEASES OR OTHER AGREEMENTS. Except for the Real Property Leases listed on API Disclosure Letter Schedule 4.6, there are no material leases, subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements, written or oral, granting to any Person the right to purchase, use or occupy any Real Property Leases. Except as set forth in API Disclosure Letter Schedule 4.6, with respect to each Real Property Lease, API or its Subsidiaries have and will transfer to TSR Wireless at the Closing (as defined in the Asset Contribution Agreement) a valid leasehold interest in the leasehold estate, free and clear of all Encumbrances other than Permitted Encumbrances. Except as set forth on API Disclosure Letter Schedule 4.6, all Real Property Leases are valid, binding and enforceable in all material respects in accordance with their terms and are in full force and effect. Except as set forth on API Disclosure Letter Schedule 4.6, API and its Subsidiaries enjoy peaceful and undisturbed possession of all real property subject to such Real Property Leases, and API and its Subsidiaries have in all material respects performed all the material obligations required to be performed by them through the date hereof with respect to such Real Property Leases, and each Real Property Lease is assignable (upon receipt of necessary landlord Consents) in connection with the transactions contemplated by the Asset Contribution Agreement. -14- 4.6.3 CERTIFICATE OF OCCUPANCY. API and its Subsidiaries have received all required material approvals of Governmental Authorities (including, without limitation, Permits and material certificates of occupancy or other similar certificates permitting lawful occupancy of the Real Property Leases) required in connection with the present use of the Real Property Leases and all improvements thereon. 4.6.4 UTILITIES. All Real Property Leases and the improvements thereon are supplied with utilities and other services necessary for the operation of such facilities as currently operated. 4.6.5 IMPROVEMENTS, FIXTURES AND EQUIPMENT. All Leasehold Improvements, and all Fixtures and Equipment and other tangible assets owned, leased or used by API or its Subsidiaries on the Real Property Leases are sufficient in all material respects for the operation of the API Business as presently conducted. 4.6.6 NO SPECIAL ASSESSMENT. Other than to the extent such Contracts relate to the API Excluded Assets, API and its Subsidiaries have not received notice of any special assessment relating to any Real Property Leases or any portion thereof, and API has no knowledge of any pending or threatened special assessment, other than any special assessments disclosed in API Disclosure Letter Schedule 4.6. Section 4.7 CONTRACTS AND COMMITMENTS. 4.7.1 CONTRACTS. Other than to the extent such Contracts relate to the API Excluded Assets, API Disclosure Letter Schedule 4.7 sets forth a complete and accurate list of all Contracts of API and its Subsidiaries of the following categories: (i) Reseller Contracts (provided, that, with respect to reseller agreements with customers only reseller agreements with customers for at least 2,000 or more pagers and with respect to reseller agreements with third party vendors only material national reseller agreements along with totals by region of reseller agreements with third party vendors), distribution, franchise, lease and license (other than with respect to software that is available in consumer retail stores and subject to "shrink wrap" license agreements) Contracts; (ii) Sales, commission, consulting, agency or advertising Contracts which are not cancelable on thirty (30) calendar days notice; (iii) Options to buy any property, real or personal, or options to sell or sublet any Real Property Leases or personal property included in the API Assets; (iv) Contracts involving expenditures or Liabilities in excess of $250,000 over the life of the Contract or otherwise material to API and its Subsidiaries; -15- (v) Contracts containing covenants limiting the freedom of API or its Subsidiaries to engage in any line of business or compete with any Person; (vi) Intentionally omitted; (vii) All Contracts with LECs for provision of Interconnection to API ("API INTERCONNECTION CONTRACTS"), including: (a) all such API Interconnection Contracts regardless of whether such agreements have yet been submitted to or approved by the relevant PUCs; (b) a listing of any requests for interconnection filed by API with PUC(s) pursuant to Section 252(a) of the Communications Act and a brief description of the status of the PUC proceeding with respect to each such request; (c) a brief description of outstanding negotiations between API and LECs regarding provision of Interconnection by LECs regardless of whether such negotiations are pursuant to a request for interconnection submitted by API pursuant to Section 252(a) of the Communications Act; and (d) any related agreements between API and LECs regarding Interconnection. (viii) All Personal Property Leases excluding Contracts with customers for lease of pagers; and (ix) All Contracts not listed pursuant to SECTIONS 4.7.1 (i) through 4.7.1 (viii) but which are (a) material to the API Business; or (b) not made in the ordinary course of the API Business. Except as set forth in API Disclosure Letter Schedule 4.7, API has delivered or made available to TDS and TSR Paging true, correct and complete copies of each of the Contracts listed on API Disclosure Letter Schedule 4.7 and API Disclosure Letter Schedule 4.8, including all amendments and supplements thereto other than Personal Property Leases with individual customers on standard forms (the standard forms having been supplied). 4.7.2 ABSENCE OF BREACHES OR DEFAULTS. Except as set forth in API Disclosure Letter Schedule 4.7, all of the Contracts are valid and in full force and effect. API or its Subsidiaries have duly performed all of their material obligations under such Contracts to the extent those obligations to perform have accrued, and no material violation of, or material default or breach under, such Contracts by API or its Subsidiaries, or, to API's knowledge, any other party has occurred and neither API nor its Subsidiaries, nor, to API's knowledge, any other party has repudiated any material provisions thereof. 4.7.3 PRODUCT WARRANTY. API and its Subsidiaries have committed no act, and there has been no omission, which would result in, and there has been no occurrence which would give rise to, any material product liability or material liability for breach of warranty (whether covered by insurance or not) on the part of API or its Subsidiaries, with respect to products sold, or services rendered prior to the Closing. -16- Section 4.8 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. API Disclosure Letter Schedule 4.8 sets forth a complete and accurate list of the names and addresses of API and its Subsidiaries' (i) ten (10) largest direct customers and the ten (10) largest reseller customers for November 1997 for each sales region, showing the approximate recurring revenue in dollars by API and its Subsidiaries to each such customer during such month; and (ii) five (5) largest suppliers for January through November 1997 showing the approximate total purchases in dollars by API and its Subsidiaries from each such supplier during such period. As of the date hereof, neither API nor any of its Subsidiaries has received any communication from any customer or supplier named on API Disclosure Letter Schedule 4.8 of any intention to terminate or reduce purchases from or supplies to API and its Subsidiaries. Section 4.9 OPERATION OF THE API BUSINESS. Except as set forth in API Disclosure Letter Schedule 4.9, (i) API has conducted the API Business only through API and its Subsidiaries and not through any other divisions or any direct or indirect Subsidiary or Affiliate of TDS and (ii) no part of the API Business is operated by TDS or API through any entity other than API and its Subsidiaries. Section 4.10 INVENTORY. All Inventory is of good, usable and merchantable quality and, except as set forth on API Disclosure Letter Schedule 4.10, does not include obsolete or discontinued items not otherwise saleable for ten dollars ($10) or more in the ordinary course of business. Except as set forth on API Disclosure Letter Schedule 4.10 or in amounts which are not material; 4.10.1 all Inventory is of such quality as to meet the quality control standards of API and any applicable governmental quality control standards; 4.10.2 all Inventory is saleable as current Inventory at the current prices thereof in the ordinary course of business; 4.10.3 all Inventory is recorded on the books of the API Business and in the API Interim Balance Sheet at the net book value determined in accordance with GAAP; 4.10.4 except for a write-down made in September 1996, and September 1997 no write-down in inventory has been made or should have been made pursuant to GAAP during the past two years. Except for items undergoing repair off premises, in the possession of employees or customers all Inventory is located at the Real Property Leases. Section 4.11 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither API or any Subsidiaries of API, nor any officer, employee or agent of API or its Subsidiaries, nor any other Person acting on their behalf, has, directly or indirectly, within the past five years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the API Business (or assist in connection with any actual or proposed -17- transaction relating to the API Business) (i) which subjected or might have subjected API or any of its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) which if not given in the past, might have had a Material Adverse Effect, (iii) which if not continued in the future, might have a Material Adverse Effect or subject TDS or TSR Wireless to suit or penalty in any private or governmental litigation or proceeding, (iv) for any of the purposes described in Section 162(c) of the Code or (v) for the purpose of establishing or maintaining any concealed fund or concealed bank account. Section 4.12 NO CONFLICT OR VIOLATION. Except for (i) the filing with the SEC of the SCHEDULE 14D-9 and, if required by applicable law, the API Proxy Statement in connection with this Agreement and the transactions contemplated hereby and (ii) the filing of the Certificate of Merger with the Delaware Secretary and appropriate documents with the relevant states in which API is qualified to do business and except as set forth on API Disclosure Letter Schedule 4.12 and as required pursuant to the API/TDS Agreements, neither the execution, delivery or performance of this Agreement by API nor the consummation by API of the transactions contemplated hereby, including the Merger, will (a) violate or conflict with any provision of the Restated Certificate of Incorporation or Bylaws of API or any of API's Subsidiaries, (b) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) (any such violations, conflicts, breaches, defaults, terminations, accelerations, or creation of Encumbrances are herein referred to collectively, as "VIOLATIONS") upon any of the API Assets under, or require any Consent under any of the terms, conditions or provisions of any Contract, any Financing Obligation of API, any Authorization, any Real Property Lease, Personal Property Lease, franchise, Permit, agreement, or other instrument or obligation (i) to which API or any of its Subsidiaries is a party or (ii) by which the API Assets are bound, (c) violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award to which API or any of its Subsidiaries or the API Assets is subject, (d) impose any Encumbrance (other than a Permitted Encumbrance) on the API Assets. Except as specified in API Disclosure Letter Schedule 4.12, or in connection with necessary corporate approvals by API of the Merger and transactions contemplated hereby, no Consent is required to be obtained or made by API or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Section 4.13 REGULATORY MATTERS. 4.13.1 FCC LICENSES. (i) API Disclosure Letter Schedule 4.13.1 lists (a) each FCC License and, in each case, the name of the licensee, the call sign, the operating frequency or frequencies, the location and the expiration date of the FCC License; and -18- (b) each FCC License Application as of the date hereof and, in each case, the name of the applicant, the proposed frequency or frequencies, the proposed location and the FCC file number of the FCC License Application. API has made available to TDS and TSR Paging for inspection copies of each FCC License and FCC License Application. (ii) Except as set forth on API Disclosure Letter Schedule 4.13.1, (A) none of the FCC Licenses or FCC License Applications is subject to any purchase, sale, option or right of first refusal agreements; (B) API has good and marketable title, to the extent allowed by law, to the FCC Licenses; and (C) subject to the regulatory jurisdiction of the FCC , API holds all FCC Licenses free and clear of all Encumbrances. (iii) API Disclosure Letter Schedule 4.13.1 lists each 929 MHz one-way paging frequency for which API or any of its Subsidiaries currently has nationwide exclusivity ("API 929 MHz EXCLUSIVE FREQUENCY"). Except as set forth in API Disclosure Letter Schedule 4.13.1, for each API 929 MHz Exclusive Frequency: (i) API and its Subsidiaries timely constructed and placed into operation in accordance with FCC Rules sufficient transmitters to comply with 929 MHz frequency exclusivity requirements imposed by the FCC (collectively, "FCC 929 MHz EXCLUSIVITY REQUIREMENTS") as specified, INTER ALIA, in FCC Rules and FCC decisions in AMENDMENT OF THE COMMISSION'S RULES TO PROVIDE CHANNEL EXCLUSIVITY TO QUALIFIED PRIVATE PAGING SYSTEMS AT 929-930 MHz, REPORT AND ORDER, PR Docket No. 93-35, 8 FCC Rcd 8318 (1993), RECON. 11 FCC Rcd 3091 (1996), and WIRELESS TELECOMMUNICATIONS BUREAU ANNOUNCES 929-930 MHz PAGING LICENSEES THAT HAVE MET CONSTRUCTION REQUIREMENTS FOR NATIONWIDE EXCLUSIVITY, PUBLIC NOTICE, DA 96-748 (released May 10, 1996); REVISION OF PART 22 AND PART 90 OF THE COMMISSION'S RULES TO FACILITATE FUTURE DEVELOPMENT OF PAGING SYSTEMS, WT Docket No. 96-18, FCC 97-59 (released February 24, 1997); (ii) API and its Subsidiaries have continued to operate sufficient transmitters to comply with the terms and conditions of such FCC Licenses and Authorizations, the Communications Act, the FCC Rules and all applicable state laws and regulations. 4.13.2 FILINGS, ETC. (i) The FCC Licenses and FCC License Applications and are the only FCC and PUC Permits and Authorizations necessary to conduct the API Business. Except as set forth on API Disclosure Letter Schedule 4.13.2, API and its Subsidiaries have duly and in a timely fashion secured or filed under applicable law all necessary Permits and Authorizations from, and have filed all required registrations, applications, reports and any other documents with, the FCC, and, if applicable, any PUC and any other Governmental Authority exercising jurisdiction or having jurisdiction over API and its Subsidiaries, in each case, with respect to the API Business. Except as set forth on API Disclosure Letter Schedule 4.13.2, (a) the FCC Licenses (b) all other Authorizations are in full force and effect, are valid for the balances of the current license term, are not impaired by acts or failures to make required filings on the part of API or any of its Subsidiaries, and are free and clear of restrictions that may reasonably -19- be expected to limit the full operation of the FCC Licenses or Authorizations, in each case without adverse conditions, restrictions or impairments, except for such conditions as are generally applicable to holders of such FCC Licenses and Authorizations. No renewal of any FCC License would constitute a major environmental action under the rules of the FCC. (ii) Except as set forth on API Disclosure Letter Schedule 4.13.2, neither API nor its Subsidiaries is subject to any Order or any pending or, to the knowledge of API, threatened, Action (excluding rule making that has general industry applicability) which affects or would be expected to affect, in any material respect, the validity of any FCC License, or result in the revocation, termination, or adverse modification thereof, or impair the renewal thereof. Except as set forth on API Disclosure Letter Schedule 4.13.2, no event has occurred and is continuing (excluding rule making that has general industry applicability) that could reasonably be expected to (a) result in the revocation, termination, non-renewal or adverse modification of any FCC License or (b) materially and adversely affect any rights of API or its Subsidiaries thereunder. 4.13.3 FEES. API and its Subsidiaries have paid all franchise, license, regulatory or other fees and charges which have become due and payable pursuant to any applications, filings, recordings and registrations with, and all Authorizations and Permits from, the FCC, any PUC or any other Governmental Authority, in respect of the API Business. 4.13.4 SHARING AGREEMENTS. Except as set forth on API Disclosure Letter Schedule 4.13.4, neither API nor any of its Subsidiaries is a party to any agreement for the shared use of facilities or equipment used in connection with the API Business. 4.13.5 OPERATIONS. The equipment operating pursuant to the FCC Licenses or PUC Authorizations of API and its Subsidiaries is operating in all material respects in accordance with the terms and conditions of such FCC License or Authorizations, the Communications Act, the FCC Rules and all applicable state laws and regulations. 4.13.6 CONSTRUCTION. Except as set forth on API Disclosure Letter Schedule 4.13.6 all construction for facilities that API intends to place in service proposed in any FCC License is proceeding in a manner that may reasonably be expected to allow compliance with applicable FCC construction benchmarks, the completion of such construction and commencement of operations within the time specified in the relevant FCC License. -20- Section 4.14 FINANCIAL STATEMENTS; RECEIVABLES; PUBLIC FILINGS. 4.14.1 FINANCIAL STATEMENTS. The API Financial Statements are attached as API Disclosure Letter Schedule 4.14.1. The API Financial Statements (a) were prepared in accordance with the Books and Records of API and its Subsidiaries, (b) were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby subject, in the case of the API Unaudited Financial Statements, to the absence of footnotes and to normal year-end adjustments and (c) fairly present (i) the consolidated assets, liabilities (including all reserves) and financial position of API and its Subsidiaries (other than AMS) and (ii) the assets, Liabilities (including all reserves) and financial position of AMS in each case as of the respective dates thereof and the results of operations and changes in cash flows for the periods then ended, consolidated as appropriate. The API Audited Financial Statements have been audited by Arthur Anderson LLP, independent certified public accountants, whose reports thereon are included with such API Audited Financial Statements. 4.14.2 RECEIVABLES. All of the receivables of API and its Subsidiaries (including accounts receivable, loans receivable and advances) which have arisen in connection with the API Business and which are reflected in the Interim Financial Statements, and all such receivables which will have arisen since the Interim Balance Sheet Date, have arisen only from BONA FIDE transactions in the ordinary course of business. All receivables of API and its Subsidiaries on the date of this Agreement are, and on the Closing Date will be, good and collectible in the ordinary course of business of API within 120 days of their incurrence, subject to any applicable reserves set forth in the Interim Balance Sheet of API. API has no knowledge of any facts or circumstances generally which would result in any material increase in the uncollectability of such receivables as a class in excess of the reserves therefor set forth on the Interim Financial Statements. API Disclosure Letter Schedule 4.14.2 accurately lists as of November 28, 1997 all receivables arising out of or relating to the API Business in excess of $1,000, the amount owing and the aging of such receivable and the name and last known address of the party from whom such receivable is owing. 4.14.3 FILINGS. API Disclosure Letter Schedule 4.14.3 sets forth a list of all reports filed by API with the SEC under the Exchange Act during the period from January 1, 1995 to the date hereof (collectively, the "SEC REPORTS"), true and correct copies of which have been made available to TDS and TSR Paging. None of the SEC Reports, as of their respective dates (as amended through the date hereof) contained any untrue statement of material fact or omitted to state a material fact with respect to the API Business required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 4.15 BOOKS AND RECORDS. API and its Subsidiaries have made and kept (and given TDS and TSR Paging access to) the Books and Records of API, -21- which, in all material respects accurately and fairly reflect the activities of API and its Subsidiaries that would be so recorded. Section 4.16 LITIGATION. Except as set forth on API Disclosure Letter Schedules 4.13.2 and 4.16 there is no Action or Order, pending or to the knowledge of API threatened (a) against, related to or affecting (i) API or any of its Subsidiaries or the API Assets, or (ii) any shareholders (including TDS) officers or directors of API or any of its Subsidiaries (in each case, in such capacity) and which either (A) may be reasonably expected to result in damages in excess of $100,000 in respect of any individual Order for the payment of money damages (or $200,000 in the aggregate), or (B) seeks as of the date hereof to delay, limit or enjoin the transactions contemplated by this Agreement or (b) in which API or any of its Subsidiaries is a plaintiff, including any derivative suits brought by or on behalf of API or any of its Subsidiaries. None of API or any of its Subsidiaries is in default with respect to or subject to any Order, and to the knowledge of API, there are no unsatisfied Orders against API or any of its Subsidiaries or the API Assets. Section 4.17 COMPLIANCE WITH LAW. API and its Subsidiaries are and have been in compliance in all material respects with all Authorizations, Regulations, and Permits in respect of the API Assets and the API Business; IT BEING UNDERSTOOD that nothing in this representation is intended to address any compliance issues that are the subject of any other representation or warranty set forth herein. Section 4.18 BROKERS. Except for the fees payable to PaineWebber, Inc., in connection with the transactions contemplated hereby, which shall be paid by API, no broker, investment banker or other person is entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of API. A true, correct and complete copy of the engagement letter or other agreement between API and PaineWebber, Inc. has been delivered to Purchaser. Section 4.19. NO OTHER AGREEMENTS TO SELL THE API ASSETS. Except as contemplated by TDS in the Asset Contribution Agreement, neither API nor any of its officers, directors or affiliates have any commitment or legal obligation, absolute or contingent, to any other Person other than TSR Wireless and TSR Paging to sell, assign, transfer or effect a sale of the API Assets (other than sales of Inventory in the ordinary course of business), to sell or effect a sale of the capital stock of API or any of its Subsidiaries (other than in connection with existing employee stock option and stock purchase plans) to effect any merger, consolidation, exclusive license, liquidation, dissolution or other reorganization of API or any of its Subsidiaries, or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing business combination transactions. Section 4.20 PROPRIETARY RIGHTS. -22- 4.20.1 PROPRIETARY RIGHTS. API Disclosure Letter Schedule 4.20 lists all of API and its Subsidiaries' domestic and foreign registrations of trademarks and of other marks, trade names or other trade rights, and all pending applications for any such registrations, all of API's and its Subsidiaries' registered copyrights and all of API's and its Subsidiaries' patents and pending patent applications, and all agreements under which API or its Subsidiaries are licensed to use Proprietary Rights. 4.20.2 OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. API or one of its Subsidiaries owns and/or has the right to use each of the Proprietary Rights listed on API Disclosure Letter Schedule 4.20. The Proprietary Rights listed on API Disclosure Letter Schedule 4.20 constitute all of the Proprietary Rights necessary to conduct the API Business in the manner presently conducted. None of the Proprietary Rights is involved in any pending or, to the knowledge of API, threatened litigation. No other Person (i) has the right to use any of the Proprietary Rights, except pursuant to the Contracts; or (ii) to API's knowledge, except as set forth in API Disclosure Letter Schedule 4.20, is infringing upon any Proprietary Rights. To API's knowledge, the use by API and its Subsidiaries of the Proprietary Rights is not infringing upon or otherwise violating the rights of any third party. No proceedings have been instituted against or notices received by API or any of its Subsidiaries that are presently outstanding alleging that the use by API or any of its Subsidiaries of the Proprietary Rights infringes upon or otherwise violates any rights of a third party in or to such Proprietary Rights. All Proprietary Rights are assignable by API and its Subsidiaries to TSR Wireless in the manner contemplated by the Asset Contribution Agreement. Section 4.21 ENVIRONMENTAL MATTERS. 4.21.1 COMPLIANCE WITH ENVIRONMENTAL LAW. Each of API and its Subsidiaries has complied and is in compliance in all material respects with all applicable Environmental Laws pertaining to any of the properties and assets of the API Business (including the Facilities) and the use and ownership thereof, and to the operation of the API Business. No violation by API or any of its Subsidiaries is being alleged of any applicable Environmental Law relating to any of the properties and assets of the API Business including the Facilities or the use, occupation or ownership thereof, or to the operation of the API Business. 4.21.2 OTHER ENVIRONMENTAL MATTERS. Neither API nor to the knowledge of API any other Person (including any tenant or subtenant) has caused or taken any action that will result in, and neither API nor any of its Subsidiaries is subject to, any material Liability relating (i) environmental conditions on, under, or about the Facilities, including without limitation, the air, soil and groundwater conditions at such Facilities or (ii) the past or present use, management, handling, transport, treatment, generation, storage, disposal or Release of any Hazardous Materials. API has disclosed and made available to TDS and TSR Paging all information, including, without limitation, all studies, analyses and test results, in the possession, custody or control of or otherwise known to API relating to (x) the environmental conditions on, under or about the Facilities, and (y) any Hazardous Materials used, managed, -23- handled, transported, treated, generated, stored or Released by API or any other Person on, under, about or from any of the Facilities, or otherwise in connection with the use or operation of the API Business. Section 4.22 TAX MATTERS. 4.22.1 API has (or by the Closing will have) duly and timely filed all Tax returns relating to the API Business with respect to Taxes through the Closing Date for which TDS or TSR Wireless could have post-closing liability ("API PCD TAXES") required to be filed on or before the Closing Date ("API PCD TAX RETURNS"). Except for API PCD Taxes set forth on API Disclosure Letter Schedule 4.22, which are being contested in good faith and by appropriate proceedings, the following API PCD Taxes have (or by the Closing Date will have) been duly and timely paid: (i) all API PCD Taxes shown to be due on the API PCD Tax Returns, (ii) all deficiencies and assessments of API PCD Taxes of which API has or by the Closing Date will have received written notice. All Taxes required to be withheld by or on behalf of API in connection with amounts paid or owing to any employee, independent contractor, creditor or other party with respect to API ("API WITHHOLDING TAXES") have been withheld, and such withheld taxes have either been duly and timely paid to the proper Governmental Authorities or set aside in accounts for such purpose. 4.22.2 Except as set forth on API Disclosure Letter Schedule 4.22, (i) all API PCD Tax Returns have been examined by the relevant taxing authority or the period for assessment of the Taxes in respect of which such Tax returns were required to be filed has expired, and (ii) no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any API PCD Taxes or API Withholding Taxes, and no power of attorney with respect to any such Taxes, has been filed with the Internal Revenue Service ("IRS") or any other Governmental Authority. 4.22.3 Except as set forth on API Disclosure Letter Schedule 4.22, (i) there are no API PCD Taxes or API Withholding Taxes for which a deficiency has been asserted in writing by any Governmental Authority to be due and (ii) no issue has been raised in writing by any Governmental Authority in the course of any audit with respect to API PCD Taxes or API Withholding Taxes. Except as set forth on API Disclosure Letter Schedule 4.22, no API PCD Taxes and no API Withholding Taxes are currently under audit by any Governmental Authority of which API has, or will have by the Closing, received written notice. 4.22.4 Except as set forth on API Disclosure Letter Schedule 4.22, there is no assessment or Action or administrative appeal pending, or threatened of which API has received assessment or written notice against or relating to API in connection with API PCD Taxes. -24- Section 4.23 INFORMATION IN DISCLOSURE DOCUMENTS. (a) Neither the Schedule 14D-9 nor the information statement to be filed by API in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act (the "INFORMATION STATEMENT") nor any of the information supplied by API specifically for inclusion in the Offer Documents or the Schedule 13E-3 will, at the respective times the Schedule 14D-9, the Information Statement, the Offer Documents or the Schedule 13E-3 are filed with the SEC or are first published, sent or given to shareholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Schedule 14D-9 and the Information Statement will comply as to form in all material respects with the applicable requirements of the Exchange Act and the applicable rules and regulations thereunder. (b) The proxy or information statement relating to any meeting of API's shareholders that may be required to be held in connection with the Merger (as it may be amended from time to time, the "API PROXY STATEMENT") will not, at the date mailed to API's shareholders and at the time of the meeting of shareholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies or otherwise. The API Proxy Statement will, when filed with the SEC by API, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Section 4.24 BENEFIT PLANS; LABOR MATTERS. (a) API Disclosure Letter Schedule 4.24 contains a complete and accurate list of all Benefit Plans sponsored, maintained, participated in or contributed to by API or any of its Subsidiaries ("API BENEFIT PLANS"). Neither API nor any of its Subsidiaries is now sponsoring, maintaining, participating in or contributing to or has ever sponsored, maintained, participated in or been obligated to contribute to any Benefit Plan subject to either Title IV of ERISA or the minimum funding standards of Section 302 of ERISA, including without limitation any defined benefit plan (as such term is defined in Section 3(35) of ERISA) or multiemployer plan (as such term is defined in Section 3(37) of ERISA). (b) API Disclosure Letter Schedule 4.24 contains a complete and accurate list of all API Benefit Plans which are sponsored or maintained by API or one of its Subsidiaries and not by TDS ("API SPONSORED BENEFIT PLANS"). With respect to each API Sponsored Benefit Plan, API has delivered to Purchaser a true and correct copy, if applicable, of (i) all plan documents and amendments thereto, trust agreements and amendments thereto and insurance and annuity contracts and policies, (ii) the current summary plan description or related materials given to employees of API and the Subsidiaries to describe such Plan, (iii) the most recent annual report (Form 5500 series) and accompanying schedules, (iv) the most recent financial statement, (v) the -25- most recent actuarial report, (vi) the most recent determination letter issued by the IRS and application submitted with respect to such letter, and (vii) all correspondence with the IRS and Department of Labor concerning any controversy. (c) With respect to all employees of API and its Subsidiaries, to the best knowledge of API, each API Benefit Plan has been administered in all material respects in accordance with its terms and complies in all material respects with all the requirements prescribed by any and all statutes, orders and governmental rules and regulations applicable to such API Benefit Plan, including, but not limited to, ERISA and the Code. (d) Each API Sponsored Benefit Plan intended to qualify under Section 401(a) and 401(k) of the Code has heretofore been determined by the Internal Revenue Service to so qualify or a timely application for such determination has been made, and the trusts created thereunder have heretofore been determined to be exempt from tax under the provisions of Section 501(a) of the Code or an application for such determination has been made, and to the knowledge of API no circumstance has occurred or exists which may reasonably be expected to cause the loss of such qualifications or exemption. (e) With respect to all employees of API and its Subsidiaries, there is no pending or, to the best knowledge of API, threatened claim in respect of any of the API Benefit Plans other than claims for benefits in the ordinary course of business. (f) API and its Subsidiaries have complied in all material respects with the health care continuation requirements of Part 6 of Title I of ERISA. (g) Neither API nor any of its Subsidiaries has engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code which could result in a material liability. (h) Except as described in API Disclosure Letter Schedule 4.24, neither API nor any of its Subsidiaries maintains or contributes to any employee welfare benefit plan within the meaning of Section 3(i) of ERISA which provides benefits to employees or their beneficiaries after termination of employment other than as required by Part 6 of Title I of ERISA. (i) Except as described in API Disclosure Letter Schedule 4.24 or in API SEC Documents filed prior to the date of this Agreement, API is not a party to or bound by any oral or written: (i) employee collective bargaining agreement, employment agreement (other than employment agreements terminable by API without premium or penalty on notice of 30 days or less under which the only monetary obligation of API is to make current wage or salary payments and provide current fringe -26- benefits), consulting, advisory or service agreement, deferred compensation agreement, confidentiality agreement or covenant not to compete; (ii) contract or agreement with any officer, director or employee (other than employment agreements disclosed in response to clause (i) or excluded from the scope of clause (i)), agent, or attorney-in-fact of API; or (iii) stock option, stock purchase, bonus or other incentive plan or agreement. (j) Except as set forth in API Disclosure Letter Schedule 4.24, API has complied in all material respects with all applicable laws, rules and regulations which relate to prices, wages, hours, discrimination in employment and collective bargaining and to its operations and none of them is liable in any material respect for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. API believes that its and its Subsidiaries' relations with their employees are satisfactory. API is not a party to, and is not affected by or threatened with, any dispute or controversy with a union or with respect to unionization or collective bargaining or other labor matters involving its employees. API is not materially affected by any dispute or controversy with a union or with respect to unionization or collective bargaining involving any supplier or customer. API Disclosure Letter Schedule 4.24 sets forth a description of any union organizing or election activities involving any non-union employees of API which have occurred since December 31, 1995 or, to the knowledge of API, are threatened as of the date hereof. Section 4.25 OPINION OF FINANCIAL ADVISOR. API has received the opinion of PaineWebber, Inc., its financial advisor, to the effect that, as of February 10, 1998, the consideration to be received in the Offer and the Merger, taken as a whole, by API's shareholders is fair to API's shareholders (other than TDS) from a financial point of view, a copy of which opinion has been delivered to TDS. Section 4.26 CERTAIN AGREEMENTS. Except as set forth in API Disclosure Letter Schedule 4.26, neither API nor any of its Subsidiaries is a party to any oral or written agreement or plan, including without limitation any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, under which any compensation or benefits will be increased, or the vesting of compensation or benefits will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any compensation or benefits will be calculated on the basis of any of the transactions contemplated by this Agreement. -27- ARTICLE V REPRESENTATIONS AND WARRANTIES OF TDS AND PURCHASER TDS and Purchaser represent and warrant to API as follows: Section 5.1 ORGANIZATION; OWNERSHIP. (a) Each of TDS and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is presently being conducted. (b) As of the date hereof and immediately prior to the consummation of the Offer, (i) TDS beneficially owns and will own 12,500,000 Series A Common Shares and 4,000,000 Common Shares and (ii) TDS owns and will own all of the outstanding shares of Purchaser. Section 5.2 AUTHORITY. Each of TDS and Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of TDS (as a party hereto and as the sole shareholder of Purchaser) and Purchaser and the consummation of the Merger and of the other transactions contemplated hereby have been duly approved by the Board of Directors of each of TDS and Purchaser and by TDS in its capacity as the sole shareholder of TDS. No other corporate proceedings on the part of TDS or Purchaser are necessary to authorize the entering into and the performance of this Agreement and the transactions contemplated hereby, other than with respect to the Merger, the filing and recordation of appropriate merger documents as required by the DGCL. This Agreement has been duly executed and delivered by each of TDS and Purchaser and constitutes a valid and binding obligation of each of TDS and Purchaser. Section 5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required by or with respect to TDS or any of its Subsidiaries in connection with the execution and delivery of this Agreement by TDS and Purchaser or the consummation by TDS and Purchaser of the Merger or the other transactions contemplated hereby, except for (i) the filing with the SEC by TDS and Purchaser of the Offer Documents and of such reports as may be required by Sections 13 and 16(a) of the Exchange Act in connection with this Agreement and the transactions contemplated hereby, (ii) the filing of the Certificate of Merger with the Delaware Secretary and appropriate documents with the relevant authorities of states in which API is qualified to do business and (iii) such filings, approvals, orders, notices, registrations, declarations and consents as may be required under any applicable state takeover or similar laws, and any applicable state environmental laws or laws with respect to the ownership by a foreign entity of real property. Neither the execution, delivery or performance of this Agreement nor the consummation of the transactions contemplated hereby will result in -28- any Violation of any of the terms, conditions or provisions of (i) the respective certificates or articles of incorporation or by-laws or comparable organizational documents of TDS or Purchaser, (ii) any loan or credit agreement, note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument, permit concession, franchise or obligation to which TDS or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound or affected or (iii) any judgment, order, writ, injunction, decree, law, statute, rule or regulation applicable to TDS or any of its Subsidiaries or their respective properties or assets except, in the case of clause (ii), for Violations that would not prevent or impair the consummation of the Offer or the Merger in any respect and would not, individually or in the aggregate, have a material adverse effect on TDS and its Subsidiaries or on the ability of TDS and Purchaser to perform their obligations under this Agreement. Section 5.4 INFORMATION IN DISCLOSURE DOCUMENTS. (a) None of the Offer Documents or the information supplied by TDS or Purchaser specifically for inclusion in the Schedule 14D-9 will, at the respective times the Offer Documents (including any amendments or supplements thereto) or the Schedule 14D-9 are filed with the SEC or are first published, sent or given to shareholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) None of the information supplied by TDS or Purchaser specifically for inclusion or incorporation by reference in API Proxy Statement will, at the date mailed to API's shareholders and at the time of the meeting of shareholders, if required by applicable law to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 5.5 BROKERS. Except for the fees payable to Credit Suisse First Boston and BancBoston Securities, Inc. in connection with the transactions contemplated hereby, which shall be paid by TDS, no broker, investment banker or other person is entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of TDS and Purchaser. ARTICLE VI COVENANTS Section 6.1 CONDUCT OF API BUSINESS. From the date hereof through the Closing API, except as contemplated by this Agreement, or as consented to by TDS in writing, shall operate its business in the ordinary course and substantially in accordance with past practice (except with respect to certain FCC Licenses and FCC -29- License Applications and certain reductions in planned License build-outs as described in API Disclosure Letter Schedule 4.12.6) and will use its best efforts not to take any action inconsistent with this Agreement. Without limiting the generality of the foregoing, API and each of its Subsidiaries shall not, except as specifically contemplated by this Agreement: 6.1.1 change or amend the Certificate of Incorporation or Bylaws of API or any of API's Subsidiaries, except as otherwise required by law; 6.1.2 issue, reissue, sell or pledge or authorize or propose the issuance, reissuance, sale or pledge of any of its capital stock of any class, or securities convertible or exchangeable into capital stock of any class, or any rights, warrants or options to acquire any convertible or exchangeable securities or capital stock, other than the issuance of Common Shares upon the exercise of stock options outstanding on the date of this Agreement under API Option Plans in accordance with their present terms; 6.1.3 declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) on or in respect of any class or series of its capital stock or otherwise make any payments to its shareholders in their capacity as such; 6.1.4 (i) adjust, split, combine, subdivide or reclassify any of its capital stock or (ii) redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any shares of capital stock of API or of any of its Subsidiaries or any other securities thereof or any rights, options or warrants to acquire such shares or other securities; 6.1.5 enter into, extend, modify, terminate or renew any Contract disclosed, or which would have been required to be disclosed on API Disclosure Letter Schedule 4.7 if entered into, extended or modified prior to the date of this Agreement, or any Real Property Lease; 6.1.6 sell, assign, transfer, convey, lease, mortgage, pledge or otherwise dispose of or encumber any FCC License, FCC License Application except those previously identified in API Disclosure Letter Schedule 6.1.6 or any other API Assets, or any interests therein other than sales and leases of Inventory in the ordinary course of business; 6.1.7 acquire by merger or consolidation with, or merge or consolidate with, or purchase substantially all of the assets of, or otherwise acquire any material assets or business of any Person; 6.1.8 fail to expend funds for budgeted capital expenditures or commitments as set forth in the budget of API attached as Exhibit I to the Asset Contribution Agreement including, without limitation, maintaining levels of spare parts -30- sufficient to maintain and upgrade the network infrastructure as reasonably necessary and maintain the present level of Pagers in Service; 6.1.9 fail to maintain the API Assets in substantially their current state of repair, excepting normal wear and tear, or fail to replace consistent with API's past practice inoperable, worn-out or obsolete or destroyed API Assets or fail to maintain the Inventory levels of API and its Subsidiaries at the levels on the Interim Balance Sheet Date (subject to reductions in Inventory not exceeding ten (10) percent of such Inventory on the Interim Balance Sheet Date in accordance with prudent business practice); 6.1.10 make any loans or advances to any Person, except for normal advances in respect of expenses incurred by employees in the ordinary course of business. 6.1.11 take or omit to take any action which will result in the further default under (not otherwise waived) or any acceleration of any API Intercompany Liabilities or any other Financing Obligations; 6.1.12 fail to take all commercially reasonable actions reasonably necessary to retain employees of API and its Subsidiaries in the employment of API or the applicable Subsidiary through the Closing; 6.1.13 do any other act which would cause any representation or warranty of API in this Agreement to be or become untrue in any material respect; 6.1.14 except as may be required by applicable law, enter into or amend any employment, severance or similar agreements or arrangements with any of their respective directors or executive officers; 6.1.15 except as may be required by applicable law, amend in any material respect the terms of their respective employee benefit plans, programs or arrangements or any severance or similar agreements or arrangements in existence on the date hereof, enter into or amend any employment or consulting agreement, adopt or enter into any new employee benefit programs or arrangements or any severance or similar agreements or arrangements; or 6.1.16 enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder. Section 6.2 REASONABLE BEST EFFORTS. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto will use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) the obtaining of all -31- necessary actions or non-actions, waivers, consents and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings with Governmental Authorities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by any Governmental Authority, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any claims, investigations, actions, lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. Each party will promptly consult with the other with respect to, provide any necessary information with respect to and provide the other (or its counsel) copies of, all filings made by such party with any Governmental Authority in connection with this Agreement and the transactions contemplated hereby. In addition, if at any time prior to the Effective Time any event or circumstance relating to any of API, TDS or Purchaser or any of their respective Subsidiaries, or any of their respective officers or directors, should be discovered by API, TDS or Purchaser, as the case may be, and which should be set forth in an amendment or supplement to the Offer Documents, the discovering party will promptly inform the other party of such event or circumstance. Section 6.3 ACCESS TO INFORMATION. 6.3.1 From the date hereof through the Closing, API shall, and shall cause its officers, directors and employees to, afford TDS and TSR Paging and their respective Representatives, during normal business hours and upon reasonable notice to API and in a manner which will not interfere with the operation of the API Business, complete access at all reasonable times to the API Assets and the API Business for the purpose of inspecting the same, and to the officers and employees of API, and shall furnish TDS and TSR Paging and its authorized representatives all financial, operating and other data and information as TDS or TSR Paging, as the case may be, may reasonably request, except to the extent that such access would violate any governmental regulation, law or order to which API, its employees or the API Assets are subject; PROVIDED that API shall have the right to have Representatives present at all such times; and PROVIDED FURTHER that such access shall be at the expense of TDS or TSR Paging, as the case may be. 6.3.2 TSR Paging shall have the right, at its sole cost and expense to (i) after consultation with and with the consent of API (not to be unreasonably withheld or delayed) conduct tests of the soil surface or subsurface waters and air quality at, in, on, beneath or about the Real Property Leases, and such other procedures as may be recommended by an independent environmental consultant selected by TSR Paging (the "CONSULTANT") based on its reasonable professional judgment, in a manner consistent with good engineering practice, (ii) inspect records, reports, permits, applications, monitoring results, studies, correspondence, data and any other information or documents relevant to -32- environmental conditions or environmental noncompliance, and (iii) inspect all buildings and equipment at the Facilities, including without limitation the visual inspection of the Facilities for asbestos-containing construction materials; PROVIDED, in each case, such tests and inspections shall be conducted only (a) during regular business hours; and (b) in a manner which will not interfere with the operation of the API Business and/or the use of, access to or egress from the Facilities. 6.3.3 TSR Paging's right to conduct tests, inspect records and other documents, and visually inspect all buildings and equipment at the Facilities shall also be subject to the following terms and conditions: (i) All testing performed on TSR Paging's behalf shall be conducted by the Consultant; (ii) A Representative of TDS shall have the right to accompany the Consultant as it performs testing; (iii) Except as otherwise required by law, any information concerning the Real Property Leases gathered by TSR Paging or the Consultant as the result of, or in connection with, the testing shall be kept confidential in accordance with subsection (iv) below and shall not be revealed to, or discussed with, anyone other than Representatives of TSR Paging or Representatives of TDS who agree to comply with the provisions of subsection (iv) below; and (iv) In the event that any party to this Agreement or any party set forth in subsection 6.3.3(iii) is requested or required to disclose information described in subsection 6.3.2, TSR Paging shall provide API and TDS or TDS or API shall provide TSR Paging, as the case may be, with prompt notice of such request so that TDS, API or TSR Paging, as the case may be, may seek an appropriate protective order or waiver by the other party's compliance with this Agreement. If, in the absence of a protective order or the receipt of a waiver hereunder, such party is nonetheless, in the opinion of its counsel, compelled to disclose such information to any tribunal or else stand liable for contempt or suffer other censure or penalty, such party will furnish only that portion of the information which is legally required and will exercise its reasonable efforts to obtain reliable assurance that confidential treatment will be afforded to the disclosed information. The requirements of this subsection 6.3.3(iv) shall not apply to information in the public domain or lawfully acquired on a nonconfidential basis from others. Section 6.4 SHAREHOLDER APPROVAL. (a) If approval of this Agreement and the Merger by the shareholders of API is required by law, API will, at TDS's request, duly call a special meeting of its shareholders for the purpose of voting upon this Agreement (insofar as it relates to the Merger), the Merger and related matters and use its reasonable best efforts duly to give notice of, convene and hold such meeting as soon as practicable following consummation of the Offer. API will, through its Board of Directors, recommend to its shareholders approval and adoption of this Agreement and -33- approval of the Merger, except to the extent that the Board of Directors of API shall have withdrawn its approval or recommendation of this Agreement or the Merger as permitted by SECTION 6.6(b). At the shareholders' meeting, TDS and Purchaser shall cause all Series A Common Shares and Common Shares then owned by them and their subsidiaries to be voted in favor of the approval of this Agreement and the Merger. Notwithstanding the foregoing, if Purchaser or any other Subsidiary of TDS shall acquire at least 90% of the outstanding Common Shares, the parties shall, subject to Article VII, at the request of TDS, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the consummation of the Offer without a meeting of shareholders in accordance with Section 253 of the DGCL. (b) If approval of this Agreement and the Merger by the shareholders of API is required by law, API will, at TDS's request, as soon as practicable following the consummation of the Offer, prepare and file a preliminary API Proxy Statement with the SEC and will use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause the API Proxy Statement to be mailed to API's shareholders. API will notify TDS promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the API Proxy Statement or for additional information and will supply TDS with copies of all correspondence between API or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the API Proxy Statement or the Merger. If at any time prior to the approval of this Agreement by API's shareholders there shall occur any event that should be set forth in an amendment or supplement to the API Proxy Statement, API will promptly notify TDS thereof and prepare and mail to its shareholders such an amendment or supplement. API will not mail any API Proxy Statement, or any amendment or supplement thereto, to which TDS reasonably objects. Section 6.5 API OPTION PLANS. (a) Subject to the next sentence, API shall use its reasonable best efforts to cause each holder of an outstanding option with an exercise price less than the Merger Consideration (collectively, the "EMPLOYEE OPTIONS") to purchase Common Shares granted under API Option Plans to agree in writing prior to the Effective Time that (i) such holder shall be entitled to receive from API on the Closing Date, in lieu of such Employee Option, an amount in cash in respect of each Common Share subject to such Employee Option equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Employee Option (it being understood that if there is no such excess with respect to any such Employee Option, such holder will not be entitled to receive any cash, securities or other consideration with respect thereto) and (ii) such Employee Option shall be canceled immediately prior to the Effective Time. Notwithstanding the foregoing, API shall use its reasonable best efforts to cause each person, if any, subject to Section 16(b) of the Exchange Act to whom an Employee Option was granted six months or less before the Effective Time, whether or not then exercisable, to agree in writing prior to the Effective Time (but effective as of and upon the Effective Time) that (i) each such Employee Option shall be canceled as of the date of such agreement; (ii) no Common Shares shall be issued in respect thereof; and (iii) such person shall be entitled to receive from API on the date (the "OPTION PAYMENT DATE") that is six months and one day following -34- the date of grant of such option (but in no event earlier than the Closing Date), in lieu of such Employee Option, a payment equal to the aggregate amount of cash, if any, determined under the preceding sentence; PROVIDED that such person shall not be entitled to receive any such amount if prior to the Option Payment Date such person (x) terminates his employment by the Surviving Corporation or any of its Subsidiaries, otherwise than as a result of death or disability or (y) is terminated by the Surviving Corporation or any of its Subsidiaries for cause. All amounts payable pursuant to this SECTION 6.5(a) shall be subject to any applicable withholding taxes and shall be paid without interest. (b) API shall use its reasonable best efforts to ensure that from and after the Effective Time neither the Surviving Corporation nor any of its Subsidiaries is or will be bound by any options, warrants, rights or agreements which would entitle any person, other than TDS, Purchaser or their wholly owned Subsidiaries, to beneficially own, or receive any payments (other than as otherwise contemplated by SECTION 3.1 and this SECTION 6.5) in respect of, any capital stock of API or the Surviving Corporation. (c) API shall take all actions necessary to terminate API Option Plans effective as of the Effective Time. Section 6.6 NO SOLICITATION. (a) From the date hereof through the Effective Time or the earlier termination of this Agreement, API shall not, and shall use its best efforts to cause its Representatives not to, directly or indirectly, enter into, solicit, initiate or continue any discussions or negotiations with, or encourage or respond to any inquires or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any other way with, any Person, other than TDS or TSR Paging and their respective Representatives, concerning any sale of all or any substantial portion of the API Assets or the API Business, or of any shares of capital stock of API or its Subsidiaries, or any merger, consolidation, liquidation, dissolution or exclusive licensing arrangement or similar transaction involving API or its Subsidiaries (each such transaction being referred to herein as a "PROPOSED API ACQUISITION TRANSACTION"); PROVIDED, HOWEVER, that prior to the acceptance for payment of Common Shares pursuant to the Offer, to the extent required by the fiduciary obligations of the Board of Directors of API, as determined in good faith by the Board of Directors based on the written advice of outside counsel (a copy of which written advice shall be promptly furnished to TDS), API may, in response to unsolicited requests therefor, participate in discussions or negotiations with, or furnish information pursuant to an appropriate confidentiality agreement approved by API's Board of Directors to, any person. (b) Neither the Board of Directors of API nor any committee thereof (including the API Special Committee) shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to TDS or Purchaser, the approval or recommendation by the Board of Directors of API or any such committee of the Offer, this Agreement or the Merger or (ii) approve or recommend, or propose to approve or -35- recommend, any Proposed API Acquisition Transaction. Notwithstanding the foregoing, the Board of Directors of API or any committee thereof, to the extent required by the fiduciary obligations thereof, as determined in good faith by the Board of Directors of API or such committee, as the case may be, based on the written advice of outside counsel (a copy of which written advice shall be promptly furnished to TDS), may approve or recommend (and, in connection therewith, withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger) a superior proposal and API may take such actions as are contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated under the Exchange Act. For purposes of this Agreement, "superior proposal" means a bona fide written proposal made by a third party to acquire API pursuant to a tender or exchange offer, a merger, a statutory share exchange, a sale of all or substantially all its assets or otherwise on terms which the API Special Committee determines in its good faith reasonable judgment (based on the advice of independent financial advisors) to be more favorable to API and its shareholders than the Offer and the Merger and for which financing, to the extent required, is then fully committed or which, in the reasonable good faith judgment of the API Special Committee (based on the advice of independent financial advisors), is reasonably capable of being financed by such third party. (c) API shall promptly notify TDS if any discussions or negotiations are sought to be initiated, any inquiry or proposal is made, or any information is requested with respect to any Proposed API Acquisition Transaction and notify TDS of the terms of any proposal which it may receive in respect of any such Proposed API Acquisition Transaction, including, without limitation, the identity of the prospective purchaser or soliciting party, except to the extent that any such notification would violate any now existing agreement of API. Section 6.7 FEES AND EXPENSES. All fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated. Section 6.8 NOTIFICATION OF CERTAIN MATTERS. API shall give prompt notice to TDS and Purchaser, and TDS (or Purchaser, as the case may be) shall give prompt notice to API, of (a) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be reasonably likely to cause (i) any representation or warranty contained in this Agreement that is qualified as to materiality to be untrue or incorrect or any representation or warranty that is not so qualified to be untrue or incorrect in any material respect or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied in any material respect, (b) any failure of API, TDS or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect and (c) any change or event which has or is reasonably likely to have a material adverse effect on API or TDS and its Subsidiaries, as the case may be; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this SECTION 6.8 will not -36- limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 6.9 PUBLIC ANNOUNCEMENTS. API, TDS and Purchaser will consult with each other before issuing any press releases or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press releases or make any such public statements prior to such consultation, except as may be required by applicable law or by obligations pursuant to any listing agreement with any securities exchange. Section 6.10 STATE TAKEOVER LAWS. If any "fair price", "control share acquisition" or "business combination" statute or other takeover or tender offer statute or regulation shall become applicable to the transactions contemplated by this Agreement, TDS, Purchaser and API and their respective Boards of Directors shall use their reasonable best efforts to grant such approvals and take such actions as are necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to minimize the effects of such statute or regulation on the transactions contemplated hereby. Section 6.11 INDEMNIFICATION OF OFFICERS AND DIRECTORS. For six years from and after the Effective Time, TDS agrees, to the extent permitted by law, to cause the Surviving Corporation to indemnify and hold harmless all current officers and directors of API and of its Subsidiaries to the same extent such persons are currently indemnified by API pursuant to API's Restated Certificate of Incorporation and By-Laws for acts or omissions occurring at or prior to the Effective Time. TDS will cause to be maintained for a period of not less than six years from the Effective Time the current directors' and officers' insurance and indemnification policy of TDS to the extent that it provides coverage for events occurring prior to the Effective Time (the "TDS D&O Insurance") for all directors and officers of API on the date hereof. The provisions of this SECTION 6.11 are for the benefit of and may be enforced after the Effective Time by such officers and directors. Section 6.12 SHAREHOLDER LITIGATION. Each of TDS and API shall use their reasonable best efforts to settle, and API shall give TDS the opportunity to direct the defense of, any shareholder litigation against API and its directors relating to the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that no such settlement shall be agreed to without TDS's consent, which shall not be unreasonably withheld; and PROVIDED FURTHER that no settlement requiring a payment by a director shall be agreed to without such director's consent. -37- ARTICLE VII CONDITIONS Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of the parties to effect the Merger are subject to the satisfaction, on or prior to the Closing Date, of the following conditions: (a) Purchaser shall have accepted for purchase and paid for all Common Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to the obligations of TDS or Purchaser if, in breach of this Agreement or the terms of the Offer, Purchaser fails to accept for payment the Common Shares tendered pursuant to the Offer. (b) If required by applicable law, this Agreement (insofar as it relates to the Merger) and the Merger shall have been approved and adopted by the requisite affirmative vote or consent of the holders of Common Shares in accordance with applicable law and API's Restated Certificate of Incorporation. (c) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority which prohibits the consummation of the transactions contemplated herein substantially on the terms contemplated hereby. In the event any order, decree or injunction shall have been issued, each party shall use its reasonable efforts to remove any such order, decree or injunction. Section 7.2 CONDITIONS TO TDS'S OBLIGATION TO EFFECT THE MERGER. TDS's obligation to effect the Merger is subject to the Asset Contribution Agreement being in full force and effect and not terminated in accordance with the terms thereof and all of the conditions set forth in Articles XI and XII thereof shall have been satisfied or waived. ARTICLE VIII TERMINATION Section 8.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of any matters presented in connection with the Merger by the shareholders of API: (a) by mutual written consent duly authorized by the Board of Directors of TDS and API, if such termination is also approved by the API Special Committee; (b) by either TDS or API if: (i) the Effective Time shall not have occurred on or before September 30, 1998; PROVIDED, HOWEVER, that the right to terminate this Agreement under -38- this SECTION 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (c) By TDS if due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in ANNEX II hereto, Purchaser shall have: (i) failed to commence the Offer within 60 days following the date of this Agreement, (ii) terminated the Offer without having accepted any Common Shares for payment thereunder, or (iii) failed to pay for Common Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Common Shares shall have been caused by or resulted from the failure of TDS or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by TDS or Purchaser of any material representation or warranty of either of them contained in this Agreement; or (d) By API, upon approval of the Board of Directors and the API Special Committee, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions set forth in ANNEX II hereto, Purchaser shall have: (i) failed to commence the Offer within 60 days following the date of this Agreement, (ii) terminated the Offer without having accepted any Common Shares for payment thereunder, or (iii) failed to pay for Common Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of API to perform in any material respect any material covenant or agreement of it contained in this Agreement or the material breach by API of any material representation or warranty of it contained in this Agreement; or -39- (e) By API, upon approval of the Board of Directors of API and the API Special Committee, if any representation or warranty of TDS and Purchaser in this Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of this Agreement; or TDS or Purchaser shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of TDS or Purchaser to be performed or complied with by it under this Agreement. (f) By TDS, upon approval of the Board of Directors of TDS, if any representation or warranty of API in this Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of this Agreement; or API shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of API to be performed or complied with by it under this Agreement. (g) By TDS if the Board of Directors of API or any committee thereof (including the Special Committee) (A) shall withdraw, modify or change in any adverse manner (including by amendment of the Schedule 14D-9) to TDS or Purchaser its approval of this Agreement, the Offer or the Merger, (B) shall approve or recommend any Proposed API Acquisition Transaction in each case, other than by TDS or an Affiliate of TDS or (C) shall resolve to take any of the actions specified in clauses (A) or (B) above. The party desiring to terminate this Agreement pursuant to this SECTION 8.1 (other than pursuant to SECTION 8.1(a)) shall give notice of termination to the other party in accordance with SECTION 9.4. Section 8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by either API or TDS as provided in SECTION 8.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of TDS, Purchaser or API, and each shall be responsible for its own expenses except (a) the agreements contained in this SECTION 8.2 and SECTION 6.7 and ARTICLE IX shall survive termination hereof and (b) nothing herein will relieve any party from liability for any willful breach hereof. ARTICLE IX MISCELLANEOUS Section 9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. SECTION 6.11 and this ARTICLE IX and, without limitation by the specific enumeration of the foregoing, each and every other agreement contained in this -40- Agreement or any instrument or other document delivered pursuant to this Agreement and which contemplates performance after the Effective Time shall survive the Merger. None of the representations, warranties and agreements (other than those agreements referred to in the previous sentence of this SECTION 9.1 in the event of the Merger and those agreements referred to in SECTION 8.2 in the event of the termination of this Agreement in accordance with SECTION 8.1) in this Agreement or in any instrument or other document delivered pursuant to this Agreement shall survive the earlier of the Effective Time or the termination of this Agreement pursuant to SECTION 8.1, as the case may be. Section 9.2 AMENDMENT. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the shareholders of API, but, after any such approval, no amendment will be made which by law requires further approval by such shareholders without such further approval; PROVIDED, HOWEVER, that such amendment shall be approved by the API Special Committee. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 9.3 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver will be valid only if set forth in a written instrument signed on behalf of such party and, in the case of any waiver or extension by which API is to be bound, only if approved by the Special Committee. Section 9.4 NOTICES. All notices under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method provided that such transmission is confirmed by telephone; the day after it is sent, if sent for next day delivery to a domestic address by overnight mail; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: (a) if to TDS or Purchaser, addressed to: 30 North LaSalle Street Suite 4000 Chicago, Illinois 60602 Telecopy No.: (312) 630-9299 Attention: Chief Financial Officer -41- with a copy to: Sidley & Austin 875 Third Avenue New York, New York 10022 Attention: James G. Archer Telecopy No.: (212) 906-2021 (c) if to API, addressed to: 1300 Godward Street Northeast Suite 3100 Minneapolis, Minnesota 55413-1767 Attention: President Telecopy No.: (612) 623-4413 with a copy to: Ms. Jean B. Keffeler Independent Management Consultant 3424 Zenith Avenue, South Minneapolis, Minnesota 55416 and a copy to: Mr. Edwin L. Russell Chairman Minnesota Power and Light Company 30 West Superior Street Duluth, Minnesota 55802 and a copy to: Mr. Richard L. Williams III Vedder, Price, Kaufman & Kammholz 222 N. LaSalle Street Suite 2600 Chicago, Illinois 60601 Telecopy No.: (312) 609-5005 or to such other address as any party may have specified to the others using the procedures specified in this SECTION 9.4. Section 9.5 INTERPRETATION. When a reference is made in this Agreement to a Section, such reference will be to a Section of this Agreement unless otherwise -42- indicated. The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Section 9.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement (including the documents and the instruments referred to herein) (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) other than SECTION 6.11 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons), are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 9.8 GOVERNING LAW. Except to the extent that Delaware Law is mandatorily applicable to the transactions contemplated by this Agreement, this Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made, executed, delivered and performed wholly within the State of New York, without regard to any applicable conflicts of law. Section 9.9 SPECIFIC PERFORMANCE. The parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties will be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. Section 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that TDS and Purchaser may assign all or any of their rights and obligations hereunder to any Affiliate of TDS provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 9.11 VALIDITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provisions hereof, which will remain in full force and effect. -43- IN WITNESS WHEREOF, TDS, Purchaser and API have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. ------------------------------------ Name: LeRoy T. Carlson, Jr. Title: President API MERGER CORP. By: /s/ Scott H. Williamson ------------------------------------ Name: Scott H. Williamson Title: Vice President AMERICAN PAGING, INC. By: /s/ Terrence T. Sullivan ------------------------------------ Name: Terrence T. Sullivan Title: President -44- ANNEX I DEFINITIONS 1.1 DEFINED TERMS. As used herein, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference. "ACTION" shall mean any action, claim, suit, litigation, administrative appeal, proceeding, labor dispute, arbitral action, governmental audit, inquiry, criminal prosecution, investigation or unfair labor practice charge or complaint. "AFFILIATE" of a Person shall mean a Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the first Person. "Control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise. "AMS" shall mean American Messaging Services, LLC, a Minnesota limited liability company. "API ASSETS" shall mean all the right, title and interest of API and its Subsidiaries in and to properties, assets and rights of any kind, whether tangible or intangible, real or personal, except for the API Excluded Assets. "API BUSINESS" shall mean the business and operations of API and its Subsidiaries relating generally to the provision of paging and wireless messaging services, the sale and support of pagers and other telecommunications-related products and services and the provision of technical and repair services in connection therewith. "API DISCLOSURE LETTER" shall mean the letter delivered by API dated as of the date hereof which set forth certain exceptions to the representations and warranties contained in Article IV and certain other information called for by this Agreement. "API EXCLUDED ASSETS" shall mean (i) all stock and other ownership interests of API and its Subsidiaries (other than AMS) in Subsidiaries of API (other than AMS), (ii) the API assets listed on Schedule 1.1 to the Asset Contribution Agreement, (iii) any Liabilities of TDS (or its Subsidiaries, other than API and its Subsidiaries) to API and its Subsidiaries; (iv) all insurance policies of API and its Subsidiaries, (v) all refunds of any Tax that API, or any member of an affiliated, consolidated, combined or unitary group of which API is also a member, paid pursuant to Section 6.22, Section I-1 14.4.2 or Section 14.5.2 of the Asset Contribution Agreement and (vi) any deferred Tax Liability as described in note 2 to the 1996 API Financial Statements. "API FINANCIAL STATEMENTS" shall mean (i) the audited consolidated balance sheet of API and its Subsidiaries (other than AMS) as of December 31, 1997, the related consolidated statements of income and cash flow of API and its Subsidiaries (other than AMS) for the year ended December 31, 1997, the audited balance sheet of AMS as of December 31, 1996 and the related statement of income and cash flow of AMS for the year ended December 31, 1996 (and, following delivery thereof to TDS, for the year ended December 31, 1997) (collectively, the "API AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited consolidated balance sheet of API and its Subsidiaries (other than AMS) dated September 30, 1997, and the related unaudited consolidated statements of income of API and its Subsidiaries (other than AMS) for the nine (9) months ended September 30, 1997, the cash flow statement of API and its Subsidiaries (other than AMS) for the nine (9) months ended September 30, 1997, the unaudited balance sheet of AMS dated September 30, 1997, and the related unaudited statement of income of AMS for the nine (9) months ended September 30, 1997 and the cash flow statement of AMS for the nine (9) months ended September 30, 1997 (the "API UNAUDITED FINANCIAL STATEMENTS"). "API INTERCOMPANY LIABILITIES" shall mean all Liabilities of API (or its Subsidiaries) to TDS or its other Subsidiaries including, without limitation, Liabilities under the API Note. "API NOTE" shall mean that certain revolving credit agreement between TDS and API, effective as of January 1, 1994 and that certain loan note made by API in favor of TDS pursuant thereto. "API/TDS AGREEMENTS" shall mean the agreements between API and TDS listed in Item 4 of Schedule 1.1 of the Asset Contribution Agreement. "AUTHORIZATION" of a Person shall mean any consent, approval, waiver or authorization of, expiration or termination of any waiting period requirement (including pursuant to the HSR Act) of, or filing, registration, qualification, declaration or designation with or by, any Governmental Authority. "BENEFIT PLAN" shall mean any retirement, savings, profit sharing, deferred compensation, severance, stock ownership, stock purchase, stock option, performance, bonus, incentive, vacation or holiday pay, hospitalization or other medical, disability, life or other insurance, or other welfare benefit or fringe benefit plan, policy, trust, understanding or arrangement of any kind, whether written or oral, with or for the benefit of any present or prior officer, director, employee, agent or consultant (including, without limitation, each employment, compensation, deferred compensation, severance or consulting agreement or arrangement associated with a change in ownership or control of API, but excluding employment agreements terminable by API I-2 without premium or penalty on notice of 30 days or less under which the only monetary obligation of API is to make current wage or salary payments and provide current fringe benefits), with respect to which API is or will be required to make any payment. "BOOKS AND RECORDS" of API shall mean (a) all records and lists of API and its Subsidiaries pertaining to the API Assets, as applicable, (b) all records and lists of API and its Subsidiaries pertaining to the API Business, customers, suppliers or personnel of API and its Subsidiaries, (c) all product, business and marketing plans of API and its Subsidiaries and (d) all books, ledgers, files, reports, plans, drawings and operating records of every kind maintained by API and its Subsidiaries, but excluding the originals of API's minute books, stock books and tax returns, and books and records pertaining to API Excluded Assets. "COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as amended. "CONSENT" shall mean any consent, approval or waiver of a Person, not including the Authorization of any Governmental Authority. "CONTRACTS" shall mean all contracts, leases, licenses (other than Permits), commitments, understandings and agreements to which API or any of its Subsidiaries is a party or is bound, whether oral or written, including, without limitation, all reseller agreements, the Real Property Leases and the Personal Property Leases. "DEFAULT" shall mean (i) a breach of or default under any Contract, FCC License, Real Property Lease or Personal Property Lease or other agreement to which a Person is party or subject, (ii) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any of the foregoing, or (iii) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration under any of the foregoing. "ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "ENVIRONMENTAL LAWS" shall mean all Regulations which regulate or relate to the protection or clean-up of the environment, the use, treatment, storage, transportation, generation, manufacture, processing, distribution, handling or disposal of, or emission, discharge or other release or threatened release of, Hazardous Substances or otherwise dangerous substances, wastes, pollution or materials (whether, gas, liquid or solid), the preservation or protection of waterways, I-3 groundwater, drinking water, air, wildlife, plants or other natural resources, or the health and safety of Persons or property, including without limitation protection of the health and safety of employees. Environmental Laws shall include, without limitation, the Federal Insecticide, Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Hazardous Materials Transportation Act and all analogous or related federal, state or local law, each as amended. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" of API shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with, API as defined in Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "FACILITIES" shall mean all real property or facilities owned, leased or used anytime by API and/or its Subsidiaries (or a predecessor or Affiliate of API and/or its Subsidiaries). "FCC" shall mean the Federal Communications Commission or any successor body thereto. "FCC LICENSE" shall mean any license, construction permit, consent, certificate of compliance, approval or Authorization of API issued by the FCC authorizing operations in, INTER ALIA, Public Mobile Services pursuant to Part 22 of the FCC Rules, Personal Communications Services pursuant to Part 24 of the FCC Rules, Domestic Fixed Satellite Service pursuant to Part 25 of the FCC Rules, Private Land Mobile Radio Services pursuant to Part 90 of the FCC Rules (including one-way paging operations on exclusive and non-exclusive channels in the 929-930 MHz frequency band), and Fixed Microwave Radio Services pursuant to Part 101 of the FCC Rules, or other license, permit, consent, certificate of compliance, franchise approval or Authorization of the FCC or construction permit in respect of any of the foregoing. "FCC LICENSE APPLICATION" shall mean an application by API for an FCC License. "FCC RULES" shall mean the Rules and Regulations of the FCC promulgated under the Communications Act, as amended. I-4 "FINANCING OBLIGATIONS" shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, notes, debentures or similar instruments (other than surety or similar bonds), (iii) obligations under capitalized leases, (iv) obligations under conditional sale, title retention or similar agreements or arrangements creating an obligation with respect to the deferred purchase price of property (other than customary trade credit), and (v) obligations to guarantee any of the foregoing types of obligations on behalf of others. "FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures, furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment and other tangible personal property owned or used by API and its Subsidiaries. "FULLY DILUTED SHARES" shall mean all outstanding securities entitled generally to vote in the election of directors of API on a fully diluted basis, after giving effect to the exercise or conversion of all options, rights and securities exercisable or convertible into such voting securities. . "GAAP" shall mean generally accepted accounting principles in the United States, consistently applied in accordance with past practice, as in effect on the date hereof. "GOVERNMENTAL AUTHORITY" shall mean any governmental or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case whether domestic or foreign, federal, state or local. "HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant, chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive, ignitible or flammable chemical or chemical compound or hazardous substance, material or waste, whether solid, liquid or gas, including, without limitation, any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products or derivatives, radioactive substance or material, pesticide waste waters, sludges, slag and any other substance, material or waste that is subject to regulation, control or remediation under any Environmental Laws. "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "INTERIM BALANCE SHEET" shall mean the unaudited consolidated balance sheet of API as of the Interim Balance Sheet Date, as included in the API Unaudited Financial Statements. "INTERIM BALANCE SHEET DATE" shall mean September 30, 1997. I-5 "INVENTORY" shall mean all of API's and its Subsidiaries' inventory held for resale, lease or repair including all pagers, phones, phone accessories, two-way radios and their related accessories, crystals, phone cards, spare parts, wrapping, supply and packaging items and similar items, in each case wherever the same may be located or in transit. "LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated in or on the real property covered by the Real Property Leases. "LIABILITIES" shall mean any direct or indirect liability, indebtedness, obligation, responsibility, commitment, expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any Person, whether fixed or unfixed, choate or inchoate, liquidated or unliquidated, known or unknown, secured or unsecured, accrued or unaccrued, joint, several, joint and several, due or to become due, vested or unvested, executory, determined, determinable, absolute, contingent, matured, unmatured or other and whether or not required by GAAP to be set forth in a financial statement of a Person. "MATERIAL ADVERSE CHANGE" shall mean any significant and substantial adverse change in the financial condition, business or operations of the API Business or on the ability of API to consummate the transactions contemplated hereby. "MATERIAL ADVERSE EFFECT" shall mean any significant and substantial adverse effect on the financial condition, business or operations of the API Business to be acquired hereunder or on the ability of API to consummate the transactions contemplated hereby. "ORDER" shall mean any judgment, decision, consent decree, injunction, ruling or order of any Governmental Authority that is binding on any Person or its property under applicable law. "PAGERS IN SERVICE" shall mean activated pagers in service of API and its Subsidiaries (whether direct or indirect through resellers, dealers or other agents) billable for the subsequent month, excluding any pagers that are not on billing or are billed at $0.00 (including, without limitation, pagers with employees and demo or spare pagers with customers) or in respect of which the customer's account is more than 90 days delinquent and for which no payment has been received for 60 days. "PERMITS" shall mean all licenses, permits, approvals, authorizations or consents, certificates of compliance, franchise approvals or other similar authorizations of any Governmental Authority necessary for the conduct of the API Business, other than FCC Licenses. "PERMITTED ENCUMBRANCES" shall mean (i) minor liens which in aggregate are not substantial in amount, do not materially detract from the value or transferability I-6 of the property or assets subject thereto and (ii) liens arising pursuant to Personal Property Leases. "PERSON" or "PERSON" shall mean any individual, partnership, corporation, trust, association, unincorporated organization, government or any department or agency thereof or any other entity. "PERSONAL PROPERTY LEASES" shall mean all of the existing leases with respect to the personal property of API and its Subsidiaries. "PROPRIETARY RIGHTS" shall mean API's and its Subsidiaries' (i) domestic and foreign registrations of trademarks and other marks, trade names and trade rights, (ii) pending applications for such registrations, (iii) patents and applications therefor, (iv) trademarks and other marks, trade names and other trade rights whether or not registered, (v) copyrights and registrations thereof, (vi) trade secrets, designs, plans, specifications, technical information and other proprietary rights and (vii) rights under any licenses to API or its Subsidiaries to use any copyrights, marks, trade names, trade rights, patents or other proprietary rights. "PUC" shall mean any state public utilities commission, public service commission or other similar agency. "REAL PROPERTY LEASES" shall mean all real property leases entered into by API or any of its Subsidiaries. "REGULATIONS" or "REGULATIONS" shall mean any laws, statutes, ordinances, regulations, rules, notice requirements, court decisions, agency guidelines, principles of law and orders of any foreign, federal, state or local government and any other governmental department or agency, including without limitation Environmental Laws, energy, motor vehicle safety, public utility, zoning, building and health codes, occupational safety and health and laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours. "REPRESENTATIVE" or "REPRESENTATIVE" of any Person shall mean any officer, director, principal, attorney, agent, analyst, consultant or other representative of such Person. "RELEASE" shall mean and include any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment or the workplace of any Hazardous Substance, and otherwise as defined in any Environmental Law. "SEC" shall mean the Securities and Exchange Commission or any successor body thereto. I-7 "SUBSIDIARY" shall mean each corporation or other Person in which a Person owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests. Unless otherwise specified, for the purposes of this Agreement AMS shall be considered a Subsidiary of API. "TAX" shall mean any federal, state, local, foreign or other tax, levy, impost, fee, assessment or other government charge, including without limitation income, estimated income, business, occupation, franchise, property, payroll, personal property, sales, transfer, use, employment, commercial rent, occupancy, franchise or withholding taxes, and any premium, including without limitation interest, penalties and additions in connection therewith. 1.2 OTHER DEFINED TERMS. The following terms shall have the meanings defined for such terms in the Sections set forth below: TERM SECTION ---- ------- "API" Preamble "API BENEFIT PLANS" Section 4.24(a) "API 929 MHZ EXCLUSIVE FREQUENCY" Section 4.13.1(iii) "API PCD TAX RETURNS" Section 4.22.1 "API PCD TAXES" Section 4.22.1 "API PROXY STATEMENT" Section 4.23(b) "API SPECIAL COMMITTEE" Recitals "API WITHHOLDING TAXES" Section 4.22.1 "ASSET CONTRIBUTION AGREEMENT" Recitals "ASSET CONTRIBUTION AGREEMENT CONDITION" Section 1.1 "ASSETS" Section 13.1 "CERTIFICATE" Section 3.2(c) "CLOSING" Section 4.1 "CLOSING DATE" Section 2.2 "CODE" Section 3.5 "COMMON SHARES" Recitals "CONSTITUENT CORPORATIONS" Preamble "CONSULTANT" Section 6.3.2 "DELAWARE SECRETARY" Section 2.1(b) "DGCL" Recitals "DISSENTING SHARES" Section 3.1(e) "EFFECTIVE TIME" Section 2.1(b) "ERISA" Section 4.24 "ERISA AFFILIATE" Section 4.24 "EXCHANGE ACT" Recitals "FCC 929 MHZ EXCLUSIVE FREQUENCY" Section 4.13.1(iii) "IRS" Section 4.22.2 I-8 "MERGER" Recitals "MERGER CONSIDERATION" Section 3.1(a) "OFFER" Recitals "OFFER DOCUMENTS" Section 1.1(b) "PER SHARE AMOUNT" Recitals "PREFERRED SHARES" Section 4.2(a) "PROPOSED API ACQUISITION TRANSACTION" Section 6.6(a) "PURCHASER" Preamble "SEC REPORTS" Section 4.4.13 "SCHEDULE 14D-1" Section 1.1(b) "SCHEDULE 14D-9" Section 1.2(b) "SCHEDULE 13E-3" Section 1.1(b) "SERIES A COMMON SHARES" Recitals "SERIES B COMMON SHARES" Section 4.2(a) "SURVIVING CORPORATION" Section 2.1(a) "TDS" Preamble "TSR PAGING" Recitals "TSR WIRELESS" Recitals "VIOLATION" Section 4.12 "VOTING DEBT" Section 4.2(b) I-9 ANNEX II TENDER OFFER CONDITIONS Notwithstanding any other term or provision of the Offer or this Agreement, Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay for or return tendered securities promptly after the termination or withdrawal of such bidder's offer), to pay for any Common Shares tendered pursuant to the Offer and may terminate or amend the Offer if, at any time on or after the date of this Agreement, and before the acceptance of such Common Shares for payment, (i) the Asset Contribution Agreement Condition is not satisfied or (ii) any of the following events or facts shall have occurred: (a) there shall be threatened, instituted or pending any action, proceeding or application by any Governmental Authority, or by any other person, domestic or foreign, before any court or Governmental Authority (which, if brought by such other person, has a reasonable likelihood of success), (i)(A) challenging or seeking to, or which is reasonably likely to, make illegal, delay or otherwise directly or indirectly restrain or prohibit, or seeking to, or which is reasonably likely to, impose voting, procedural, price or other requirements, in addition to those required by Federal securities laws and the DGCL each as in effect on the date of the Offer, in connection with the making of the Offer, the acceptance for payment of, or payment for, some of or all the Common Shares by TDS, Purchaser or any other affiliate of TDS or the consummation by TDS, Purchaser or any other affiliate of TDS of the Merger, (B) seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Offer or the Merger, (ii) seeking to impose or confirm limitations on the ability of TDS, Purchaser or any other affiliate of TDS effectively to exercise full rights of ownership of Common Shares, including, without limitation, the right to vote any Common Shares acquired or owned by TDS, Purchaser or any other affiliate of TDS on all matters properly presented to API's shareholders, (iii) seeking any material diminution in the benefits expected to be derived by TDS, Purchaser or any other affiliate of TDS as a result of the transactions contemplated by the Offer or the Merger, (iv) otherwise directly or indirectly relating to the Offer or the Offer Documents or which otherwise, in the sole judgment of Purchaser, might materially adversely affect API or any of its Subsidiaries or TDS, Purchaser or any other affiliate of TDS or the value of Common Shares or (v) in the sole judgment of Purchaser, materially adversely affect the business, assets, liabilities, capitalization, results of operations, shareholders' equity, condition (financial or otherwise) or prospects of API or any of its Subsidiaries; or II-1 (b) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction proposed, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, (i) TDS, Purchaser or any other affiliate of TDS or API or (ii) the Offer or the Merger by any government, legislative body or court, domestic, foreign or supranational, or Governmental Authority, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) there shall have occurred any material adverse change, or any condition, event or development that is reasonably likely to result in a material adverse change, in the business, assets, liabilities, capitalization, results of operations, shareholders' equity, condition (financial or otherwise) or prospects of API; or (d) there shall have occurred or been threatened (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) any extraordinary or material adverse change in the financial markets or major stock exchange indices in the United States or abroad, (iii) any change in the general political, market, economic or financial conditions in the United States that is reasonably likely to have a material adverse effect upon the business, properties, assets, liabilities, capitalization, shareholders' equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of API or of TDS or the trading in, or value of, Common Shares, (iv) any material change in United States currency exchange rates or a suspension of, or limitation on, the markets therefor, (v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (vi) any limitation (whether or not mandatory) by any government, domestic, foreign or supranational, or Governmental Authority on, or other event that is reasonably likely to affect the extension of credit by banks or other lending institutions in the United States, (vii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (viii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (e) any required approval, permit, authorization, favorable review or consent of any Governmental Authority shall not have been obtained on terms satisfactory to Purchaser; or (f) (i) it shall have been publicly disclosed or TDS shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more than 15% of the outstanding Common Shares has been acquired by another person, II-2 entity or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) or (ii) (x) the Board of Directors of API or any committee thereof (including the API Special Committee) shall have withdrawn or modified in a manner adverse to TDS or Purchaser its approval or recommendation of the Offer, the Merger or this Agreement, or approved or recommended any Proposed API Acquisition Transaction (other than this Agreement), (y) API shall have entered into any agreement with respect to any Proposed API Acquisition Transaction (other than this Agreement) or (z) the Board of Directors of API or any committee (including the API Special Committee) thereof shall have resolved to do any of the foregoing; or (g) any of the representations and warranties of API set forth in this Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as if such representations and warranties were made as of such time; or (h) API shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of API to be performed or complied with by it under this Agreement; or (i) this Agreement shall have been terminated in accordance with its terms; or (j) Purchaser and API (with the approval of the API Special Committee) shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment or payment for Common Shares thereon. which, in the judgment of Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by TDS, Purchaser, or any of their affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and TDS and may be asserted by Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Purchaser concerning the events described in this ANNEX II will be final and binding upon all parties. II-3 EX-99.(C)(2) 3 ASSET CONTRIBUTION AGREEMENT - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------- ASSET CONTRIBUTION AGREEMENT by and among TSR PAGING INC. TELEPHONE AND DATA SYSTEMS, INC. and TSR WIRELESS LLC Dated: December 22, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . 2 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Other Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE II CONTRIBUTION OF ASSETS. . . . . . . . . . . . . 12 2.1 Contribution of TSR Paging Assets. . . . . . . . . . . . . . . . . 12 2.2 Assumption of TSR Paging Liabilities . . . . . . . . . . . . . . . 14 2.3 Contribution of API Assets . . . . . . . . . . . . . . . . . . . . 14 2.4 Assumption of API Liabilities. . . . . . . . . . . . . . . . . . . 16 2.5 API Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.6 Assets and Liabilities of AMS; Rejected Assets . . . . . . . . . . 17 ARTICLE III ISSUANCE OF MEMBERSHIP INTERESTS . . . . . . . . . . 18 3.1 Issuance of Membership Interests . . . . . . . . . . . . . . . . . 18 3.2 Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . 18 3.3 Closing Costs; Transfer Fees . . . . . . . . . . . . . . . . . . . 20 3.4 Unit Allocation Following Exercise of Extension Option . . . . . . 20 ARTICLE IV CLOSING . . . . . . . . . . . . . . . . 20 4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.2 Conveyances by TSR Paging at Closing . . . . . . . . . . . . . . . 20 4.3 Conveyances by TDS at Closing. . . . . . . . . . . . . . . . . . . 21 4.4 Form of Instruments. . . . . . . . . . . . . . . . . . . . . . . . 22 4.5 Certificates; Opinions . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE V REPRESENTATIONS AND WARRANTIES OF TSR PAGING . . . . . . . 23 5.1 Organization of TSR Paging . . . . . . . . . . . . . . . . . . . . 23 5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.4 Absence of Certain Changes or Events . . . . . . . . . . . . . . . 23 5.5 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 i Page ---- 5.6 TSR Paging Real Property . . . . . . . . . . . . . . . . . . . . . 24 5.7 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . 25 5.8 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 27 5.9 Operation of the TSR Paging Business . . . . . . . . . . . . . . . 27 5.10 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.11 Absence of Certain Business Practices. . . . . . . . . . . . . . . 28 5.12 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . 28 5.13 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . 28 5.14 Financial Statements; Receivables. . . . . . . . . . . . . . . . . 30 5.15 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 31 5.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.17 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 31 5.18 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.19 No Other Agreements to Sell the TSR Paging Assets. . . . . . . . . 32 5.20 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . 32 5.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 32 5.22 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.23 Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . 34 5.24 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.25 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . 35 5.26 Employee Benefit Plan Matters. . . . . . . . . . . . . . . . . . . 35 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF TDS. . . . . . . . . 36 6.1 Organization of TDS and API. . . . . . . . . . . . . . . . . . . . 36 6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.4 Absence of Certain Changes or Events . . . . . . . . . . . . . . . 38 6.5 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.6 API Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 39 6.7 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . 40 6.8 Customers, Distributors and Suppliers. . . . . . . . . . . . . . . 41 6.9 Operation of the API Business. . . . . . . . . . . . . . . . . . . 42 6.10 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 6.11 Absence of Certain Business Practices. . . . . . . . . . . . . . . 42 6.12 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . 43 6.13 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . 43 6.14 Financial Statements; Receivables; Public Filings. . . . . . . . . 45 6.15 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 46 6.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 ii Page ---- 6.17 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 46 6.18 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.19 No Other Agreements to Sell the API Assets . . . . . . . . . . . . 47 6.20 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . 47 6.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 47 6.22 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 6.23 Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF TSR WIRELESS. . . . . . . 49 7.1 Organization of TSR Wireless . . . . . . . . . . . . . . . . . . . 49 7.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 49 7.3 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . 50 7.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . 50 7.5 Broker and Finders . . . . . . . . . . . . . . . . . . . . . . . . 50 7.6 Litigation and Proceedings . . . . . . . . . . . . . . . . . . . . 50 7.7 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE VIII COVENANTS OF THE TRANSFERORS AND TSR WIRELESS. . . . . . . 50 8.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 50 8.2 FCC Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 8.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . . 51 ARTICLE IX COVENANTS OF TSR PAGING . . . . . . . . . . . . 52 9.1 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 52 9.2 Employee and Employee Benefit Matters. . . . . . . . . . . . . . . 52 9.3 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 53 9.4 1997 Financial Statements. . . . . . . . . . . . . . . . . . . . . 54 ARTICLE X COVENANTS OF TDS . . . . . . . . . . . . . . 55 10.1 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . 55 10.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 55 10.3 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 57 10.4 1997 Financial Statements. . . . . . . . . . . . . . . . . . . . . 58 iii Page ---- 10.5 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 10.6 Support of API . . . . . . . . . . . . . . . . . . . . . . . . . . 58 10.7 Transitional Services Agreement. . . . . . . . . . . . . . . . . . 58 10.8 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 10.9 Monthly Certificates . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE XI CONDITIONS TO OBLIGATIONS OF TSR PAGING . . . . . . . . 59 11.1 Representations, Warranties and Covenants. . . . . . . . . . . . . 59 11.2 No Injunction, etc.. . . . . . . . . . . . . . . . . . . . . . . . 59 11.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 59 11.4 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.5 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . . 60 11.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.7 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.8 Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . 60 11.9 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.10 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 60 11.11 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 60 11.12 Tenant Estoppel Certificates . . . . . . . . . . . . . . . . . . . 60 11.13 Closing Current Assets . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE XII CONDITIONS TO OBLIGATIONS OF TDS . . . . . . . . . . 61 12.1 Representations, Warranties and Covenants. . . . . . . . . . . . . 61 12.2 No Injunction, etc.. . . . . . . . . . . . . . . . . . . . . . . . 61 12.3 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . . 61 12.4 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 12.5 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . . 62 12.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 12.7 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 12.8 Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . 62 12.9 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 62 12.10 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 62 12.11 Closing Current Assets . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE XIII RISK OF LOSS; CONSENTS TO ASSIGNMENT OF CONTRACTS, REAL PROPERTY iv Page ---- LEASES AND PERSONAL PROPERTY LEASES. . . . . . . . . . . . 63 13.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 13.2 Consents to Assignment of Contracts, Real Property Leases and Personal Property Leases . . . . . . . . . . . . . . . . . . . 63 ARTICLE XIV ACTIONS BY TSR WIRELESS AND TRANSFERORS AFTER THE CLOSING. . . . 64 14.1 Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . 64 14.2 Survival of Representations, Etc.. . . . . . . . . . . . . . . . . 64 14.3 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 64 14.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 65 14.5 Bulk Sales, Transfer Taxes . . . . . . . . . . . . . . . . . . . . 68 14.6 Assistance for Filing of Tax Returns . . . . . . . . . . . . . . . 68 ARTICLE XV MISCELLANEOUS. . . . . . . . . . . . . . . 69 15.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 15.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 15.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 15.4 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 15.5 Entire Agreement; Amendments and Waivers . . . . . . . . . . . . . 74 15.6 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . . . 74 15.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 15.8 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 15.9 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 15.10 Public Statements and Press Releases . . . . . . . . . . . . . . . 74 15.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 15.12 Confidential Information . . . . . . . . . . . . . . . . . . . . . 75 v SCHEDULES
Schedule 1.1 Excluded API Assets Schedule 10.3.3 API Facilities - To Be Surrendered TSR PAGING DISCLOSURE LETTER SCHEDULES - --------------------------------------- TSR Paging Disclosure Letter Schedule 5.1 Foreign Qualifications of TSR Paging TSR Paging Disclosure Letter Schedule 5.6 TSR Paging Leased Real Property TSR Paging Disclosure Letter Schedule 5.7 TSR Paging Contracts TSR Paging Disclosure Letter Schedule 5.8 Customers and Suppliers of TSR Paging TSR Paging Disclosure Letter Schedule 5.9 Operation of TSR Paging Business TSR Paging Disclosure Letter Schedule 5.10 TSR Paging Inventory TSR Paging Disclosure Letter Schedule 5.12 Consents of TSR Paging TSR Paging Disclosure Letter Schedule 5.13.1 TSR Paging FCC Licenses, TSR Paging FCC License Applications TSR Paging Disclosure Letter Schedule 5.13.3 Filings of TSR Paging TSR Paging Disclosure Letter Schedule 5.13.5 Sharing Agreements TSR Paging Disclosure Letter Schedule 5.13.7 Construction TSR Paging Disclosure Letter Schedule 5.14.1 TSR Paging Financial Statements TSR Paging Disclosure Letter Schedule 5.14.2 Receivables of TSR Paging TSR Paging Disclosure Letter Schedule 5.16 Litigation of TSR Paging TSR Paging Disclosure Letter Schedule 5.20 Proprietary Rights of TSR Paging TSR Paging Disclosure Letter Schedule 5.22 Tax Matters TDS DISCLOSURE LETTER SCHEDULES - ------------------------------- TDS Disclosure Letter Schedule 6.1 Foreign Qualifications of API TDS Disclosure Letter Schedule 6.3 Subsidiaries of API TDS Disclosure Letter Schedule 6.6 API Leased Real Property TDS Disclosure Letter Schedule 6.7 API Contracts TDS Disclosure Letter Schedule 6.8 Customers and Suppliers of API TDS Disclosure Letter Schedule 6.9 Operation of API Business TDS Disclosure Letter Schedule 6.10 API Inventory TDS Disclosure Letter Schedule 6.12 Consents of API TDS Disclosure Letter Schedule 6.13.1 API FCC Licenses, API FCC License Applications TDS Disclosure Letter Schedule 6.13.3 Filings of API TDS Disclosure Letter Schedule 6.13.5 Sharing Agreements TDS Disclosure Letter Schedule 6.13.7 Construction TDS Disclosure Letter Schedule 6.14.1 API Financial Statements TDS Disclosure Letter Schedule 6.14.2 Receivables of API TDS Disclosure Letter Schedule 6.14.3 SEC Reports TDS Disclosure Letter Schedule 6.16 Litigation of API vi TDS Disclosure Letter Schedule 6.20 Proprietary Rights of API TDS Disclosure Letter Schedule 6.22 Tax Matters EXHIBITS EXHIBIT A Exchange and Registration Rights Agreement EXHIBIT B TSR Wireless LLC Agreement EXHIBIT C Option Agreement EXHIBIT D TDS Non-Compete and Non-Solicitation Agreement EXHIBIT E-1 Form of legal opinion of counsel for TSR Paging EXHIBIT E-2 Form of legal opinion of regulatory counsel for TSR Paging EXHIBIT F-1 Form of legal opinion of counsel for TDS and API EXHIBIT F-2 Form of legal opinion of regulatory counsel for TDS and API EXHIBIT G Form of Transitional Services Agreement EXHIBIT H Wire Instructions EXHIBIT I 1998 API Capital Expenditure Budget
vii ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT, dated as of December 22, 1997, is by and among TSR PAGING INC., a Delaware corporation ("TSR PAGING"), TELEPHONE AND DATA SYSTEMS, INC., an Iowa corporation ("TDS" and, together with TSR Paging, the "TRANSFERORS"), and TSR WIRELESS LLC, a Delaware limited liability company ("TSR WIRELESS"). RECITALS WHEREAS, the Transferors each conduct businesses which, among other things, provide local and regional wireless messaging services in the United States; WHEREAS, TDS currently owns approximately 82 percent of the issued and outstanding capital stock of API; WHEREAS, TDS proposes to negotiate and enter into an agreement of merger (the "MERGER") with API pursuant to which a wholly owned subsidiary of TDS will acquire all the outstanding stock of API not currently owned by TDS or its Affiliates. WHEREAS, following the Merger the Contributing Parties desire to combine their respective businesses by contributing all of their respective assets, all of the liabilities of TSR Paging and certain, limited, liabilities of API to TSR Wireless in exchange for their Membership Interests (as defined in the TSR Wireless LLC Agreement) of TSR Wireless. WHEREAS, upon Closing, the Transferors and TSR Wireless shall effective as of the Closing Date, enter into that certain limited liability company operating agreement, (the "TSR WIRELESS LLC AGREEMENT"), a conformed copy of which is attached hereto as Exhibit B. WHEREAS, concurrently herewith, TDS and TSR Wireless have executed and delivered that certain option agreement (the "OPTION AGREEMENT"), a conformed copy of which is attached hereto as Exhibit C, pursuant to which TDS has granted TSR Wireless an exclusive option to acquire the API Note (as defined below). AGREEMENT NOW THEREFORE, in consideration of the premises and mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINED TERMS. As used herein, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference. "ACTION" shall mean any action, claim, suit, litigation, administrative appeal, proceeding, labor dispute, arbitral action, governmental audit, inquiry, criminal prosecution, investigation or unfair labor practice charge or complaint. "AFFILIATE" of a Person shall mean a Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the first Person. "Control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise, provided however neither the Investors nor any of their respective directors, officers, partners, members, stockholders or employees shall be an Affiliate of TSR Paging for the purposes of this Agreement. "AFTER-TAX BASIS" shall mean, with respect to any indemnification payment, an amount which is sufficient to compensate the indemnified party for any Damages after taking into account all increases in Taxes payable by the indemnified party as a result of the receipt of such payment (by reason of such payment being included in income, resulting in a reduction of tax basis, or otherwise increasing such Taxes payable by the indemnified party or reducing the amount of any refund of Taxes otherwise due to the indemnified party at any time), net of the present value of any deductions or other tax benefits arising from the event which gave rise to the indemnification obligation, to the extent such deductions or other tax benefits are actually realized by the indemnified party. "AMS" shall mean American Messaging Services, LLC, a Minnesota limited liability company. "ANCILLARY AGREEMENTS" shall mean the Exchange and Registration Rights Agreement, the TSR Wireless LLC Agreement and the TDS Non-Compete and Non- Solicitation Agreement and the Transitional Services Agreement, each substantially in the forms attached hereto as Exhibits A, B, D and G, respectively. "API" shall mean American Paging, Inc. a Delaware corporation. "API BUSINESS" shall mean the business and operations of API and its Subsidiaries relating generally to the provision of paging and wireless messaging services, the 2 sale and support of pagers and other telecommunications-related products and services and the provision of technical and repair services in connection therewith. "API EXCLUDED ASSETS" shall mean (i) all stock and other ownership interests of API and its Subsidiaries (other than AMS) in Subsidiaries of API (other than AMS), (ii) the API assets listed on Schedule 1.1, (iii) any Liabilities of TDS (or its Subsidiaries, other than API and its Subsidiaries) to API and its Subsidiaries; (iv) all insurance policies of API and its Subsidiaries, (v) all refunds of any Tax that API, or any member of an affiliated, consolidated, combined or unitary group of which API is also a member, paid pursuant to Section 6.22, Section 14.4.2 or Section 14.5.2. and (vi) any deferred Tax Liability as described in note 2 to the 1996 API Financial Statements. "API FINANCIAL STATEMENTS" shall mean (i) the audited consolidated balance sheet of API and its Subsidiaries (other than AMS) as of December 31, 1996 (and, following delivery thereof to TSR Paging, as of December 31, 1997) the related consolidated statements of income and cash flow of API and its Subsidiaries (other than AMS) for the year ended December 31, 1996, (and, following delivery thereof to TSR Paging, as of December 31, 1997), the audited balance sheet of AMS as of December 31, 1996 and the related statement of income and cash flow of AMS for the year ended December 31, 1996 (and, following delivery thereof to TSR Paging, for the year ended December 31, 1997) (collectively, the "API AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited consolidated balance sheet of API and its Subsidiaries (other than AMS) dated September 30, 1997, and the related unaudited consolidated statements of income of API and its Subsidiaries (other than AMS) for the nine (9) months ended September 30, 1997, the cash flow statement of API and its Subsidiaries (other than AMS) for the nine (9) months ended September 30, 1997, the unaudited balance sheet of AMS dated September 30, 1997, and the related unaudited statement of income of AMS for the nine (9) months ended September 30, 1997 and the cash flow statement of AMS for the nine (9) months ended September 30, 1997 (the "API UNAUDITED FINANCIAL STATEMENTS"). "API INTERCOMPANY LIABILITIES" shall mean all Liabilities of API (or its Subsidiaries) to TDS or its other Subsidiaries including, without limitation, Liabilities under the API Note. "API NOTE" shall mean that certain revolving credit agreement between TDS and API, effective as of January 1, 1994 and that certain loan note made by API in favor of TDS pursuant thereto. "AUTHORIZATION" of a Person shall mean any consent, approval, waiver or authorization of, expiration or termination of any waiting period requirement (including pursuant to the HSR Act) of, or filing, registration, qualification, declaration or designation with or by, any Governmental Authority, including the Final FCC Orders. 3 "BOOKS AND RECORDS" of any Contributing Party shall mean (a) all records and lists of that Contributing Party and its Subsidiaries pertaining to the TSR Paging Assets or the API Assets, as applicable, (b) all records and lists of that Contributing Party and its Subsidiaries pertaining to the Business of that Contributing Party, customers, suppliers or personnel of that Contributing Party and its Subsidiaries, (c) all product, business and marketing plans of that Contributing Party and its Subsidiaries and (d) all books, ledgers, files, reports, plans, drawings and operating records of every kind maintained by that Contributing Party and its Subsidiaries, but excluding the originals of that Contributing Party's minute books, stock books and tax returns, and books and records pertaining to API Excluded Assets. "BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close. "CLOSING DATE" shall mean (i) March 31, 1998, or (ii) if all of the conditions set forth in Articles XI and XII have not been satisfied or waived by March 31, 1998, the fifth Business Day following the satisfaction or waiver of such conditions which Business Day is also the last day of any monthly accounting period of TSR Paging, or (iii) such other date as the Transferors shall mutually agree upon. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. "COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as amended. "CONSENT" shall mean any consent, approval or waiver of a Person, not including the Authorization of any Governmental Authority. "CONTRACTS" of any Contributing Party shall mean all contracts, leases, licenses (other than Permits), commitments, understandings and agreements to which that Contributing Party or any of its Subsidiaries is a party or is bound, whether oral or written, including, without limitation, all reseller agreements, the Real Property Leases and the Personal Property Leases of that Contributing Party or its Subsidiaries. "CONTRIBUTING PARTIES" shall mean, on the one hand, TSR Paging, and on the other hand, API and its Subsidiaries and each shall be a "CONTRIBUTING PARTY." "DEFAULT" shall mean (i) a breach of or default under any Contract, FCC License, Real Property Lease or Personal Property Lease or other agreement to which a Person is party or subject, (ii) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any of the foregoing, or (iii) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration under any of the foregoing. 4 "DGCL" shall mean the Delaware General Corporations Law, as amended. "DISCLOSURE LETTER" of a Transferor shall mean the letters delivered by such Transferor dated as of the date hereof which set forth certain exceptions to the representations and warranties contained in Articles V and VI and certain other information called for by this Agreement. Unless otherwise specified, each reference in this Agreement to any numbered Disclosure Letter Schedule of a Transferor is a reference to that numbered schedule which is included in the Disclosure Letter of such Transferor. "EMPLOYEE PLAN" of a Contributing Party shall mean any written plan, program, agreement, policy or arrangement (a "plan") maintained or contributed to by that Contributing Party or any of its Subsidiaries that is: (i) a welfare benefit plan within the meaning of Section 3(1) of ERISA; (ii) a pension benefit plan within the meaning of Section 3(2) of ERISA; (iii) a stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or similar equity-based plan; or (iv) any other deferred-compensation, retirement, severance, welfare-benefit, COBRA, bonus, incentive or fringe-benefit plan. "ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "ENVIRONMENTAL LAWS" shall mean all Regulations which regulate or relate to the protection or clean-up of the environment, the use, treatment, storage, transportation, generation, manufacture, processing, distribution, handling or disposal of, or emission, discharge or other release or threatened release of, Hazardous Substances or otherwise dangerous substances, wastes, pollution or materials (whether, gas, liquid or solid), the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources, or the health and safety of Persons or property, including without limitation protection of the health and safety of employees. Environmental Laws shall include, without limitation, the Federal Insecticide, Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Hazardous Materials Transportation Act and all analogous or related federal, state or local law, each as amended. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" of any Contributing Party shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with, under 5 "common control" with, or a member of an "affiliated service group" with, that Contributing Party as defined in Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "FACILITY" of any Contributing Party shall mean all real property or facility owned, leased or used anytime by that Contributing Party and/or its Subsidiaries (or a predecessor or Affiliate of such Contributing Party and/or its Subsidiaries). "FCC" shall mean the Federal Communications Commission or any successor body thereto. "FCC LICENSE" shall mean any license, construction permit, consent, certificate of compliance, approval or Authorization issued by the FCC authorizing operations in, INTER ALIA, Public Mobile Services pursuant to Part 22 of the FCC Rules, Personal Communications Services pursuant to Part 24 of the FCC Rules, Domestic Fixed Satellite Service pursuant to Part 25 of the FCC Rules, Private Land Mobile Radio Services pursuant to Part 90 of the FCC Rules (including one-way paging operations on exclusive and non-exclusive channels in the 929-930 MHz frequency band), and Fixed Microwave Radio Services pursuant to Part 101 of the FCC Rules, or other license, permit, consent, certificate of compliance, franchise approval or Authorization of the FCC or construction permit in respect of any of the foregoing. "FCC LICENSE APPLICATION" shall mean an application for an FCC License. "FCC RULES" shall mean the Rules and Regulations of the FCC promulgated under the Communications Act, as amended. "FINAL FCC ORDERS" shall mean a final, nonappealable order no longer subject to administrative or judicial reconsideration, review or appeal. "FINANCING OBLIGATIONS" shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, notes, debentures or similar instruments (other than surety or similar bonds), (iii) obligations under capitalized leases, (iv) obligations under conditional sale, title retention or similar agreements or arrangements creating an obligation with respect to the deferred purchase price of property (other than customary trade credit), and (v) obligations to guarantee any of the foregoing types of obligations on behalf of others. "FIXTURES AND EQUIPMENT" of any Contributing Party shall mean all of the furniture, fixtures, furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment and other tangible personal property owned or used by that Contributing Party and its Subsidiaries. "GAAP" shall mean generally accepted accounting principles in the United States, consistently applied in accordance with past practice, as in effect on the date hereof. 6 "GOVERNMENTAL AUTHORITY" shall mean any governmental or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case whether domestic or foreign, federal, state or local. "HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant, chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive, ignitible or flammable chemical or chemical compound or hazardous substance, material or waste, whether solid, liquid or gas, including, without limitation, any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products or derivatives, radioactive substance or material, pesticide waste waters, sludges, slag and any other substance, material or waste that is subject to regulation, control or remediation under any Environmental Laws. "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "INTERIM BALANCE SHEET" of a Contributing Party shall mean the unaudited consolidated balance sheet of that Contributing Party as of the Interim Balance Sheet Date, as included in the API Unaudited Financial Statements or the TSR Paging Unaudited Financial Statements, as applicable. "INTERIM BALANCE SHEET DATE" shall mean September 30, 1997. "INVENTORY" of a Contributing Party shall mean all of that Contributing Party's and its Subsidiaries' inventory held for resale, lease or repair including all pagers, phones, phone accessories, two-way radios and their related accessories, crystals, phone cards, spare parts, wrapping, supply and packaging items and similar items, in each case wherever the same may be located or in transit. "INVESTORS" shall mean TA Associates Group, Spectrum Equity Investors L.P. and St. Paul Venture Capital, Inc. "LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated in or on the real property covered by the Real Property Leases. "LIABILITIES" shall mean any direct or indirect liability, indebtedness, obligation, responsibility, commitment, expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any Person, whether fixed or unfixed, choate or inchoate, liquidated or unliquidated, known or unknown, secured or unsecured, accrued or unaccrued, joint, several, joint and several, due or to become due, vested or unvested, executory, determined, determinable, absolute, contingent, matured, unmatured or other and whether or not required by GAAP to be set forth in a financial statement of a Person including, without limitation, all Financing Obligations of such Person. 7 "MATERIAL ADVERSE CHANGE", in respect of any Contributing Party, shall mean any significant and substantial adverse change in the financial condition, business or operations of the Business of that Contributing Party and its Subsidiaries to be acquired hereunder or on the ability of such Contributing Party to consummate the transactions contemplated hereby or by the Ancillary Agreements or the Merger. "MATERIAL ADVERSE EFFECT", in respect of any Contributing Party, shall mean any significant and substantial adverse effect on the financial condition, business or operations of the Business of that Contributing Party and its Subsidiaries to be acquired hereunder or on the ability of such Contributing Party to consummate the transactions contemplated hereby or by the Ancillary Agreements, the Merger Agreement or the Option Agreement. "NET MONTHLY PAGER REVENUES" of any Contributing Party shall mean all revenues from pagers of such Contributing Party and its Subsidiaries whose assets are being contributed (other than AMS in the case of API) recognizable in the relevant month in accordance with GAAP limited to recurring airtime charges, recurring pager rental charges, recurring ancillary service charges, and recurring debit/credit adjustments but excluding all equipment sales, one time or non-recurring charges, accessory charges, late fees and connection fees less the aggregate sums paid or payable to third party airtime vendors for such month by such Contributing Party for such month. "NET WORKING CAPITAL" shall mean the sum of all current assets of a Contributing Party and its Subsidiaries (other than AMS in the case of API) including cash, Inventory and accounts receivable less current liabilities of such Contributing Party and its Subsidiaries. "ORDER" shall mean any judgment, decision, consent decree, injunction, ruling or order of any Governmental Authority that is binding on any Person or its property under applicable law. "PAGERS IN SERVICE" of a Contributing Party shall mean Closing Date activated pagers in service of that Contributing Party and its Subsidiaries (whether direct or indirect through resellers, dealers or other agents) billable for the subsequent month (and collectible for the purposes of calculating the adjustment set forth in Section 3.2), excluding any pagers that are not on billing or are billed at $0.00 (including, without limitation, pagers with employees and demo or spare pagers with customers) or in respect of which the customer's account is more than 90 days delinquent and for which no payment has been received for 60 days. "PERMITS" shall mean in respect of any Contributing Party, all licenses, permits, approvals, authorizations or consents, certificates of compliance, franchise approvals or other similar authorizations of any Governmental Authority necessary for the conduct of the Business of that Contributing Party and its Subsidiaries, other than FCC Licenses. 8 "PERMITTED ENCUMBRANCES" shall mean (i) minor liens which in aggregate are not substantial in amount, do not materially detract from the value or transferability of the property or assets subject thereto, (ii) liens arising pursuant to Personal Property Leases of a Contributing Party, and (iii) in the case of the TSR Paging Assets, liens granted pursuant to the TSR Paging Credit Agreement and in respect of any TSR Paging Assumed Liabilities. "PERSON" shall mean any individual, partnership, corporation, trust, association, unincorporated organization, government or any department or agency thereof or any other entity. "PERSONAL PROPERTY LEASES" of any Contributing Party shall mean all of the existing leases with respect to the personal property of that Contributing Party and its Subsidiaries. "PROPRIETARY RIGHTS" of any Party shall mean that Contributing Party's and its Subsidiaries' (i) domestic and foreign registrations of trademarks and other marks, trade names and trade rights, (ii) pending applications for such registrations, (iii) patents and applications therefor, (iv) trademarks and other marks, trade names and other trade rights whether or not registered, (v) copyrights and registrations thereof, (vi) trade secrets, designs, plans, specifications, technical information and other proprietary rights and (vii) rights under any licenses to such Contributing Party or its Subsidiaries to use any copyrights, marks, trade names, trade rights, patents or other proprietary rights. "PUC" shall mean any state public utilities commission, public service commission or other similar agency. "REAL PROPERTY LEASES" of any Contributing Party shall mean all real property leases entered into by such Contributing Party or any of its Subsidiaries. "REGULATIONS" shall mean any laws, statutes, ordinances, regulations, rules, notice requirements, court decisions, agency guidelines, principles of law and orders of any foreign, federal, state or local government and any other governmental department or agency, including without limitation Environmental Laws, energy, motor vehicle safety, public utility, zoning, building and health codes, occupational safety and health and laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours. "REPRESENTATIVE" of any Person shall mean any officer, director, principal, attorney, agent, analyst, consultant or other representative of such Person. "RELEASE" shall mean and include any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment or the workplace of any Hazardous Substance, and otherwise as defined in any Environmental Law. 9 "SEC" shall mean the Securities and Exchange Commission or any successor body thereto. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SUBSIDIARY" shall mean each corporation or other Person in which a Person owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests. Unless otherwise specified, for the purposes of this Agreement AMS shall be considered a Subsidiary of TDS and API. "TAX" shall mean any federal, state, local, foreign or other tax, levy, impost, fee, assessment or other government charge, including without limitation income, estimated income, business, occupation, franchise, property, payroll, personal property, sales, transfer, use, employment, commercial rent, occupancy, franchise or withholding taxes, and any premium, including without limitation interest, penalties and additions in connection therewith. "TRANSFER" shall mean and includes the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of, pledging, hypothecating or otherwise transferring as security (and correlative words shall have correlative meanings). "TSR PAGING BUSINESS" shall mean the business and operations of TSR Paging relating generally to the provision of paging and wireless messaging services, the sale and support of pagers, cellphones, PCS phones, 2-way radios and accessories and other telecommunications-related products and services and the provision of technical and repair services in connection therewith, as well as the provision of long distance telephone resale services. "TSR PAGING EXCLUDED ASSETS" shall mean all refunds of any Tax that TSR Paging, any shareholder of TSR Paging and any member of an affiliated, consolidated, combined or unitary group of which TSR Paging is also a member, paid pursuant to Section 5.22, Section 14.4.1 or Section 14.5.2. "TSR PAGING FINANCIAL STATEMENTS" shall mean (i) the audited balance sheet of TSR Paging as of December 31, 1996, (and, following delivery thereof to TDS, as of December 31, 1997), and the related statement of income and cash flow of TSR Paging for the year ended December 31, 1996 (and, following delivery thereof to TDS, as of December 31, 1997), (the "TSR PAGING AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited balance sheet of TSR Paging dated September 30, 1997, and the related unaudited statement of income of TSR Paging for the nine (9) months ended September 30, 1997 and the cash flow statement of TSR Paging for the nine (9) months ended September 30, 1997 (the "TSR PAGING UNAUDITED FINANCIAL STATEMENTS"). 10 1.2 OTHER DEFINED TERMS. The following terms shall have the meanings defined for such terms in the Sections set forth below: Term Section ----- ------- "API ASSETS" Section 2.3 "API ASSUMED LIABILITIES" Section 2.4 "API ASSUMPTION DOCUMENT" Section 4.3.2 "API PCD TAX RETURNS" Section 6.22.1 "API CONTRACTS" Section 6.7 "API EXCLUDED LIABILITIES" Section 2.5 "API FACILITIES" Section 6.21.1 "API FCC LICENSE APPLICATION" Section 6.13.2 "API FCC LICENSE" Section 6.13.1 "API INVENTORY" Section 6.10 "API LEASED REAL PROPERTY" Section 6.6 "API 929 MHz EXCLUSIVE FREQUENCY" Section 6.13.1(iii) "API PCD TAXES" Section 6.22.1 "API PERSONAL PROPERTY LEASES" Section 6.7.1 "API PAGER SHORTFALL" Section 3.2.2 "API REVENUE SHORTFALL" Section 3.2.2 "API WITHHOLDING TAXES" Section 6.22.1 "ASSETS" Section 13.1 "AUDITOR" Section 3.2.5 "AUGUST CERTIFICATE" Section 10.9 "TSR WIRELESS INDEMNITEES" Section 14.4.1 "TSR WIRELESS" Preamble "CLAIM NOTICE" Section 14.4.5 "CLAIM" Section 14.4.5 "CLOSING" Section 4.1 "CONFIDENTIAL INFORMATION" Section 15.12.1 "CONSULTANT" Section 10.1.2 "DAMAGES" Section 14.4.1 "EXCHANGE ACT" Section 6.14.3 "EXTENSION OPTION" Section 15.1.1(v) "FCC 929 MHz EXCLUSIVE FREQUENCY" Section 5.13.1(iii) "FICA" Section 9.2.5 "FUTA" Section 9.2.5 "INDEMNITEES" Section 14.4.2 "INVESTMENT DOCUMENTS" Section 5.7.1 "IRS" Section 5.22.2 "JULY CERTIFICATE" Section 10.9 "JUNE CERTIFICATE" Section 10.9 "MEMBERSHIP INTERESTS" Recitals 11 "MERGER" Recitals "MIS CHARGES Section 2.4.2 "OFFER DOCUMENTS" Section 10.6.2 "OFFER" Section 10.6.1 "OPTION AGREEMENT" Recitals "OTHER FILINGS" Section 10.9.1 "PROPOSED API ACQUISITION TRANSACTION" Section 10.1 "SCHEDULE 14D-9" Section 10.7.1 "SEC REPORTS" Section 6.14.3 "SHAREHOLDERS' MEETING" Section 10.9 "SHARES" Section 10.6.1 "TDS" Preamble "TDS INDEMNITEES" Schedule 14.4.1 "THIRD PARTY NOTICE" Section 14.4.5 "TRANSFERORS" Preamble "TRANSFER TAXES" Section 14.5.2 "TSR PAGING" Preamble "TSR PAGING ASSETS" Section 2.1 "TSR PAGING ASSUMED LIABILITIES" Section 2.2 "TSR PAGING ASSUMPTION DOCUMENT" Section 4.2 "TSR PAGING PCD TAX RETURNS" Section 5.22.1 "TSR PAGING CONTRACTS" Section 5.7 "TSR PAGING CREDIT AGREEMENT" Section 5.7.1 (xii) "TSR PAGING EMPLOYEES" Section 9.3.1 "TSR PAGING FACILITIES" Section 5.21.1 "TSR PAGING FCC LICENSE APPLICATION" Section 5.13.2 "TSR PAGING FCC LICENSE" Section 5.13.1 "TSR PAGING INDEMNITEES" Section 14.4.2 "TSR PAGING INVENTORY" Section 5.6 "TSR PAGING LEASED REAL PROPERTY" Section 5.6 "TSR PAGING 929 MHz EXCLUSIVE FREQUENCY" Section 5.13.1(iii) "TSR PAGING PCD TAXES" Section 5.22.1 "TSR PAGING PERSONAL PROPERTY LEASES" Section 5.7.1 "TSR PAGING PAGER SHORTFALL" Section 3.2.1 "TSR PAGING REVENUE SHORTFALL" Section 3.24.1 "TSR PAGING WITHHOLDING TAXES" Section 5.22.1 "TSR WIRELESS" Recitals "UNIT ADJUSTMENTS" Section 3.2.3 12 "UNITS" Section 3.2.3 "WIRE TRANSFER" Section 15.1.1(v) ARTICLE II CONTRIBUTION OF ASSETS 2.1 CONTRIBUTION OF TSR PAGING ASSETS. Upon the terms and subject to the conditions contained herein, at the Closing, TSR Paging will convey, transfer, assign and deliver to TSR Wireless, and TSR Wireless will acquire from TSR Paging, all of the right, title and interest of TSR Paging in and to properties, assets and rights of any kind, whether tangible or intangible, real or personal, other than the TSR Paging Excluded Assets (collectively, the "TSR PAGING ASSETS"), including, without limitation, all of TSR Paging's right, title and interest in the following: 2.1.1 All accounts and notes receivable (whether current or noncurrent), refunds, deposits, prepayments or prepaid expenses of TSR Paging; 2.1.2 All cash and cash equivalents of TSR Paging on hand or in banks, certificates of deposit, money market funds and securities; 2.1.3 All TSR Paging Contracts; 2.1.4 All TSR Paging Real Property Leases and all TSR Paging Personal Property Leases; 2.1.5 Intentionally omitted. 2.1.6 All Leasehold Improvements of TSR Paging; 2.1.7 All Fixtures and Equipment of TSR Paging; 2.1.8 All TSR Paging Inventory; 2.1.9 All Books and Records of TSR Paging; 2.1.10 All Proprietary Rights of TSR Paging; 2.1.11 All Permits of TSR Paging; 2.1.12 All computer software of TSR Paging, to the extent transferable; 2.1.13 All insurance policies of TSR Paging, to the extent assignable; 13 2.1.14 All available supplies, sales literature, promotional literature, customer, supplier and distributor lists, art work, display units, telephone and fax numbers and purchasing records related to the TSR Paging Business; 2.1.15 All rights under or pursuant to all warranties, representations and guarantees made by suppliers in connection with the TSR Paging Assets or services furnished to TSR Paging to the extent such warranties, representations and guarantees are assignable; 2.1.16 All claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind relating to the TSR Paging Assets, the TSR Paging Business or the TSR Paging Assumed Liabilities, against any Person, including, without limitation, any liens, security interests, pledges or other rights to payment or to enforce payment in connection with products delivered or services rendered by TSR Paging on or prior to the Closing Date; and 2.1.17 All FCC Licenses, FCC License Applications owned or used in the operation of the TSR Paging Business held by TSR Paging including, without limitation, those FCC Licenses and FCC License Applications listed on TSR Paging Disclosure Letter Schedule 5.13. 2.2 ASSUMPTION OF TSR PAGING LIABILITIES. Upon the terms and subject to the conditions contained herein, at the Closing, TSR Wireless shall assume and become responsible for all Liabilities of TSR Paging (the "TSR PAGING ASSUMED LIABILITIES"), including, without limitation: 2.2.1 All Liabilities accruing, arising out of, or relating to events or occurrences under the TSR Paging FCC Licenses, TSR Paging FCC License Applications, TSR Paging Contracts, TSR Paging Real Property Leases and TSR Paging Personal Property Leases; 2.2.2 All accounts payable, accrued expenses and other current Liabilities of TSR Paging; 2.2.3 All Financing Obligations of TSR Paging; 2.2.4 All Liabilities arising out of TSR Wireless's employment of all employees of TSR Paging, including all Liabilities under any Employee Plan of TSR Paging or any ERISA Affiliate of TSR Paging; and 2.2.5 All Liabilities for Taxes of TSR Paging except any Tax for which TSR Paging, any shareholder of TSR Paging, or any member of an affiliated, consolidated, combined or unitary group of which TSR Paging is also a member, is liable pursuant to Section 5.22, Section 14.4.1 or Section 14.5.2. 14 2.3 CONTRIBUTION OF API ASSETS. Upon the terms and subject to the conditions contained herein and subject to Section 2.6, at the Closing, TDS shall cause API and each of its Subsidiaries to convey, transfer, assign and deliver to TSR Wireless, and TSR Wireless will acquire from API and such Subsidiaries, all of the right, title and interest of API and such Subsidiaries in and to properties, assets and rights of any kind, whether tangible or intangible, real or personal, except for the API Excluded Assets (collectively, the "API ASSETS"), including, without limitation, all of API's and such Subsidiaries' right, title and interest in the following: 2.3.1 All accounts and notes receivable (whether current or noncurrent), refunds, deposits, prepayments or prepaid expenses of API and its Subsidiaries (except in connection with insurance policies of API or its Subsidiaries); 2.3.2 All cash and cash equivalents of API and its Subsidiaries on hand, in the TDS cash management system, or in banks, certificates of deposit, money market funds and securities, including such cash as is necessary to ensure that the consolidated Net Working Capital, excluding any API Intercompany Liabilities (but including the MIS Charges), of API and its Subsidiaries on the Closing Date calculated in accordance with GAAP on a consistent basis with current practice is $9,800,000 and, if necessary, TDS shall advance or contribute to API such cash as is necessary to enable API to comply with this Section 2.3.2; 2.3.3 All API Contracts, unless rejected by TSR Paging pursuant to Section 2.6.2; 2.3.4 All API Real Property Leases and all API Personal Property Leases; 2.3.5 Intentionally omitted; 2.3.6 All Leasehold Improvements of API and its Subsidiaries; 2.3.7 All Fixtures and Equipment of API and its Subsidiaries; 2.3.8 All API Inventory; 2.3.9 All Books and Records of API and its Subsidiaries; 2.3.10 All Proprietary Rights of API and its Subsidiaries; 2.3.11 All Permits of API and its Subsidiaries to the extent transferable; 2.3.12 All computer software of API and its Subsidiaries to the extent transferable; 2.3.13 Intentionally omitted; 15 2.3.14 All available supplies, sales literature, promotional literature, customer, supplier and distributor lists, art work, display units, telephone and fax numbers and purchasing records related to the API Business; 2.3.15 All rights under or pursuant to all warranties, representations and guarantees made by suppliers in connection with the API Assets or services furnished to API or its Subsidiaries, to the extent such warranties, representations and guarantees are assignable; 2.3.16 All claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind relating to the API Assets or the API Assumed Liabilities, against any Person, including, without limitation, any liens, security interests, pledges or other rights to payment or to enforce payment in connection with products delivered or services rendered by API or its Subsidiaries on or prior to the Closing Date; 2.3.17 All FCC Licenses and FCC License Applications owned or used in the operation of the API Business held by API, API's Subsidiaries (including but not limited to Advanced Wireless Messaging, Inc.), TDS or any Subsidiary of TDS, including, without limitation, those FCC Licenses and FCC License Applications listed on TDS Disclosure Letter Schedule 6.13; and 2.3.18 All right, title and interest of API in AMS unless rejected by TSR Paging pursuant to Section 2.6.2. 2.4 ASSUMPTION OF API LIABILITIES. Upon the terms and subject to the conditions contained herein and subject to Section 2.6, at the Closing, TSR Wireless shall assume the following, and only the following, Liabilities of API and its Subsidiaries (the "API ASSUMED LIABILITIES"); 2.4.1 All Liabilities accruing, arising out of, or relating to events or occurrences happening after the Closing Date under (i) the API FCC Licenses and the API FCC License Applications; (ii) Contracts listed on TDS Disclosure Letter Schedules 6.6 and 6.7 and not rejected by TSR Paging pursuant to Section 2.6.2, or under Contracts which are not listed on TDS Disclosure Letter Schedules 6.6 and 6.7, but which TSR Paging, in its sole discretion, elects to accept and assume; and (iii) Real Estate Leases and Personal Property Leases; but not including any Liability for any Default under any FCC License, FCC License Application or Contract, Real Estate Lease or Personal Property Lease in each case, of API or any of its Subsidiaries occurring on or prior to the Closing Date or occurring after the Closing Date as a result of actions or omissions prior to the Closing Date; and 2.4.2 All of API's and its Subsidiaries' current liabilities set forth on the API Interim Balance Sheet or incurred after the Interim Balance Sheet Date (i) in the ordinary course of business, (ii) consistent with amounts historically incurred and (iii) in compliance with the terms of this Agreement other than (x) the API Intercompany Liabilities, but including monthly service charges of TDS for API's use of certain computer facilities and 16 processing services of TDS ("MIS CHARGES"), (y) any Tax excluded pursuant to Section 2.5.2 and (z) any Liabilities excluded pursuant to Section 2.5.1 to the extent not included in current liabilities. 2.5 API LIABILITIES. Notwithstanding any other provision of this Agreement, TSR Wireless shall not assume, or otherwise be responsible for, (i) any Liabilities of TDS or (ii) except for the Assumed Liabilities expressly specified in Section 2.4, any Liabilities of API or any of its Subsidiaries, in each case whether liquidated or unliquidated, or known or unknown, whether arising out of occurrences prior to, at or after the date hereof ("API EXCLUDED LIABILITIES"), which API Excluded Liabilities include, without limitation: 2.5.1 Any Liabilities to or in respect of any employees or former employees of API or any of its Subsidiaries including without limitation (i) any employment agreement, whether or not written, between API or any of its Subsidiaries and any Person, (ii) any Liability under any Employee Plan at any time maintained, contributed to or required to be contributed to by or with respect to API or any of its Subsidiaries, or any ERISA Affiliate of API or any of its Subsidiaries or TDS or under which API or any of its Subsidiaries or TDS may incur any Liability, or any contributions, benefits or Liabilities therefor, or any Liability with respect to API's or any of its Subsidiaries withdrawal or partial withdrawal from or termination of any Employee Plan and (iii) any claim of an unfair labor practice, or any claim under any state unemployment compensation or worker's compensation law or regulation or under any federal or state employment discrimination law or regulation, which shall have been asserted on or prior to the Closing Date or is based on acts or omissions which occurred on or prior to the Closing Date. 2.5.2 Any Liability of API or any of its Subsidiaries in respect of any Tax except any Tax Liability (other than income tax) included within current liabilities described in Section 2.4.2. 2.5.3 Any Liability arising from any injury to or death of any Person or damage to or destruction of any property, whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from services performed by or on behalf of API or any of its Subsidiaries or any other Person or entity on or prior to the Closing Date; 2.5.4 Any Liability of API or any of its Subsidiaries arising out of or related to any Action against or any Action which adversely affects the API Assets and which shall have been asserted on or prior to the Closing Date or to the extent the basis of which shall have arisen on or prior to the Closing Date; 2.5.5 Any Liability of API or any of its Subsidiaries resulting from entering into, performing its obligations pursuant to or consummating the transactions contemplated by, this Agreement except as otherwise provided in Sections 3.3 and 14.5.2; 17 2.5.6 Any Financing Obligations of API or its Subsidiaries; 2.5.7 The API Intercompany Liabilities except for the MIS Charges; 2.5.8 Any Liability for violation of any Environmental Law; 2.5.9 Any Liability in respect of any Facility formerly owned, leased or occupied by API or any of its Subsidiaries or any predecessor thereto; and 2.5.10 Any Liability arising in respect of any Claim by any shareholder of TDS or API (except for the MIS Charges). 2.6 ASSETS AND LIABILITIES OF AMS; REJECTED ASSETS 2.6.1 AMS. Notwithstanding any other provision of this Agreement, TSR Wireless shall not assume any API Assets which are assets of AMS or any Liabilities of AMS other than Liabilities to the BIRD Foundation which constitute Liabilities of API assumed hereunder, which shall remain with AMS following the Closing. 2.6.2 REJECTED API ASSETS. TSR Paging in its sole discretion may reject (i) any API Assets not listed or described on the Disclosure Schedule, except those not required to be so disclosed, (ii) any API Contract with a third party airtime vendor, provided however that TSR Wireless shall enter into a "back to back" contract with API to resell such airtime on the same financial terms as the rejected third party airtime vendor Contracts, but otherwise on terms similar to TSR Paging's usual terms, and (iii) the interests of API (and any of its Subsidiaries) in AMS, and any Liabilities associated therewith by notice to TDS at any time on or prior to the Closing Date, in which case any such API Assets shall be excluded from the sale hereunder and the definition of API Assets shall be modified accordingly. ARTICLE III ISSUANCE OF MEMBERSHIP INTERESTS 3.1 ISSUANCE OF MEMBERSHIP INTERESTS. Unless TSR Paging shall have exercised the Extension Option, in which case the provisions of Section 3.4 shall apply and the provisions of this Section 3.1 shall not apply, on the Closing Date, TSR Wireless shall issue to the Transferors an aggregate of 20,000,000 Units of TSR Wireless (the "UNITS"), which Units shall represent Membership Interests of TSR Wireless in exchange for the Assets which are being contributed to, and the Liabilities being assumed by, TSR Wireless pursuant to this Agreement, which Units shall reflect the total value of the assets contributed to, and the Liabilities assumed by, TSR Wireless but not any other Contributed Property (as defined in the TSR Wireless LLC Agreement) already contributed to TSR Wireless on or before Closing and 18 which shall be apportioned, subject to adjustment as set forth in Section 3.2, between the Transferors as follows: 3.1.1 to TSR Paging, 14,000,000 Units, and 3.1.2 to TDS, 6,000,000 Units. 3.2 POST-CLOSING ADJUSTMENT. 3.2.1 CERTIFICATION BY TSR PAGING. Within forty-five (45) Business Days after the Closing Date, TSR Paging shall certify to TDS and TSR Wireless (i) the number of Pagers in Service of TSR Paging as of the Closing Date and (ii) the Net Monthly Pager Revenue of TSR Paging for the month ended the Closing Date. If the number of Pagers in Service of TSR Paging as of the Closing Date is less than 1,260,000, and/or the Net Monthly Pager Revenue of TSR Paging for the month ended on the Closing Date is less than $5,500,000, then the certificate shall state the shortfall in the number of Pagers in Service of TSR Paging ("TSR PAGING PAGER SHORTFALL") and the shortfall in the Net Monthly Pager Revenue of TSR Paging ("TSR PAGING REVENUE SHORTFALL"). The provisions of this Section 3.2.1 shall not be deemed to diminish the rights of TSR Wireless or TDS under Section 14.4. 3.2.2 CERTIFICATION BY TDS. Within forty-five (45) Business Days after the Closing Date, TDS shall certify to TSR Paging and TSR Wireless (i) the number of Pagers in Service of API for the month ended the Closing Date and (ii) the Net Monthly Pager Revenue of API as of the Closing Date. If the number of Pagers in Service of API as of the Closing Date is less than 775,000, and/or the Net Monthly Pager Revenues of API for the month ended the Closing Date is less than $5,800,000, then the certificate shall state the shortfall in the number of Pagers in Service of API ("API PAGER SHORTFALL") and the shortfall in the Net Monthly Pager Revenues of API ("API REVENUE SHORTFALL"). The provisions of this Section 3.2.2 shall not be deemed to diminish the rights of TSR Wireless or TSR Paging under Section 14.4. 3.2.3 UNIT ADJUSTMENT. Promptly, and in any event within five (5) Business Days following receipt of the certificates referred to above, TSR Wireless shall calculate and certify to the Transferors the adjustments to be made to the Units allocated to each Transferor hereunder, as of the Closing Date, to be made as follows (the "UNIT ADJUSTMENTS"): (i) The number of Units allocated to TSR Paging hereunder on the Closing shall be reduced by the greater of (a) the product of the TSR Paging Pager Shortfall multiplied by 9.828, and (b) the product of the TSR Paging Revenue Shortfall multiplied by 1.770, and the excess Units and the Membership Interests represented by the Units shall be cancelled by TSR Wireless, effective as of the Closing Date; and 19 (ii) The number of Units allocated to TDS hereunder on the Closing shall be reduced by the greater of (a) the product of the API Pager Shortfall (if greater than 77,500) multiplied by 9.828, and (b) the product of the API Revenue Shortfall (if greater than $580,000) multiplied by 1.770, and the excess Units and the Membership Interests represented by the Units shall be cancelled by TSR Wireless, effective as of the Closing Date. 3.2.4 DISPUTED UNIT ADJUSTMENT. If either Transferor shall disagree with the Unit Adjustment, which disagreement shall be limited to the number of Pagers in Service or the Net Monthly Pager Revenue, the Pager Shortfall or the Revenue Shortfall certified by the other Transferor or TSR Wireless's failure to apply the standards and correctly perform the calculations of the Unit Adjustments set forth in Section 3.2.3, it shall notify the other Transferor and TSR Wireless of such disagreement in writing specifying in detail the particulars of such disagreement within twenty (20) Business Days after receipt of the applicable certificate. 3.2.5 RESOLUTION OF DISPUTED UNIT ADJUSTMENT AMOUNT. The Transferors shall use their reasonable efforts for a period of thirty (30) calendar days after (i) the delivery of a notice pursuant to Section 3.2.4 above (or such longer period as the Transferors shall mutually agree upon), or after Closing if Section 3.4 is applicable, to resolve any disagreements raised by a Transferor with respect to the number of Pagers in Service, the Net Monthly Pager Revenue, the Pager Shortfall or the Revenue Shortfall of the other Transferor (as set forth in the June Certificate, if applicable) or the calculation of the Unit Adjustments or the Unit Allocation pursuant to Section 3.4, as the case may be. If, at the end of such period, the Transferors and TSR Wireless are unable to resolve all such disagreements, Arthur Andersen LLP (the "AUDITOR") shall resolve any remaining disagreements. The Auditor shall determine whether the Pagers in Service, the Net Monthly Pager Revenue, the Pager Shortfall and the Revenue Shortfall were correctly certified by the relevant Transferor, only with respect to the remaining differences submitted to the Auditor, and whether and to what extent, if any, the Unit Adjustment requires further adjustment. The determination of the Auditor shall be final, binding and conclusive on the parties. The Transferors and TSR Wireless shall use their reasonable efforts to cause the Auditor to make its determination within thirty (30) calendar days of accepting its selection. Within ten (10) calendar days after the date of determination of the Auditor, the Units of the Transferors allocated hereunder shall be adjusted by the Unit Adjustment as determined by the Auditor in the manner set forth in Section 3.2.3 and the Membership Interest represented by the Units shall be correspondingly adjusted. The fees and expenses of the Auditor shall be borne by the Transferors equally or as otherwise determined by the Auditor. 3.3 CLOSING COSTS; TRANSFER FEES. The cost of any surveys, title reports or title searches, and the recording or filing of all applicable conveyancing instruments incurred by reason of the transfer of Assets hereunder will be paid by the TSR Wireless upon the Closing. 20 3.4 UNIT ALLOCATION FOLLOWING EXERCISE OF EXTENSION OPTION. If TSR Paging shall have exercised the Extension Option, on the Closing Date, TSR Wireless shall issue 14,000,000 Units to TSR Paging and shall issue to TDS the number of Units as results from subtracting from 6,000,000 the greater of (i) the product of the API Pager Shortfall as at June 30, 1998 multiplied by 9.828 and (ii) the product of the API Revenue Shortfall for the month ended June 30, 1998 multiplied by 1.770, each as set forth on the June Certificate, subject to adjustment after Closing as set forth in Section 3.2.5 upon the request of either Transferor on the Closing Date. ARTICLE IV CLOSING 4.1 CLOSING. The Closing of the transactions contemplated herein (the "CLOSING") shall be held at 10:00 a.m. local time on the Closing Date at the offices of Latham & Watkins, 885 Third Avenue, New York, New York, unless the parties hereto otherwise agree. 4.2 CONVEYANCES BY TSR PAGING AT CLOSING. 4.2.1 INSTRUMENTS AND POSSESSION. To effect the acquisition and assumption referred to in Section 2.1, TSR Paging will, at the Closing, execute and deliver to TSR Wireless: (i) one or more instruments of conveyance conveying in the aggregate all of TSR Paging's owned personal property included in the TSR Paging Assets; (ii) the Exchange and Registration Rights Agreement duly executed by the Stockholders and the Investors (as defined therein) in substantially the form attached as Exhibit A (the "EXCHANGE AND REGISTRATION RIGHTS AGREEMENT"); (iii) Assignments of Lease with respect to the TSR Paging Real Property Leases and the TSR Paging Personal Property Leases; (iv) an Assignment of the TSR Paging Contracts; (v) Assignments of those Proprietary Rights included in the TSR Paging Assets, in recordable form to the extent necessary to assign such rights; (vi) such of the Ancillary Agreements to which TSR Paging is a party; 21 (vii) such other instruments as shall be reasonably requested by TSR Wireless to vest in TSR Wireless such right, title or interest in and to the TSR Paging Assets in accordance with this Agreement; (viii) the certificates, opinions of counsel and other documents to be delivered by TSR Paging described in Article XII; and (ix) the Consents and Authorizations of TSR Paging. 4.2.2 ASSUMPTION AND OTHER DOCUMENTS. To effect the acquisition and assumption referred to in Section 2.2, at the Closing, TSR Wireless shall execute and deliver to TSR Paging: (i) an instrument of assumption evidencing TSR Wireless's assumption, pursuant to Section 2.2, of the TSR Paging Assumed Liabilities (the "TSR PAGING ASSUMPTION DOCUMENT"); (ii) the Ancillary Agreements, duly signed by TSR Wireless; and (iii) such other instruments as shall be reasonably requested by TSR Paging to evidence TSR Wireless's assumption of the Assumed Liabilities in accordance with this Agreement. 4.3 CONVEYANCES BY TDS AT CLOSING. 4.3.1 INSTRUMENTS AND POSSESSION. To effect the acquisition and assumption referred to in Section 2.3, TDS will, or will cause API or its Subsidiaries, as appropriate, to, at the Closing, execute and deliver to TSR Wireless: (i) one or more instruments of conveyance conveying in the aggregate all of API's and its Subsidiaries' owned personal property included in the API Assets: (ii) Assignments of Lease with respect to the API Real Property Leases and the API Personal Property Leases; (iii) an Assignment of the API Contracts; (iv) Assignments of those Proprietary Rights included in the API Assets, in recordable form to the extent necessary to assign such rights; (v) such of the Ancillary Agreements to which API and/or TDS is a party; 22 (vi) such other instruments as shall be reasonably requested by TSR Wireless to vest in TSR Wireless such right, title or interest in and to the API Assets in accordance with this Agreement; (vii) the certificates, opinions of counsel and other documents to be delivered by TDS described in Article XI; and (viii) the Consents and Authorizations of API. 4.3.2 ASSUMPTION AND OTHER DOCUMENTS. To effect the acquisition and assumption referred to in Section 2.4, at the Closing, TSR Wireless shall execute and deliver to TDS or API and its Subsidiaries, as the case may be: (i) an instrument of assumption evidencing TSR Wireless's assumption, pursuant to Section 4, of the API Assumed Liabilities (the "API ASSUMPTION DOCUMENT"); (ii) the Ancillary Agreements duly signed by TSR Wireless; and (iii) such other instruments as shall be reasonably requested by TDS to evidence TSR Wireless's assumption of the API Assumed Liabilities in accordance with this Agreement. 4.4 FORM OF INSTRUMENTS. To the extent that a form of any document to be delivered hereunder is not attached as an Exhibit hereto, such documents shall be in form and substance, and shall be executed and delivered in a manner, reasonably satisfactory to the party or parties in whose favor the document runs. 4.5 CERTIFICATES; OPINIONS. The Transferors and TSR Wireless shall deliver the certificates, opinions of counsel and other documents described in Articles XI and XII. ARTICLE V REPRESENTATIONS AND WARRANTIES OF TSR PAGING TSR Paging hereby represents and warrants to TDS and TSR Wireless as follows: 5.1 ORGANIZATION OF TSR PAGING. TSR Paging is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. TSR Paging is duly qualified under the FCC Rules and Policies to hold a controlling interest in the TSR Wireless as contemplated herein. TSR Paging is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties 23 owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Certificate of Incorporation and Bylaws of TSR Paging, and all amendments thereto, heretofore delivered to TSR Wireless are accurate and complete as of the date hereof. TSR Paging Disclosure Letter Schedule 5.1 lists all jurisdictions in which TSR Paging is qualified to do business as a foreign corporation. 5.2 AUTHORIZATION. TSR Paging has all requisite corporate power and authority to own, lease and operate the TSR Paging Assets, to conduct the TSR Paging Business as it is presently being conducted, to execute and deliver this Agreement, the Ancillary Agreements and the Option Agreement and to perform its obligations hereunder and thereunder including, without limitation, the transfer of the TSR Paging Assets. The execution and delivery of this Agreement, the Ancillary Agreements and the Option Agreement by TSR Paging and the consummation by TSR Paging of the transactions contemplated hereby and thereby have been duly approved by the board of directors of TSR Paging. No other corporate proceedings on the part of TSR Paging is necessary to authorize the entering into and the performance of this Agreement, the Ancillary Agreements and the Option Agreement and the transactions contemplated hereby and thereby including, without limitation, transfer of the TSR Paging Assets. This Agreement and the Option Agreement have been duly executed and delivered by TSR Paging and are legal, valid and binding obligations of TSR Paging and each of the Ancillary Agreements to which TSR Paging is to be a party when executed at Closing will constitute legal, valid and binding obligations of TSR Paging, enforceable against TSR Paging in accordance with their respective terms. 5.3 SUBSIDIARIES. TSR Paging has no Subsidiaries. 5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Interim Balance Sheet Date, except as contemplated by this Agreement, there has not been any: 5.4.1 Material Adverse Change in respect of TSR Paging, the TSR Paging FCC Licenses and/or the TSR Paging FCC License Applications; 5.4.2 change in accounting methods, principles or practices by TSR Paging, except as required by law or by generally applicable changes instituted in the accounting profession; 5.4.3 material damage, destruction or loss (whether or not covered by insurance) adversely affecting the Assets or the TSR Paging Business; 5.4.4 sale, assignment or transfer of any material portion of the TSR Paging Assets other than sales of Inventory in the ordinary course of business; 5.4.5 cancellation or termination of any material Contract of TSR Paging; 24 5.4.6 institution of settlement of or agreement to settle any Action relating to the TSR Paging Business or the TSR Paging Assets other than in the ordinary course of business consistent with past practices but not in any case involving amounts in excess of $200,000 in the aggregate; or 5.4.7 agreement by TSR Paging to do, or any action or omission by TSR Paging which is likely to result in, any of the representations and warranties set forth in the preceding clauses 5.4.1 through 5.4.6 becoming untrue other than as expressly provided for herein. 5.5 ASSETS. TSR Paging has and will transfer good and marketable title to the TSR Paging Assets and, upon the consummation of the transactions contemplated hereby, TSR Wireless will acquire good title to all the TSR Paging Assets, free and clear of any Encumbrances, other than Permitted Encumbrances. The TSR Paging Assets include all assets necessary for the conduct of the TSR Paging Business as presently conducted. 5.6 TSR PAGING REAL PROPERTY. TSR Paging owns no Real Property. TSR Paging Disclosure Letter Schedule 5.6 contains a complete and accurate list of all Real Property Leases of TSR Paging ("TSR PAGING LEASED REAL PROPERTY" distinguishing between the stores, transmission sites, office premises and warehouses comprising the TSR Paging Leased Real Property. 5.6.1 INTENTIONALLY OMITTED. 5.6.2 ACTIONS. There are no pending or, to the knowledge of TSR Paging, threatened condemnation proceedings or other Actions with respect to any TSR Paging Leased Real Property. 5.6.3 REAL PROPERTY LEASES OR OTHER AGREEMENTS. Except for the TSR Paging Real Property Leases listed on TSR Paging Disclosure Letter Schedule 5.6, there are no material leases, subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements, written or oral, granting to any Person the right to purchase, use or occupy any TSR Paging Leased Real Property. With respect to each TSR Paging Real Property Lease, TSR Paging has and will transfer to TSR Wireless at the Closing a valid leasehold interest in the leasehold estate, free and clear of all Encumbrances other than Permitted Encumbrances. All TSR Paging Real Property Leases are valid, binding and enforceable in all material respects in accordance with their terms and are in full force and effect. TSR Paging enjoys peaceful and undisturbed possession of all real property subject to such TSR Paging Real Property Leases, and TSR Paging has in all material respects performed all the material obligations required to be performed by it through the date hereof with respect to such TSR Paging Real Property Leases, and each TSR Paging Real Property Lease is assignable (upon receipt of necessary landlord Consents) in connection with the transactions contemplated hereby. 25 5.6.4 CERTIFICATE OF OCCUPANCY. TSR Paging has received all required material approvals of Governmental Authorities (including, without limitation, Permits and material certificates of occupancy or other similar certificates permitting lawful occupancy of the TSR Paging Leased Real Property) required in connection with the present use of the TSR Paging Leased Real Property and all improvements thereon. 5.6.5 UTILITIES. All TSR Paging Leased Real Property and the improvements thereon are supplied with utilities and other services necessary for the operation of such facilities as currently operated. 5.6.6 IMPROVEMENTS, FIXTURES AND EQUIPMENT. All Leasehold Improvements, and all Fixtures and Equipment and other tangible assets owned, leased or used by TSR Paging on the TSR Paging Leased Real Property are sufficient in all material respects for the operation of the TSR Paging Business as presently conducted. 5.6.7 NO SPECIAL ASSESSMENT. TSR Paging has not received notice of any special assessment relating to any TSR Paging Leased Real Property or any portion thereof, and TSR Paging has no knowledge of any pending or threatened special assessment, other than any special assessments disclosed in TSR Paging Disclosure Letter Schedule 5.6. 5.7 CONTRACTS AND COMMITMENTS. 5.7.1 CONTRACTS. TSR Paging Disclosure Letter Schedule 5.7 sets forth a complete and accurate list of all Contracts of TSR Paging of the following categories: (i) Reseller Contracts for over 2,000 pagers; (ii) Sales, commission, consulting, agency or advertising Contracts which are not cancelable on thirty (30) calendar days notice and, in the case of advertising Contracts, which could result in payments of over $50,000 over the life of the Contract; (iii) Options to buy any property, real or personal, or options to sell or sublet any TSR Paging Leased Real Property or personal property included in the TSR Paging Assets; (iv) Contracts involving expenditures or Liabilities in excess of $250,000 over the life of the Contract or otherwise material to TSR Paging; (v) Contracts containing covenants limiting the freedom of TSR Paging to engage in any line of business or compete with any Person; (vi) Intentionally omitted; 26 (vii) All Contracts with Local Exchange Carriers, whether incumbent, independent, competitive or otherwise (collectively "LECs", for provision of interconnection services and facilities (collectively, "INTERCONNECTION") to TSR Paging ("TSR Paging INTERCONNECTION CONTRACTS"), including: (a) all such TSR Paging Interconnection Contracts regardless of whether such agreements have yet been submitted to or approved by the relevant PUCs; (b) a listing of any requests for Interconnection filed by TSR Paging with PUC(s) pursuant to Section 252(a) of the Communications Act and a brief description of the status of the PUC proceeding with respect to each such request; (c) a brief description of outstanding negotiations between TSR Paging and LECs regarding provision of Interconnection by LECs regardless of whether such negotiations are pursuant to a request for Interconnection submitted by TSR Paging pursuant to Section 252(a) of the Communications Act; and (d) any related agreements between TSR Paging and LECs regarding Interconnection; (viii) All Personal Property Leases of TSR Paging ("TSR PAGING PERSONAL PROPERTY LEASES"), excluding Contracts with customers for lease of pagers and excluding non-material Personal Property Leases entered into in the ordinary course of business; (ix) All Contracts not listed pursuant to Sections 5.7.1(i) through 5.7.1(viii) but which are (a) material to the TSR Paging Business; or (b) not made in the ordinary course of the TSR Paging Business; (x) the securities purchase agreement dated July 17, 1995 between, inter alia, the Investors and TSR Paging and the option agreement, investment agreement and form of notes ancillary thereto (the "INVESTMENT DOCUMENTS"); (xi) any TSR Paging Employee Plan, any employment agreements between TSR Paging and Phil Sacks, Leonard P. DiSavino and Mitchell L. Sacks and any stock option or phantom stock or other equity based plan of TSR Paging; and (xii) the Third Amended and Restated Credit Agreement among TSR Paging and First National Bank of Chicago dated as of October 29, 1997 (the "TSR PAGING CREDIT AGREEMENT"). TSR Paging has delivered or made available to TDS true, correct and complete copies of each of the Contracts listed on TSR Paging Disclosure Letter Schedule 5.7, including all amendments and supplements thereto other than TSR Paging Personal Property Leases with individual customers on standard forms (the standard forms having been supplied). 5.7.2 ABSENCE OF BREACHES OR DEFAULTS. All of the Contracts to which TSR Paging is a party or bound ("TSR PAGING CONTRACTS") are valid and in full force and effect. TSR Paging has duly performed all of its material obligations under such Contracts to the extent those obligations to perform have accrued, and no material violation of, or material default or breach under, such Contracts by TSR Paging, or, to TSR Paging's knowledge, any 27 other party has occurred and neither TSR Paging, nor, to TSR Paging's knowledge, any other party has repudiated any material provisions thereof. No material violation of, or material default or breach under, has occurred with respect to the Investment Documents by TSR Paging, or to TSR Paging's knowledge, its Stockholders. 5.7.3 PRODUCT WARRANTY. TSR Paging has committed no act, and there has been no omission, which would result in, and there has been no occurrence which would give rise to, any material product liability or material liability for breach of warranty (whether covered by insurance or not) on the part of TSR Paging, with respect to products sold, or services rendered prior to the Closing. 5.8 INTENTIONALLY OMITTED. 5.9 OPERATION OF THE TSR PAGING BUSINESS. Except as set forth in TSR Paging Disclosure Letter Schedule 5.9, (i) TSR Paging has conducted the TSR Paging Business only through TSR Paging and not through any other divisions or any direct or indirect Subsidiary or Affiliate of TSR Paging and (ii) no part of the TSR Paging Business is operated by TSR Paging through any entity other than TSR Paging. 5.10 INVENTORY. All Inventory of TSR Paging ("TSR PAGING INVENTORY") is of good, usable and merchantable quality in all respects and, except as set forth on TSR Paging Disclosure Letter Schedule 5.10, does not include obsolete or discontinued items not otherwise saleable for ten dollars ($10) or more in the ordinary course of business. Except as set forth on TSR Paging Disclosure Letter Schedule 5.10 or in amounts that are not material; 5.10.1 all TSR Paging Inventory is of such quality as to meet the quality control standards of TSR Paging and any applicable governmental quality control standards; 5.10.2 all TSR Paging Inventory is saleable as current Inventory at the current prices thereof in the ordinary course of business; and 5.10.3 all TSR Paging Inventory is recorded on the books of the TSR Paging Business and in the TSR Paging Interim Balance Sheet at the lower of cost or market value determined in accordance with GAAP. 5.11 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither TSR Paging, nor any officer, employee or agent of TSR Paging, nor any other Person acting on their behalf, has, directly or indirectly, within the past five years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the TSR Paging Business (or assist in connection with any actual or proposed transaction relating to the TSR Paging Business) (i) which subjected or might have subjected TSR Paging or any of its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) which if not given in the past, might have had a 28 Material Adverse Effect, (iii) which if not continued in the future, might have a Material Adverse Effect or subject TSR Wireless to suit or penalty in any private or governmental litigation or proceeding, (iv) for any of the purposes described in Section 162(c) of the Code or (v) for the purpose of establishing or maintaining any concealed fund or concealed bank account. 5.12 NO CONFLICT OR VIOLATION. Subject to Sections 8.2, 11.6 and 12.6 and except as set forth in TSR Paging Disclosure Letter Schedule 5.12, neither the execution, delivery or performance of this Agreement, the Ancillary Agreements or the Option Agreement by TSR Paging nor the consummation by TSR Paging of the transactions contemplated hereby and thereby will (a) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of TSR Paging, (b) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the TSR Paging Assets under, or require any Consent under any of the terms, conditions or provisions of any TSR Paging Contract, any Financing Obligation of TSR Paging, any Authorization, any TSR Paging Real Property Lease, TSR Paging Personal Property Lease, franchise, Permit, agreement, or other instrument or obligation (i) to which TSR Paging is a party or (ii) by which the TSR Paging Assets are bound, (c) violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award to which TSR Paging or the TSR Paging Assets is subject, (d) impose any Encumbrance (other than a Permitted Encumbrance) on the TSR Paging Assets. Except as set forth in TSR Paging Disclosure Letter Schedule 5.12, no Consent is required to be obtained or made by TSR Paging in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. 5.13 REGULATORY MATTERS. 5.13.1 FCC LICENSES. (i) TSR Paging Disclosure Letter Schedule 5.13.1 lists (a) each FCC License which is issued to TSR Paging ("TSR PAGING FCC LICENSE") and, in each case, the name of the licensee (if other than TSR Paging), the call sign, the operating frequency or frequencies, the location and the expiration date of the TSR Paging FCC License; and (b) each FCC License Application of TSR Paging ("TSR PAGING FCC LICENSE APPLICATION") as of the date hereof and, in each case, the name of the applicant (if other than TSR Paging), the frequency or frequencies, the proposed location and the file number of the TSR Paging FCC License Application. Pursuant to the provisions of Section 9.1, TSR Paging has made available to TDS for inspection copies of each TSR Paging FCC License and TSR Paging FCC License Application. 29 (ii) Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.1, (A) none of the TSR Paging FCC Licenses or TSR Paging FCC License Applications is subject to any purchase, sale, option or right of first refusal agreements; (B) TSR Paging has good and marketable title to the TSR Paging FCC Licenses to the extent allowed by law; and (C) subject to the regulatory jurisdiction of the FCC, TSR Paging holds all TSR Paging FCC Licenses free and clear of all Encumbrances. (iii) TSR Paging Disclosure Letter Schedule 5.13.1 lists each 929 MHz one-way paging frequency for which TSR Paging currently has nationwide exclusivity ("TSR PAGING 929 MHz EXCLUSIVE FREQUENCY"). Except as set forth in TSR Paging Disclosure Letter Schedule 5.13.1, for each TSR Paging 929 MHz Exclusive Frequency: (i) TSR Paging timely constructed and placed into operation in accordance with FCC Rules sufficient transmitters to comply with 929 MHz frequency exclusivity requirements imposed by the FCC (collectively, "FCC 929 MHz EXCLUSIVITY REQUIREMENTS") as specified, INTER ALIA, in FCC Rules and FCC decisions in AMENDMENT OF THE COMMISSION'S RULES TO PROVIDE CHANNEL EXCLUSIVITY TO QUALIFIED PRIVATE PAGING SYSTEMS AT 929-930 MHz, REPORT AND ORDER, PR Docket No. 93-35, 8 FCC Rcd 8318 (1993), RECON. 11 FCC Rcd 3091 (1996), and WIRELESS TELECOMMUNICATIONS BUREAU ANNOUNCES 929-930 MHz PAGING LICENSEES THAT HAVE MET CONSTRUCTION REQUIREMENTS FOR NATIONWIDE EXCLUSIVITY, PUBLIC NOTICE, DA 96-748 (released May 10, 1996); REVISION OF PART 22 AND PART 90 OF THE COMMISSION'S RULES TO FACILITATE FUTURE DEVELOPMENT OF PAGING SYSTEMS, WT Docket No. 96-18, FCC 97-59 (released February 24, 1997); (ii) TSR Paging has continued to operate sufficient transmitters to comply with the terms and conditions of such TSR Paging FCC Licenses and Authorizations, the Communications Act, the FCC Rules and all applicable state laws and rules. 5.13.2 INTENTIONALLY OMITTED. 5.13.3 FILINGS, ETC. (i) The TSR Paging FCC Licenses and TSR Paging FCC License Applications are the only FCC and PUC Permits and Authorizations necessary to conduct the TSR Paging Business. Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.3, TSR Paging has duly and in a timely fashion secured or filed under applicable law all necessary Permits and Authorizations from, and have filed all required registrations, applications, reports and any other documents with, the FCC, and, if applicable, any PUC and any other Governmental Authority exercising jurisdiction or having jurisdiction over TSR Paging, in each case, with respect to the TSR Paging Business. Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.3, (a) the TSR Paging FCC Licenses and (b) all other Authorizations are in full force and effect, are valid for the balances of the current license term, are not impaired by acts or failures to make required filings on the part of TSR Paging, and are free and clear of restrictions that may reasonably be expected to limit the full operation of the TSR Paging FCC Licenses or Authorizations, in each case without adverse conditions, restrictions or impairments, except for such conditions as are generally applicable to holders of 30 such FCC Licenses and Authorizations. No renewal of any TSR Paging FCC License would constitute a major environmental action under the rules of the FCC. (ii) Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.3, TSR Paging is not subject to any Order or any pending or, to the knowledge of TSR Paging, threatened, Action (excluding rulemaking that has general industry applicability) which affects or would be expected to affect, in any material respect, the validity of any TSR Paging FCC License, or result in the revocation, termination, or adverse modification thereof, or impair the renewal thereof. Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.3, no event has occurred and is continuing (excluding rule making that has general industry applicability) that could reasonably be expected to (a) result in the revocation, termination, non-renewal or adverse modification of any TSR Paging FCC License or (b) materially and adversely affect any rights of TSR Paging thereunder. 5.13.4 FEES. TSR Paging has paid all franchise, license, regulatory or other fees and charges which have become due and payable pursuant to any applications, filings, recordings and registrations with, and all Authorizations and Permits from, the FCC, any PUC or any other Governmental Authority, in respect of the TSR Paging Business. 5.13.5 SHARING AGREEMENTS. Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.5, TSR Paging is not a party to any agreement for the shared use of facilities or equipment used in connection with the TSR Paging Business. 5.13.6 OPERATIONS. The equipment operating pursuant to the TSR Paging FCC Licenses or PUC Authorizations of TSR Paging is operating in all material respects in accordance with the terms and conditions of such TSR Paging FCC License or Authorizations, the Communications Act, the FCC Rules and all applicable state laws and regulations. 5.13.7 CONSTRUCTION. Except as set forth on TSR Paging Disclosure Letter Schedule 5.13.7 all construction for facilities that TSR Paging intends to place in service proposed in any TSR Paging FCC License is proceeding in a manner that may reasonably be expected to allow the completion of such construction and commencement of operations within the time specified in the relevant TSR Paging FCC License. 5.14 FINANCIAL STATEMENTS; RECEIVABLES. 5.14.1 FINANCIAL STATEMENTS. The TSR Paging Financial Statements are attached hereto as TSR Paging Disclosure Letter Schedule 5.14.1. The TSR Paging Financial Statements (a) were prepared in accordance with the Books and Records of TSR Paging, (b) were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby subject, in the case of the TSR Paging Unaudited Financial Statements, to the absence of footnotes and to normal year-end adjustments and (c) fairly present the assets, Liabilities (including all reserves) and financial position of TSR Paging as of the respective dates thereof and the results of operations and changes in cash 31 flows for the periods then ended, as appropriate. The TSR Paging Audited Financial Statements have been audited by Arthur Andersen LLP, independent certified public accountants, whose reports thereon are included with such TSR Paging Audited Financial Statements. 5.14.2 RECEIVABLES. All of the receivables of TSR Paging (including accounts receivable, loans receivable and advances) which have arisen in connection with the TSR Paging Business and which are reflected in the Interim Financial Statements, and all such receivables which will have arisen since the Interim Balance Sheet Date, have arisen only from BONA FIDE transactions in the ordinary course of business. All receivables of TSR Paging on the date of this Agreement are, and on the Closing Date will be, good and collectible in the ordinary course of business of TSR Paging within 120 days of their incurrence, subject to any applicable reserves set forth on the Interim Balance Sheet of TSR Paging. TSR Paging has no knowledge of any facts or circumstances generally which would result in any material increase in the uncollectability of such receivables as a class in excess of the reserves therefor set forth on the Interim Financial Statements. TSR Paging Disclosure Letter Schedule 5.14.2 hereto accurately lists as of December 11, 1997, all receivables arising out of or relating to the TSR Paging Business in excess of $1,000, the amount owing and the aging of such receivable and the name of the party from whom such receivable is owing. 5.15 BOOKS AND RECORDS. TSR Paging has made and kept (and given TDS access to) the Books and Records of TSR Paging, which, in all material respects accurately and fairly reflect the activities of TSR Paging that would be so recorded. 5.16 LITIGATION. Except as set forth on Schedules 5.13.3 and 5.16 there is no Action or Order, pending or, to the knowledge of TSR Paging, threatened (a) against, related to or affecting (i) TSR Paging or the TSR Paging Assets, or (ii) any stockholders, officers or directors of TSR Paging (in each case, in such capacity) and which either (A) may be reasonably expected to result in Damages in excess of $100,000 in respect of any individual Order for the payment of money damages (or $200,000 in the aggregate), or (B) seeks as of the date hereof to delay, limit or enjoin the transactions contemplated by this Agreement, the Ancillary Agreements or the Option Agreement or (b) in which TSR Paging is a plaintiff, including any derivative suits brought by or on behalf of TSR Paging. TSR Paging is not in default with respect to or subject to any Order, and to the knowledge of TSR Paging, there are no unsatisfied Orders against TSR Paging or the TSR Paging Assets. 5.17 COMPLIANCE WITH LAW. TSR Paging is and has been in compliance in all material respects with all Authorizations, Regulations, and Permits in respect of the TSR Paging Assets and the TSR Paging Business; IT BEING UNDERSTOOD that nothing in this representation is intended to address any compliance issues that are the subject of any other representation or warranty set forth herein. 32 5.18 NO BROKERS. No broker, finder or similar agent is entitled to any finder's fee, brokerage fees or commission or similar payment from TSR Paging in connection with the transactions contemplated hereby. 5.19 NO OTHER AGREEMENTS TO SELL THE TSR PAGING ASSETS. Except for (i) security granted pursuant to the TSR Paging Credit Agreement (ii) the options to acquire stock of TSR Paging granted to the Investors and others pursuant to the Investor Documents and (iii) stock options granted to officers, directors and employees of TSR Paging, neither TSR Paging nor any of its officers, directors, shareholders or Affiliates have any commitment or legal obligation, absolute or contingent, to any other Person other than TSR Wireless and TDS to sell, assign, transfer or effect a sale of the TSR Paging Assets (other than sales of Inventory in the ordinary course of business), to sell or effect a sale of the capital stock of TSR Paging, to effect any merger, consolidation, exclusive license, liquidation, dissolution or other reorganization of TSR Paging or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing business combination transactions. 5.20 PROPRIETARY RIGHTS. 5.20.1 PROPRIETARY RIGHTS. TSR Paging Disclosure Letter Schedule 5.20 lists all of TSR Paging's domestic and foreign registrations of trademarks and of other marks, trade names or other trade rights, and all pending applications for any such registrations, all of TSR Paging's registered copyrights and all of TSR Paging's patents and pending patent applications, and all agreements under which TSR Paging is licensed to use Proprietary Rights. 5.20.2 OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. TSR Paging owns and/or has the right to use each of the Proprietary Rights listed on TSR Paging Disclosure Letter Schedule 5.20. The Proprietary Rights listed on TSR Paging Disclosure Letter Schedule 5.20 constitute all of the material Proprietary Rights necessary to conduct the TSR Paging Business in the manner presently conducted. None of the Proprietary Rights is involved in any pending or, to the knowledge of TSR Paging, threatened litigation. No other Person (i) has the right to use any of the Proprietary Rights, except pursuant to the Contracts; or (ii) to TSR Paging's knowledge is infringing upon any Proprietary Rights. To TSR Paging's knowledge, the use by TSR Paging of the Proprietary Rights is not infringing upon or otherwise violating the rights of any third party. No proceedings have been instituted against or notices received by TSR Paging that are presently outstanding alleging that the use by TSR Paging of the Proprietary Rights infringes upon or otherwise violates any rights of a third party in or to such Proprietary Rights. All Proprietary Rights are assignable by TSR Paging to TSR Wireless in the manner contemplated by this Agreement. 5.21 ENVIRONMENTAL MATTERS. 5.21.1 COMPLIANCE WITH ENVIRONMENTAL LAW. TSR Paging has complied and is in compliance in all material respects with all applicable Environmental Laws pertaining to any 33 of the properties and assets of the TSR Paging Business (including the Facilities of TSR Paging ("TSR PAGING FACILITIES")) and the use and ownership thereof, and to the operation of the TSR Paging Business. No violation by TSR Paging is being alleged of any applicable Environmental Law relating to any of the properties and assets of the TSR Paging Business including the TSR Paging Facilities or the use, occupation or ownership thereof, or to the operation of the TSR Paging Business. 5.21.2 OTHER ENVIRONMENTAL MATTERS. Neither TSR Paging nor to TSR Paging's knowledge any other Person (including any tenant or subtenant) has caused or taken any action that will result in, and TSR Paging is not subject to, any material Liability relating (i) environmental conditions on, under, or about the TSR Paging Facilities, including without limitation, the air, soil and groundwater conditions at such Facilities or (ii) the past or present use, management, handling, transport, treatment, generation, storage, disposal or Release of any Hazardous Materials. TSR Paging has disclosed and made available to TDS all information, including, without limitation, all studies, analyses and test results, in the possession, custody or control of or otherwise known to TSR Paging relating to (x) the environmental conditions on, under or about the TSR Paging Facilities, and (y) any Hazardous Materials used, managed, handled, transported, treated, generated, stored or Released by TSR Paging or any other Person on, under, about or from any of the TSR Paging Facilities, or otherwise in connection with the use or operation of the TSR Paging Business. 5.22 TAX MATTERS. 5.22.1 TSR Paging has (or by the Closing will have), in respect of the TSR Paging Business and the TSR Paging Assets, duly and timely filed all Tax returns required to be filed on or before the Closing Date ("TSR PAGING PCD TAX RETURNS"), and paid all Taxes which have become due pursuant to such Tax returns or pursuant to any assessment which has become payable ("TSR PAGING PCD TAXES"). All Tax returns are complete in all material respects. All Taxes required to be collected or withheld by or on behalf of TSR Paging (including amounts paid or owing to any employee, independent contractor, creditor or other party with respect to TSR Paging) ("TSR PAGING WITHHOLDING TAXES") have been collected or withheld, and such taxes have either been duly and timely paid to the proper Governmental Authorities or set aside in accounts for such purpose. 5.22.2 Except as set forth on TSR Paging Disclosure Letter Schedule 5.22, (i) all TSR Paging PCD Tax Returns have been examined by the relevant taxing authority or the period for assessment of the Taxes in respect of which such Tax returns were required to be filed has expired, and (ii) no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any TSR Paging PCD Taxes or TSR Paging Withholding Taxes, and no power of attorney with respect to any such Taxes, has been filed with the Internal Revenue Service ("IRS") or any other Governmental Authority. 5.22.3 Except as set forth on TSR Paging Disclosure Letter Schedule 5.22, (i) there are no TSR Paging PCD Taxes or TSR Paging Withholding Taxes for which a deficiency 34 has been asserted in writing by any Governmental Authority to be due (ii) no issue has been raised in writing by any Governmental Authority in the course of any audit with respect to TSR Paging PCD Taxes or TSR Paging Withholding Taxes and (iii) there are no Tax rulings, requests for rulings or closing agreements relating to TSR Paging which could affect TSR Paging's liability for Taxes for any period after the Closing Date. Except as set forth on TSR Paging Disclosure Letter Schedule 5.22, no TSR Paging PCD Taxes and no TSR Paging Withholding Taxes are currently under audit by any Governmental Authority of which TSR Paging has or will have by the Closing, received written notice. 5.22.4 TSR Wireless will not be required to deduct and withhold any amount pursuant to section 1445(a) of the Code upon the transfer of the TSR Paging Business to TSR Wireless. 5.22.5 Except as set forth on TSR Paging Disclosure Letter Schedule 5.22, there is no assessment or Action pending or threatened of which TSR Paging has received an assessment or written notice against or relating to TSR Paging in connection with TSR Paging PCD Taxes. 5.22.6 None of the TSR Paging Assets is properly treated as owned by persons other than TSR Paging for income tax purposes. 5.22.7 TSR Paging (i) has made a valid election under Section 1362 of the Code to be treated as an "S Corporation" and has, at all times since the date it was organized, qualified as an "S Corporation" for purposes of Subchapter S of the Code, and (ii) with respect to all states which for state Tax purposes allow a corporation to be treated as an "S Corporation" or similar entity entitled to special Tax treatment, all elections for such treatment have been properly and validly made in such states and TSR Paging has maintained compliance at all times with all applicable qualifications and filing procedures for such treatment provided however that it shall not be a breach of this Section 5.22.7 for any of the foregoing to be untrue insofar as such breach has not had, and is not likely to have, a Material Adverse Effect on TSR Paging. 5.23 INVESTMENT INTENT. TSR Paging is acquiring its Membership Interests for its own account for investment and with no present intention of distributing or reselling such Membership Interests or any part thereof. TSR Paging is fully informed as to the applicable limitations upon any distribution or resale of Membership Interests, which have not been registered pursuant to the Securities Act. TSR Paging agrees not to distribute or resell any of the Membership Interests if such distribution or resale would constitute a violation of the Securities Act by TSR Paging. 5.24 CAPITALIZATION. The authorized and issued capital stock of TSR Paging is as set forth in TSR Paging Disclosure Letter Schedule 5.24. All of the presently issued and outstanding shares of capital stock of TSR Paging have been duly and validly authorized and issued and are fully paid and non-assessable and have been issued in compliance with all 35 applicable federal and state securities laws. Except as provided above or in TSR Paging Disclosure Letter Schedule 5.24, TSR Paging has not issued any other shares of its capital stock or any other equity interests and there are no outstanding warrants, options or other rights to purchase or acquire any of such shares or other equity interests, nor any outstanding securities convertible into such shares or other equity interest or outstanding warrants, options or other rights to acquire any such convertible securities. Except as disclosed in TSR Paging Disclosure Letter Schedule 5.24, there are no preemptive rights with respect to the issuance or sale of any of TSR Paging's capital stock. The outstanding capital stock of TSR Paging is held of record and beneficially by the Persons identified in TSR Paging Disclosure Letter Schedule 5.24 in the amounts indicated therein. 5.25 EMPLOYMENT MATTERS. 5.25.1 There is no material unfair labor practice Action pending against TSR Paging before any Governmental Authority. 5.25.2 There is no labor strike pending or, to the knowledge of TSR Paging, threatened against or involving TSR Paging. TSR Paging believes that its relations with its employees are satisfactory. No union organizing or election activities known to TSR Paging involving any non-union employees of TSR Paging have occurred since January 1, 1996. 5.25.3 TSR Paging has complied with the Worker Adjustment and Retraining Notification Act and furnished any required notices of any "plant closing" or "mass layoff" which TSR Paging has ordered to take place. 5.25.4 TSR Paging is not a party to any collective bargaining agreement or labor contract with respect to any of its employees and is not a party to, and, to its knowledge, has no liability or obligations under, any individual employment agreement or contract with any of its current or former employees that has not been performed in all material respects by TSR Paging. 5.26 EMPLOYEE BENEFIT PLAN MATTERS. 5.26.1 TSR Paging Disclosure Letter Schedule 5.26.1 contains a complete and accurate list of all Employee Plans maintained or contributed to by TSR Paging ("TSR PAGING EMPLOYEE PLANS"). Neither TSR Paging nor any ERISA Affiliate of TSR Paging is now maintaining or contributing to or has ever maintained or contributed to or been obligated to contribute to any Employee Plan subject to either Title IV of ERISA or the minimum funding standards of Section 302 of ERISA, including without limitation any "multiemployer plan" (as such term is defined in Section 3(37) of ERISA). 5.26.2 Each TSR Paging Employee Plan has been administered in accordance with its terms and complies in all material respects with all the requirements prescribed by any 36 and all statutes, orders and governmental rules and regulations applicable to such TSR Paging Employee Plan, including, but not limited to, ERISA and the Code. 5.26.3 Each TSR Paging Employee Plan intended to qualify under Section 401(a) and 401(k) of the Code has heretofore been determined by the Internal Revenue Service to so qualify or a timely application for such determination has been made, and the trusts created thereunder have heretofore been determined to be exempt from tax under the provisions of Section 501(a) of the Code or an application for such determination has been made, and to the knowledge of TSR Paging no circumstance has occurred or exists which may reasonably be expected to cause the loss of such qualifications or exemption. 5.26.4 There is no pending or, to the knowledge of TSR Paging, threatened Claim in respect of any of the TSR Paging Employee Plans other than claims for benefits in the ordinary course of business or Claims which are not material. 5.26.5 To its knowledge, TSR Paging has complied in all material respects with the health care continuation requirements of Part 6 of Title I of ERISA. 5.26.6 The consummation of the transactions contemplated by this Agreement will not result in any material automatic increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any compensation or benefits payable to or in respect of any employee of TSR Paging or any participant in a TSR Paging Employee Plan. 5.26.7 TSR Paging has not engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code which could result in a material liability. 5.26.8 Except as described in TSR Paging Disclosure Letter Schedule 5.26.8, TSR Paging does not maintain or contribute to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to employees or their beneficiaries after termination of employment other than as required by Part 6 of Title I of ERISA. 5.26.9 TSR Paging has delivered or made available to TDS true and complete copies of all TSR Paging Employee Plans, including amendments, trust agreements, and insurance contracts relating to such Plans, all summary plan descriptions and all modifications thereto communicated to employees, the most recent Form 5500 and determination letter issues by the Internal Revenue Service for any applicable TSR Paging Employee Plan, and the most recent actuarial report describing the estimated liabilities of TSR Paging to provide pension and welfare benefits to employees and their beneficiaries after termination of employment and any related information regarding funding by TSR Paging to pay such liabilities. 37 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF TDS TDS hereby represents and warrants to TSR Paging and TSR Wireless as follows: 6.1 ORGANIZATION OF TDS AND API. TDS is a corporation duly organized, validly existing and in good standing under the laws of the State of Iowa. TDS is duly qualified under the FCC Rules and Policies to hold an interest in TSR Wireless as contemplated herein. API is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Except as set forth on TDS Disclosure Letter Schedule 6.1, API is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Certificate of Incorporation and Bylaws of API, and all amendments thereto, heretofore delivered to TSR Wireless are accurate and complete as of the date hereof. TDS Disclosure Letter Schedule 6.1 lists all jurisdictions in which API is qualified to do business as a foreign corporation. 6.2 AUTHORIZATION. TDS and API have all requisite corporate power and authority to own, lease and operate the API Assets, to conduct the API Business as it is presently being conducted, and TDS has and, upon receipt of necessary approvals by its board of directors and shareholders (all of which shall have been received by Closing), API will have, all requisite corporate power and authority to execute and deliver such of this Agreement, the Ancillary Agreements and the Option Agreement to which each of them is a party, and to perform their respective obligations hereunder and thereunder including, without limitation, the transfer of the API Assets and the Merger. The execution and delivery of this Agreement, the Ancillary Agreements and the Option Agreement by TDS, and the consummation by TDS of the transactions contemplated hereby and thereby have been duly approved by the board of directors of TDS. No other corporate proceedings on the part of TDS, are necessary to authorize the entering into and the performance of this Agreement, the Ancillary Agreements and the Option Agreement and the transactions contemplated hereby and thereby including, without limitation, transfer of the API Assets. This Agreement and the Option Agreement have been duly executed and delivered by TDS and are legal, valid and binding obligations of TDS and each of the Ancillary Agreements when executed at Closing will constitute legal, valid and binding obligations of TDS, and/or API (as applicable), enforceable against TDS and/or API (as applicable) in accordance with their respective terms. 6.3 SUBSIDIARIES. TDS Disclosure Letter Schedule 6.3 is a correct and complete list of API's Subsidiaries, each of which is a corporation or limited liability company duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation (as applicable) (as identified on TDS Disclosure Letter Schedule 6.3), and has the requisite corporate or limited liability company power and authority to conduct its business as it is presently being conducted and to own and lease its properties and 38 assets. The transactions contemplated by this Agreement to which such Subsidiaries are or will be a party will, upon receipt of necessary approvals of their respective boards of directors and stockholders, as necessary (all of which shall have been received by Closing), be duly approved by all necessary corporate or limited liability company proceedings on the part of such Subsidiaries. TDS Disclosure Letter Schedule 6.3 contains a true, correct and complete list of all jurisdictions in which each Subsidiary is qualified to do business as a foreign corporation or limited liability company. Except as set forth in TDS Disclosure Letter Schedule 6.3, each of the Subsidiaries is duly qualified to do business as a foreign corporation or limited liability company (as applicable) and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Certificate or Articles of Incorporation and Bylaws or other organizational documents of each Subsidiary of API have been made available to TSR Paging and are accurate and complete. API owns of record and beneficially all of the issued and outstanding capital stock of each free and clear of any Encumbrances, except as set forth on TDS Disclosure Letter Schedule 6.3. 6.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Interim Balance Sheet Date, except as contemplated by this Agreement, there has not been any: 6.4.1 Material Adverse Change in respect of API, or any of its Subsidiaries, the API FCC Licenses and/or the API FCC License Applications. 6.4.2 change in accounting methods, principles or practices by API or any of its Subsidiaries, except as required by law or by generally applicable changes instituted in the accounting profession; 6.4.3 material damage, destruction or loss (whether or not covered by insurance) adversely affecting the API Assets or the API Business; 6.4.4 cancellation, individually or the aggregate of any material indebtedness or waiver or release of any material right or claim of API or its Subsidiaries; 6.4.5 cancellation or termination of any material Contract of API or its Subsidiaries or entry into any material Contract by API or its Subsidiaries, other than in respect of the API Excluded Assets; 6.4.6 sale, assignment or transfer of (i) any transmitters and paging terminals of API or its Subsidiaries included in the Interim Balance Sheet of API, whether in use or in storage or (ii) any material portion of the API Assets other than sales of Inventory in the ordinary course of business; 6.4.7 failure to replenish API's inventories and supplies in a normal and customary manner consistent with prior practice and prudent business practices prevailing in 39 the industry, except for reductions in API's and its Subsidiaries' Inventory not exceeding ten percent of such Inventory on the Interim Balance Sheet Date consistent with prudent business practice, or any purchase commitment made by API or its Subsidiaries in excess of the normal, ordinary and usual requirements of its business or at any price in excess of the then current market price or upon terms and conditions more onerous than those usual and customary in the industry, or any change in the selling, pricing, advertising or personnel practices of API and its Subsidiaries inconsistent with their prior practice and prudent business practices prevailing in the industry; 6.4.8 institution of settlement of or agreement to settle any Action relating to the API Business (other than the API Excluded Assets) or the API Assets other than in the ordinary course of business consistent with past practices but not in any case involving amounts in excess of $200,000 in the aggregate; 6.4.9 agreement by API or its Subsidiaries to do, or any action or omission by API or its Subsidiaries which is likely to result in, any of the representations and warranties set forth in the preceding clauses 6.4.1 through 6.4.8 becoming untrue other than as expressly provided for herein. 6.5 ASSETS. API and its Subsidiaries have and will transfer good and marketable title to the API Assets and, upon the consummation of the transactions contemplated hereby, TSR Wireless will acquire good title to all the API Assets, free and clear of any Encumbrances other than Permitted Encumbrances. The API Assets include all assets necessary for the conduct of the API Business as presently conducted. 6.6 API REAL PROPERTY. API and its Subsidiaries do not own any Real Property. TDS Disclosure Letter Schedule 6.6 also contains a complete and accurate list of all Real Property Leases of API and its Subsidiaries ("API LEASED REAL PROPERTY" distinguishing between the stores, transmission sites, office premises and other Leased Real Property comprising the API Leased Real Property. 6.6.1 INTENTIONALLY OMITTED. 6.6.2 ACTIONS. There are no pending or, to the knowledge of API, threatened condemnation proceedings or other Actions with respect to any API Real Property. 6.6.3 REAL PROPERTY LEASES OR OTHER AGREEMENTS. Except for the API Real Property Leases listed on TDS Disclosure Letter Schedule 6.6, there are no material leases, subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements, written or oral, granting to any Person the right to purchase, use or occupy any API Leased Real Property. Except as set forth in TDS Disclosure Letter Schedule 6.6, with respect to each API Real Property Lease, API or its Subsidiaries have and will transfer to TSR Wireless at the Closing a valid leasehold interest in the leasehold estate, free and clear of all Encumbrances other than Permitted Encumbrances. Except as set forth on TDS Disclosure 40 Letter Schedule 6.6, all API Real Property Leases are valid, binding and enforceable in all material respects in accordance with their terms and are in full force and effect. Except as set forth on TDS Disclosure Letter Schedule 6.6, API and its Subsidiaries enjoy peaceful and undisturbed possession of all real property subject to such API Real Property Leases, and API and its Subsidiaries have in all material respects performed all the material obligations required to be performed by them through the date hereof with respect to such API Real Property Leases, and each API Real Property Lease is assignable (upon receipt of necessary landlord Consents) in connection with the transactions contemplated hereby. 6.6.4 CERTIFICATE OF OCCUPANCY. API and its Subsidiaries have received all required material approvals of Governmental Authorities (including, without limitation, Permits and material certificates of occupancy or other similar certificates permitting lawful occupancy of the API Leased Real Property) required in connection with the present use of the API Leased Real Property and all improvements thereon. 6.6.5 UTILITIES. All API Leased Real Property and the improvements thereon are supplied with utilities and other services necessary for the operation of such facilities as currently operated. 6.6.6 IMPROVEMENTS, FIXTURES AND EQUIPMENT. All Leasehold Improvements, and all Fixtures and Equipment and other tangible assets owned, leased or used by API or its Subsidiaries on the API Leased Real Property are sufficient in all material respects for the operation of the API Business as presently conducted. 6.6.7 NO SPECIAL ASSESSMENT. Other than to the extent such Contracts relate to the Excluded Assets, API and its Subsidiaries have not received notice of any special assessment relating to any API Leased Real Property or any portion thereof, and API has no knowledge of any pending or threatened special assessment, other than any special assessments disclosed in TDS Disclosure Letter Schedule 6.6. 6.7 CONTRACTS AND COMMITMENTS. 6.7.1 CONTRACTS. Other than to the extent such Contracts relate to the Excluded Assets, TDS Disclosure Letter Schedule 6.7 sets forth a complete and accurate list of all Contracts of API and its Subsidiaries of the following categories: (i) Reseller Contracts (provided, that, with respect to reseller agreements with customers only reseller agreements with customers for at least 2,000 or more pagers and with respect to reseller agreements with third party vendors only material national reseller agreements along with totals by region of reseller agreements with third party vendors), distribution, franchise, lease and license (other than with respect to software that is available in consumer retail stores and subject to "shrink wrap" license agreements) Contracts; 41 (ii) Sales, commission, consulting, agency or advertising Contracts which are not cancelable on thirty (30) calendar days notice; (iii) Options to buy any property, real or personal, or options to sell or sublet any API Leased Real Property or personal property included in the API Assets; (iv) Contracts involving expenditures or Liabilities in excess of $250,000 over the life of the Contract or otherwise material to API and its Subsidiaries; (v) Contracts containing covenants limiting the freedom of API or its Subsidiaries to engage in any line of business or compete with any Person; (vi) Intentionally omitted; (vii) All Contracts with LECs for provision of Interconnection to API ("API INTERCONNECTION CONTRACTS"), including: (a) all such API Interconnection Contracts regardless of whether such agreements have yet been submitted to or approved by the relevant PUCs; (b) a listing of any requests for interconnection filed by API with PUC(s) pursuant to Section 252(a) of the Communications Act and a brief description of the status of the PUC proceeding with respect to each such request; (c) a brief description of outstanding negotiations between API and LECs regarding provision of Interconnection by LECs regardless of whether such negotiations are pursuant to a request for interconnection submitted by API pursuant to Section 252(a) of the Communications Act; and (d) any related agreements between API and LECs regarding Interconnection. (viii) All Personal Property Leases of API and its Subsidiaries ("API PERSONAL PROPERTY LEASES") excluding Contracts with customers for lease of pagers; and (ix) All Contracts not listed pursuant to Sections 6.7.1 (i) through 6.7.1 (viii) but which are (a) material to the API Business; or (b) not made in the ordinary course of the API Business. Except as set forth in TDS Disclosure Letter Schedule 6.7, API has delivered or made available to TSR Paging true, correct and complete copies of each of the Contracts listed on TDS Disclosure Letter Schedule 6.7 and TDS Disclosure Letter Schedule 6.8, including all amendments and supplements thereto other than API Personal Property Leases with individual customers on standard forms (the standard forms having been supplied). 6.7.2 ABSENCE OF BREACHES OR DEFAULTS. Except as set forth in TDS Disclosure Letter Schedule 6.6, all of the Contracts to which API or any Subsidiary of API is a party or bound ("API CONTRACTS") are valid and in full force and effect. API or its Subsidiaries have duly performed all of their material obligations under such Contracts to the extent those obligations to perform have accrued, and no material violation of, or material default or breach under, such Contracts by API or its Subsidiaries, or, to TDS's knowledge, any other party has 42 occurred and neither API nor its Subsidiaries, nor, to TDS's knowledge, any other party has repudiated any material provisions thereof. 6.7.3 PRODUCT WARRANTY. API and its Subsidiaries have committed no act, and there has been no omission, which would result in, and there has been no occurrence which would give rise to, any material product liability or material liability for breach of warranty (whether covered by insurance or not) on the part of API or its Subsidiaries, with respect to products sold, or services rendered prior to the Closing. 6.8 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. TDS Disclosure Letter Schedule 6.8 sets forth a complete and accurate list of the names and addresses of API and its Subsidiaries' (i) ten (10) largest direct customers and the ten (10) largest reseller customers for November 1997 for each sales region, showing the approximate recurring revenue in dollars by API and its Subsidiaries to each such customer during such month; and (ii) five (5) largest suppliers for January through November 1997 showing the approximate total purchases in dollars by API and its Subsidiaries from each such supplier during such period. As of the date hereof, neither API nor any of its Subsidiaries has received any communication from any customer or supplier named on TDS Disclosure Letter Schedule 6.8 of any intention to terminate or reduce purchases from or supplies to API and its Subsidiaries. 6.9 OPERATION OF THE API BUSINESS. Except as set forth in TDS Disclosure Letter Schedule 6.9, (i) TDS and API have conducted the API Business only through API and its Subsidiaries and not through any other divisions or any direct or indirect Subsidiary or Affiliate of TDS and (ii) no part of the API Business is operated by TDS or API through any entity other than API and its Subsidiaries. 6.10 INVENTORY. All Inventory of API and its Subsidiaries ("API INVENTORY") is of good, usable and merchantable quality and, except as set forth on TDS Disclosure Letter Schedule 6.10, does not include obsolete or discontinued items not otherwise saleable for ten dollars ($10) or more in the ordinary course of business. Except as set forth on TDS Disclosure Letter Schedule 6.10 or in amounts which are not material; 6.10.1 all API Inventory is of such quality as to meet the quality control standards of API and any applicable governmental quality control standards; 6.10.2 all API Inventory is saleable as current Inventory at the current prices thereof in the ordinary course of business; 6.10.3 all API Inventory is recorded on the books of the API Business and in the API Interim Balance Sheet at the net book value determined in accordance with GAAP; 6.10.4 except for a write-down made in September 1996, and September 1997 no write-down in inventory has been made or should have been made pursuant to GAAP 43 during the past two years. Except for items undergoing repair off premises, in the possession of employees or customers all API Inventory is located at the API Leased Real Property. 6.11 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither API or any Subsidiaries of API, nor any officer, employee or agent of API or its Subsidiaries, nor any other Person acting on their behalf, has, directly or indirectly, within the past five years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the API Business (or assist in connection with any actual or proposed transaction relating to the API Business) (i) which subjected or might have subjected API or any of its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) which if not given in the past, might have had a Material Adverse Effect, (iii) which if not continued in the future, might have a Material Adverse Effect or subject TSR Wireless to suit or penalty in any private or governmental litigation or proceeding, (iv) for any of the purposes described in Section 162(c) of the Code or (v) for the purpose of establishing or maintaining any concealed fund or concealed bank account. 6.12 NO CONFLICT OR VIOLATION. Subject to Sections 8.2, 11.6 and 12.6 hereof and except as set forth on TDS Disclosure Letter Schedule 6.12, neither the execution, delivery or performance of this Agreement, the Ancillary Agreements or the Option Agreement by TDS and/or API (as applicable) nor the consummation by TDS and/or API (as applicable) of the transactions contemplated hereby, including the Merger, and thereby will (a) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of TDS or API or any of API's Subsidiaries, (b) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the API Assets under, or require any Consent under any of the terms, conditions or provisions of any API Contract, any Financing Obligation of API, any Authorization, any API Real Property Lease, API Personal Property Lease, franchise, Permit, agreement, or other instrument or obligation (i) to which API or any of its Subsidiaries is a party or (ii) by which the API Assets are bound, (c) violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award to which API or any of its Subsidiaries or the API Assets is subject, (d) impose any Encumbrance (other than a Permitted Encumbrance) on the API Assets. Except as specified in TDS Disclosure Letter Schedule 6.12, or in connection with necessary corporate approvals by API of the Merger and transactions contemplated hereby, no Consent is required to be obtained or made by API or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. 44 6.13 REGULATORY MATTERS. 6.13.1 FCC LICENSES. (i) TDS Disclosure Letter Schedule 6.13.1 lists (a) each FCC License used in the operation of the API Business ("API FCC LICENSE") and, in each case, the name of the licensee, the call sign, the operating frequency or frequencies, the location and the expiration date of the API FCC License; and (b) each FCC License Application filed as part of the operation of the API Business ("API FCC LICENSE APPLICATION") as of the date hereof and, in each case, the name of the applicant, the proposed frequency or frequencies, the proposed location and the FCC file number of the API FCC License Application. Pursuant to the provisions of Section 10.2.1, TDS has made available to TSR Paging for inspection copies of each API FCC License and API FCC License Application. (ii) Except as set forth on TDS Disclosure Letter Schedule 6.13.1, (A) none of the API FCC Licenses or API FCC License Applications is subject to any purchase, sale, option or right of first refusal agreements; (B) API has good and marketable title, to the extent allowed by law, to the API FCC Licenses; and (C) subject to the regulatory jurisdiction of the FCC , API holds all API FCC Licenses free and clear of all Encumbrances. (iii) TDS Disclosure Letter Schedule 6.13.1 lists each 929 MHz one-way paging frequency for which API or any of its Subsidiaries currently has nationwide exclusivity ("API 929 MHz EXCLUSIVE FREQUENCY"). Except as set forth in TDS Disclosure Letter Schedule 6.13.1, for each API 929 MHz Exclusive Frequency: (i) API and its Subsidiaries timely constructed and placed into operation in accordance with FCC Rules sufficient transmitters to comply with FCC 929 MHz Exclusivity Requirements; (ii) API and its Subsidiaries have continued to operate sufficient transmitters to comply with the terms and conditions of such API FCC Licenses and Authorizations, the Communications Act, the FCC Rules and all applicable state laws and regulations. 6.13.2 INTENTIONALLY OMITTED. 6.13.3 FILINGS, ETC. (i) The API FCC Licenses and API FCC License Applications and are the only FCC and PUC Permits and Authorizations necessary to conduct the API Business. Except as set forth on TDS Disclosure Letter Schedule 6.13.3, API and its Subsidiaries have duly and in a timely fashion secured or filed under applicable law all necessary Permits and Authorizations from, and have filed all required registrations, applications, reports and any other documents with, the FCC, and, if applicable, any PUC and any other Governmental Authority exercising jurisdiction or having jurisdiction over API and its Subsidiaries, in each case, with respect to the API Business. Except as set forth on TDS Disclosure Letter Schedule 6.13.3, (a) the API FCC Licenses (b) all other Authorizations are in full force and effect, are 45 valid for the balances of the current license term, are not impaired by acts or failures to make required filings on the part of API or any of its Subsidiaries, and are free and clear of restrictions that may reasonably be expected to limit the full operation of the API FCC Licenses or Authorizations, in each case without adverse conditions, restrictions or impairments, except for such conditions as are generally applicable to holders of such FCC Licenses and Authorizations. No renewal of any API FCC License would constitute a major environmental action under the rules of the FCC. (ii) Except as set forth on TDS Disclosure Letter Schedule 6.13.3, neither API nor its Subsidiaries is subject to any Order or any pending or, to the knowledge of TDS, threatened, Action (excluding rule making that has general industry applicability) which affects or would be expected to affect, in any material respect, the validity of any API FCC License, or result in the revocation, termination, or adverse modification thereof, or impair the renewal thereof. Except as set forth on TDS Disclosure Letter Schedule 6.13.3, no event has occurred and is continuing (excluding rule making that has general industry applicability) that could reasonably be expected to (a) result in the revocation, termination, non-renewal or adverse modification of any API FCC License or (b) materially and adversely affect any rights of API or its Subsidiaries thereunder. 6.13.4 FEES. API and its Subsidiaries have paid all franchise, license, regulatory or other fees and charges which have become due and payable pursuant to any applications, filings, recordings and registrations with, and all Authorizations and Permits from, the FCC, any PUC or any other Governmental Authority, in respect of the API Business. 6.13.5 SHARING AGREEMENTS. Except as set forth on TDS Disclosure Letter Schedule 6.13.5, neither API nor any of its Subsidiaries is a party to any agreement for the shared use of facilities or equipment used in connection with the API Business. 6.13.6 OPERATIONS. The equipment operating pursuant to the API FCC Licenses or PUC Authorizations of API and its Subsidiaries is operating in all material respects in accordance with the terms and conditions of such API FCC License or Authorizations, the Communications Act, the FCC Rules and all applicable state laws and regulations. 6.13.7 CONSTRUCTION. Except as set forth on TDS Disclosure Letter Schedule 6.13.7 all construction for facilities that API intends to place in service proposed in any API FCC License is proceeding in a manner that may reasonably be expected to allow compliance with applicable FCC construction benchmarks, the completion of such construction and commencement of operations within the time specified in the relevant API FCC License. 46 6.14 FINANCIAL STATEMENTS; RECEIVABLES; PUBLIC FILINGS. 6.14.1 FINANCIAL STATEMENTS. The API Financial Statements are attached hereto as TDS Disclosure Letter Schedule 6.14.1. The API Financial Statements (a) were prepared in accordance with the Books and Records of API and its Subsidiaries, (b) were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby subject, in the case of the API Unaudited Financial Statements, to the absence of footnotes and to normal year-end adjustments and (c) fairly present (i) the consolidated assets, liabilities (including all reserves) and financial position of API and its Subsidiaries (other than AMS) and (ii) the assets, Liabilities (including all reserves) and financial position of AMS in each case as of the respective dates thereof and the results of operations and changes in cash flows for the periods then ended, consolidated as appropriate. The API Audited Financial Statements have been audited by Arthur Anderson LLP, independent certified public accountants, whose reports thereon are included with such API Audited Financial Statements. 6.14.2 RECEIVABLES. All of the receivables of API and its Subsidiaries (including accounts receivable, loans receivable and advances) which have arisen in connection with the API Business and which are reflected in the Interim Financial Statements, and all such receivables which will have arisen since the Interim Balance Sheet Date, have arisen only from BONA FIDE transactions in the ordinary course of business. All receivables of API and its Subsidiaries on the date of this Agreement are, and on the Closing Date will be, good and collectible in the ordinary course of business of API within 120 days of their incurrence, subject to any applicable reserves set forth in the Interim Balance Sheet of API. TDS has no knowledge of any facts or circumstances generally which would result in any material increase in the uncollectability of such receivables as a class in excess of the reserves therefor set forth on the Interim Financial Statements. TDS Disclosure Letter Schedule 6.14.2 hereto accurately lists as of November 28, 1997 all receivables arising out of or relating to the API Business in excess of $1,000, the amount owing and the aging of such receivable and the name and last known address of the party from whom such receivable is owing. 6.14.3 FILINGS. TDS Disclosure Letter Schedule 6.14.3 sets forth a list of all reports filed by API with the SEC under the Exchange Act during the period from January 1, 1995 to the date hereof (collectively, the "SEC REPORTS"), true and correct copies of which have been made available to TSR Paging. None of the SEC Reports, as of their respective dates (as amended through the date hereof) contained any untrue statement of material fact or omitted to state a material fact with respect to the API Business required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. 6.15 BOOKS AND RECORDS. API and its Subsidiaries have made and kept (and given TSR Paging access to) the Books and Records of API, which, in all material respects accurately and fairly reflect the activities of API and its Subsidiaries that would be so recorded. 47 6.16 LITIGATION. Except as set forth on Schedules 6.13.3 and 6.16 there is no Action or Order, pending or to the knowledge of API threatened (a) against, related to or affecting (i) API or any of its Subsidiaries or the API Assets, or (ii) any stockholders (including TDS) officers or directors of API or any of its Subsidiaries (in each case, in such capacity) and which either (A) may be reasonably expected to result in Damages in excess of $100,000 in respect of any individual Order for the payment of money damages (or $200,000 in the aggregate), or (B) seeks as of the date hereof to delay, limit or enjoin the transactions contemplated by this Agreement, the Ancillary Agreements, the Merger Agreement or the Option Agreement or (b) in which TDS (in a matter directly related to API or the API Business), API or any of its Subsidiaries is a plaintiff, including any derivative suits brought by or on behalf of TDS, API or any of its Subsidiaries. None of TDS (in a matter directly related to API or the API Business), API or any of its Subsidiaries is in default with respect to or subject to any Order, and to the knowledge of TDS, there are no unsatisfied Orders against API or any of its Subsidiaries or the API Assets. 6.17 COMPLIANCE WITH LAW. API and its Subsidiaries are and have been in compliance in all material respects with all Authorizations, Regulations, and Permits in respect of the API Assets and the API Business; IT BEING UNDERSTOOD that nothing in this representation is intended to address any compliance issues that are the subject of any other representation or warranty set forth herein. 6.18 NO BROKERS. Except for the fees payable to Credit Suisse First Boston and BancBoston Securities Inc. in connection with the transactions contemplated hereby, which shall be paid by TDS, no broker, finder or similar agent is entitled to any finder's fee, brokerage fees or commission or similar payment from TDS, API or any of its Subsidiaries in connection with the transactions contemplated hereby. 6.19 NO OTHER AGREEMENTS TO SELL THE API ASSETS. Neither TDS nor API nor any of their respective officers, directors or affiliates have any commitment or legal obligation, absolute or contingent, to any other Person other than TSR Wireless and TSR Paging to sell, assign, transfer or effect a sale of the API Assets (other than Sales of Inventory in the ordinary course of business), to sell or effect a sale of the capital stock of API or any of its Subsidiaries (other than in connection with existing employee stock option and stock purchase plans to effect any merger, consolidation, exclusive license, liquidation, dissolution or other reorganization of API or any of its Subsidiaries, or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing business combination transactions. 6.20 PROPRIETARY RIGHTS. 6.20.1 PROPRIETARY RIGHTS. TDS Disclosure Letter Schedule 6.20 lists all of API and its Subsidiaries' domestic and foreign registrations of trademarks and of other marks, trade names or other trade rights, and all pending applications for any such registrations, all of API's and its Subsidiaries' registered copyrights and all of API's and its Subsidiaries' patents 48 and pending patent applications, and all agreements under which API or its Subsidiaries are licensed to use Proprietary Rights. 6.20.2 OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. API or one of its Subsidiaries owns and/or has the right to use each of the Proprietary Rights listed on TDS Disclosure Letter Schedule 6.20. The Proprietary Rights listed on TDS Disclosure Letter Schedule 6.20 constitute all of the Proprietary Rights necessary to conduct the API Business in the manner presently conducted. None of the Proprietary Rights is involved in any pending or, to the knowledge of TDS, threatened litigation. No other Person (i) has the right to use any of the Proprietary Rights, except pursuant to the Contracts; or (ii) to TDS' knowledge, except as set forth in TDS Disclosure Letter Schedule 6.20, is infringing upon any Proprietary Rights. To TDS' knowledge, the use by API and its Subsidiaries of the Proprietary Rights is not infringing upon or otherwise violating the rights of any third party. No proceedings have been instituted against or notices received by API or any of its Subsidiaries that are presently outstanding alleging that the use by API or any of its Subsidiaries of the Proprietary Rights infringes upon or otherwise violates any rights of a third party in or to such Proprietary Rights. All Proprietary Rights are assignable by API and its Subsidiaries to TSR Wireless in the manner contemplated by this Agreement. 6.21 ENVIRONMENTAL MATTERS. 6.21.1 COMPLIANCE WITH ENVIRONMENTAL LAW. Each of API and its Subsidiaries has complied and is in compliance in all material respects with all applicable Environmental Laws pertaining to any of the properties and assets of the API Business (including the Facilities of API and its Subsidiaries ("API FACILITIES")) and the use and ownership thereof, and to the operation of the API Business. No violation by API or any of its Subsidiaries is being alleged of any applicable Environmental Law relating to any of the properties and assets of the API Business including the API Facilities or the use, occupation or ownership thereof, or to the operation of the API Business. 6.21.2 OTHER ENVIRONMENTAL MATTERS. Neither API nor to the knowledge of API any other Person (including any tenant or subtenant) has caused or taken any action that will result in, and neither API nor any of its Subsidiaries is subject to, any material Liability relating (i) environmental conditions on, under, or about the API Facilities, including without limitation, the air, soil and groundwater conditions at such Facilities or (ii) the past or present use, management, handling, transport, treatment, generation, storage, disposal or Release of any Hazardous Materials. TDS has disclosed and made available to TSR Paging all information, including, without limitation, all studies, analyses and test results, in the possession, custody or control of or otherwise known to TDS relating to (x) the environmental conditions on, under or about the API Facilities, and (y) any Hazardous Materials used, managed, handled, transported, treated, generated, stored or Released by API or any other Person on, under, about or from any of the API Facilities, or otherwise in connection with the use or operation of the API Business. 49 6.22 TAX MATTERS. 6.22.1 API has (or by the Closing will have) duly and timely filed all Tax returns relating to the API Business with respect to Taxes through the Closing Date for which TSR Wireless could have post-closing liability ("API PCD TAXES") required to be filed on or before the Closing Date ("API PCD TAX RETURNS"). Except for API PCD Taxes set forth on TDS Disclosure Letter Schedule 6.22, which are being contested in good faith and by appropriate proceedings, the following API PCD Taxes have (or by the Closing Date will have) been duly and timely paid: (i) all API PCD Taxes shown to be due on the API PCD Tax Returns, (ii) all deficiencies and assessments of API PCD Taxes of which API has or by the Closing Date will have received written notice. All Taxes required to be withheld by or on behalf of API in connection with amounts paid or owing to any employee, independent contractor, creditor or other party with respect to API ("API WITHHOLDING TAXES") have been withheld, and such withheld taxes have either been duly and timely paid to the proper Governmental Authorities or set aside in accounts for such purpose. 6.22.2 Except as set forth on TDS Disclosure Letter Schedule 6.22, (i) all API PCD Tax Returns have been examined by the relevant taxing authority or the period for assessment of the Taxes in respect of which such Tax returns were required to be filed has expired, and (ii) no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any API PCD Taxes or API Withholding Taxes, and no power of attorney with respect to any such Taxes, has been filed with the Internal Revenue Service ("IRS") or any other Governmental Authority. 6.22.3 Except as set forth on TDS Disclosure Letter Schedule 6.22, (i) there are no API PCD Taxes or API Withholding Taxes for which a deficiency has been asserted in writing by any Governmental Authority to be due and (ii) no issue has been raised in writing by any Governmental Authority in the course of any audit with respect to API PCD Taxes or API Withholding Taxes. Except as set forth on TDS Disclosure Letter Schedule 6.22.3, no API PCD Taxes and no API Withholding Taxes are currently under audit by any Governmental Authority of which API has, or will have by the Closing, received written notice. 6.22.4 TSR Wireless will not be required to deduct and withhold any amount pursuant to section 1445(a) of the Code upon the transfer of the API Business to TSR Wireless. 6.22.5 Except as set forth on TDS Disclosure Letter Schedule 6.22, there is no assessment or Action or administrative appeal pending, or threatened of which API has received assessment or written notice against or relating to API in connection with API PCD Taxes. 6.23 INVESTMENT INTENT. TDS is acquiring its Membership Interests for its own account for investment and with no present intention of distributing or reselling such 50 Membership Interests or any part thereof. TDS is fully informed as to the applicable limitations upon any distribution or resale of Membership Interests, which have not been registered pursuant to the Securities Act. TDS agrees not to distribute or resell any of the Membership Interests if such distribution or resale would constitute a violation of the Securities Act by TDS. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF TSR WIRELESS TSR Wireless hereby represents and warrants to the Transferors as follows: 7.1 ORGANIZATION OF TSR WIRELESS. TSR Wireless is a limited liability company duly formed validly existing and in good standing under the laws of the State of Delaware. Copies of the Certificate of Formation and Limited Liability Company Agreement of TSR Wireless, heretofore delivered by TSR Wireless to each of the Transferors, are accurate and complete as of the date hereof. TSR Wireless is duly qualified to do business and is in good standing in each jurisdiction in which such qualification is required or will be required as a result of the transactions contemplated by this Agreement by applicable law, except where the failure to be so qualified will not have a material adverse effect on the ability of TSR Wireless to consummate the transactions contemplated hereby. TSR Wireless has not engaged in any activity other than in connection with the transactions contemplated hereby. 7.2 AUTHORIZATION. TSR Wireless has full corporate power and authority to execute and deliver this Agreement, the Ancillary Agreements and the Option Agreement and to perform its obligations hereunder and thereunder. The execution, delivery and performance by TSR Wireless of this Agreement, the Ancillary Agreements and the Option Agreement has been duly authorized by all requisite action on the part of TSR Wireless. This Agreement and the Option Agreement have been duly executed and delivered by TSR Wireless and are valid and binding obligations of TSR Wireless and each of the Ancillary Agreements when executed at Closing will constitute a valid and binding obligation of TSR Wireless enforceable against TSR Wireless in accordance with their respective terms. 7.3 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this Agreement, the Ancillary Agreements or the Option Agreement by TSR Wireless, nor the performance of its obligations hereunder and thereunder will result in (i) a violation of or a conflict with any provision of the Certificate of Formation of TSR Wireless or the TSR Wireless LLC Agreement, or (ii) violate or conflict with or result in a breach of or constitute a default under any term or provision of any contract, agreement, commitment, lease, license, franchise or permit or other instrument or obligation to which TSR Wireless is a party or is bound, or (iii) a violation by TSR Wireless of any Regulation or Order to which TSR Wireless is subject. 51 7.4 CONSENTS AND APPROVALS. No Authorization, Consent or Permit, is required to be made or obtained by TSR Wireless in connection with TSR Wireless's execution, delivery and performance of this Agreement. 7.5 BROKER AND FINDERS. Neither TSR Wireless nor any of its Affiliates has entered into any agreement or incurred any obligation, directly or indirectly, for the payment of any brokerage fees, commissions or finder's fee in connection with the transactions contemplated by this Agreement. 7.6 LITIGATION AND PROCEEDINGS. There are no Actions pending or, to the best of knowledge of TSR Wireless, threatened against the consummation by TSR Wireless of the transactions contemplated hereby. 7.7 COMPLIANCE WITH LAW. TSR Wireless is, and since its organization has been, in compliance in all material respects with all applicable Regulations and Permits. ARTICLE VIII COVENANTS OF THE TRANSFERORS AND TSR WIRELESS The Transferors and TSR Wireless hereby each covenant as follows: 8.1 FURTHER ASSURANCES. Each of the parties hereto agrees, both before and after the Closing, (i) to use their respective best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, the Ancillary Agreements and the Merger, (ii) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated hereunder and under the Ancillary Agreement and the Merger, (iii) to cooperate with each other in connection with the foregoing, including using their respective best efforts (A) to obtain all necessary Authorizations and Consents; (B) to obtain all necessary Permits as are required to be obtained under any Regulations, (C) to effect all necessary registrations and filings, including, without limitation, submissions of information requested by Governmental Authorities, and (D) to fulfill all conditions to this Agreement provided, in connection with the Merger, the use of best efforts (x) shall require TDS to offer merger consideration of $2.25 per share in cash (net) to acquire the outstanding Common Stock of API in the Merger not owned by TDS, (y) subject to approval of the Merger by a special committee of the independent directors of the Board of Directors of API, shall require TDS to forthwith consummate the Merger upon acquiring ninety (90) or more percent of the outstanding Common Stock of API and if TDS shall fail to acquire ninety (90) percent of the outstanding Common Stock of API, to proceed forthwith and consummate the Merger in accordance with applicable state law and (z) shall not require TDS to complete a merger which does not have the recommendation of a special committee of independent directors of API; PROVIDED, 52 HOWEVER, that neither shall be required to make any material payments, commence litigation or agree to any material modifications to the terms of any Contracts, Real Property Leases or Permits in connection with the foregoing. Notwithstanding the generality of this Section 8.1, TSR Paging's due diligence review of the API FCC Licenses has raised certain discrepancies and errors that TSR Paging believes should be corrected prior to Closing. API will use its reasonable commercial efforts, with TSR Paging's cooperation, to correct such discrepancies and errors prior to Closing and will correct such errors and discrepancies within its control. 8.2 FCC CONSENT. Each of the parties hereto acknowledges and agrees that the transactions contemplated by this Agreement, including but not necessarily limited to assignment of the TSR Paging FCC Licenses to TSR Wireless and assignment of the API FCC Licenses to TSR Wireless, can only by accomplished upon receipt of prior FCC Consent. Without in any way limiting the generality of Section 8.1 hereof, the parties agree to cooperate with each other, including using their respective best efforts, to promptly prepare, file with the FCC, prosecute and obtain FCC grant by Final FCC Order within the time frame specified in Section 15.1.1 (ii) of this Agreement of the applications necessary to obtain all required FCC Consent, including but not necessarily limited to applications to obtain FCC Consent to assignment of the API FCC Licenses to TSR Wireless (collectively, the "API-TSR WIRELESS ASSIGNMENT APPLICATION") and to obtain FCC Consent to assignment of the TSR Paging FCC Licenses to TSR Wireless (collectively, the "TSR PAGING-TSR WIRELESS ASSIGNMENT APPLICATION"). With respect to the API-TSR Wireless Assignment Application and the TSR Paging-TSR Wireless Assignment Application: (A) TDS will prepare those portions of such applications required for TDS, API and/or their Subsidiaries; (B) TSR Paging will prepare those portions of such applications required for TSR Paging; (C) TSR Wireless will specify the manner in which TSR Wireless's portions of such applications are prepared; (D) TSR Wireless will pay all FCC-imposed filing fees with respect to the API-TSR Wireless Assignment Application; and (E) TSR Wireless will pay all FCC-imposed filing fees with respect to the TSR Paging-TSR Wireless Assignment Application. 8.3 NOTIFICATION OF CERTAIN MATTERS. From the date hereof through the Closing, each Transferor shall give prompt notice to TSR Wireless and the other Transferor and TSR Wireless shall give prompt notice to each Transferor of (a) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any of the Transferors' or TSR Wireless's respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect and (b) any failure of any Transferor or to comply with or satisfy any of its respective covenants, conditions or agreements to be complied with or satisfied by it under this Agreement; PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach of a representation, warranty, covenant or agreement, or to satisfy any condition. ARTICLE IX 53 COVENANTS OF TSR PAGING TSR Paging hereby covenants as follows: 9.1 ACCESS TO INFORMATION. 9.1.1 From the date hereof through the Closing, subject to any confidentiality obligations of TSR Paging, TSR Paging shall, and shall cause its officers, directors and employees to, afford TDS and its Representatives, during normal business hours and upon reasonable notice to TSR Paging and in a manner which will not unduly interfere with the operation of the TSR Paging Business, complete access at all reasonable times to the TSR Paging Assets for the purpose of inspecting the same, and to the officers and employees of TSR Paging, and shall furnish TDS and its Representatives all financial, operating and other data and information as TDS may reasonably request, except to the extent that such access would violate any Regulation to which TSR Paging, its employees, the TSR Paging Assets or the TSR Paging Business is subject; PROVIDED that TSR Paging shall have the right to have a Representative present at all such times; and PROVIDED FURTHER that such access shall be at the expense of the party exercising its rights hereunder. Notwithstanding such access and the information provided to TDS after the date hereof, TDS and TSR Wireless each acknowledge and agrees that TSR Paging makes no representation or warranty, express or implied, at common law, by statute or otherwise, except as specifically set forth in this Agreement. 9.2 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS. 9.2.1 TSR Paging shall use all reasonable efforts to cause all employees of TSR Paging to make available their employment services to TSR Wireless (the "TSR PAGING EMPLOYEES"). Effective as of the Closing Date, TSR Wireless shall offer employment to all of the TSR Paging Employees on the same terms and conditions and with the same benefits as enjoyed by them prior to the Closing Date and shall assume all Liabilities of TSR Paging in respect of the TSR Paging Employees or other beneficiaries or dependents, including all Liabilities under the Employee Plans of TSR Paging and all Liabilities in relation to life, disability, accidental death or dismemberment, supplemental unemployment compensation, medical, dental, hospitalization, other health or other welfare or fringe benefits or expense reimbursements. In connection therewith, TSR Wireless shall assume all of TSR Paging's responsibility for, become the successor plan sponsor of, and assume, each of TSR Paging's Employee Plans. 9.2.2 From and after the Closing, TSR Wireless shall assume and become solely responsible for any and all Liabilities of TSR Paging in respect of each TSR Paging Employee, or the beneficiary or dependent of each such TSR Paging Employee, to provide post-employment welfare benefits to such TSR Paging Employee, beneficiary or dependent following termination of employment with TSR Wireless. 54 9.2.3 From and after the Closing Date, TSR Wireless shall assume and be solely responsible for any and all Liabilities relating to or arising in connection with the requirements of section 4980B of the Code to provide continuation of health care coverage under any Employee Plan of TSR Paging in respect of TSR Paging Employees and their covered dependents. 9.2.4 From and after the Closing Date, TSR Wireless shall assume and be solely responsible for any and all Liabilities to or in respect of any TSR Paging Employee relating to or arising in connection with any and all claims for workers' compensation benefits arising in connection with any occupational injury or disease occurring or existing on or prior to the Closing Date. 9.2.5 TSR Paging will, and TSR Wireless will, (i) treat TSR Wireless as a "successor employer' and TSR Paging as a "predecessor," within the meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to TSR Paging Employees who are employed by TSR Wireless for purposes of Taxes imposed under the United States Federal Unemployment Tax Act ("FUTA") or the United States Federal Insurance Contributions Act ("FICA") and (ii) cooperate with each other to avoid, to the extent possible, the filing of more year within which the Closing Date occurs. 9.2.6 At the request of TSR Wireless with respect to any particular applicable Tax law relating to employment, unemployment insurance, social security, disability, workers' compensation payroll, health care or other similar Tax other than Taxes imposed under FICA and FUTA, TSR Paging will and TSR Wireless will, (i) treat TSR Wireless as a successor employer and TSR Paging as a predecessor employer, within the meaning of the relevant provisions of such Tax law, with respect to TSR Paging Employees who are employed by TSR Wireless and (ii) cooperate with each other to avoid, to the extent possible, the filing of more than one individual information reporting form pursuant to each such Tax law with respect to each TSR Paging Employee for the calendar year within which the Closing Date occurs. 9.2.7. Before and after the Closing, TSR Paging will use all reasonable efforts to cause TSR Wireless to take, or cause to be taken, all actions necessary, proper or advisable to carry out its obligations hereunder. 9.3 CONDUCT OF BUSINESS. From the date hereof through the Closing TSR Paging shall, except as contemplated by this Agreement, or as consented to by TDS in writing, operate its business in the ordinary course and substantially in accordance with past practice and will use its best efforts not to take any action inconsistent with this Agreement. Without limiting the generally of the foregoing, TSR Paging shall not, except as specifically contemplated by this Agreement: 9.3.1 engage in any transaction not permitted by Sections 5.10 and 5.11 of the Securities Purchase Agreement dated July 17, 1995 between, amongst other Persons, TSR Paging and the Investors; 55 9.3.2 do any other act which would cause any representation or warranty of TSR Paging in this Agreement to be or become untrue in any material respect; or 9.3.3 enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder. 9.3.4 directly or indirectly, (a) enter into any merger, consolidation or reorganization in which TSR Paging is not the surviving corporation or (b) transfer or agree to transfer all or substantially all TSR Paging's Assets, unless prior to such merger, consolidation, reorganization or asset transfer (collectively, a "TRANSACTION"), the surviving corporation or the transferee, respectively, shall have agreed in writing (i) to assume the obligations of TSR Paging under this Agreement, and for that purpose references in the Exchange and Registration Rights Agreement to "Registrable Securities" shall be deemed to include any securities which API or its shareholders would be entitled to receive pursuant to any such Transaction, or (ii) to purchase the API Assets and the API Assumed Liabilities or otherwise acquire the API Business for consideration consisting of cash, a cash equivalent or freely transferable and marketable securities (or, if not freely transferable and marketable, subject to restrictions no more onerous than on the securities received by the Investors in the Transaction), PROVIDED that such consideration (x) shall be the same type of consideration as payable to TSR Paging or its shareholders in connection with the Transaction, (y) shall be payable on the same terms as the consideration paid to TSR Paging in the Transaction, (z) shall be in an amount that bears the same proportion to the consideration paid to TSR Paging in the Transaction as the initial Membership Interest of API pursuant to Section 3.1 bears to the initial Membership Interest of TSR Paging pursuant to Section 3.1 (i.e., the aggregate consideration paid in such a Transaction for TSR Paging and for the API Assets and API Assumed Liabilities shall be allocated 70% to TSR Paging and 30% to API), and PROVIDED FURTHER that the obligation to purchase the API Assets and the API Assumed Liabilities or otherwise acquire the API Business shall be contingent on and subject only to the satisfaction by API or TDS of closing conditions comparable to those set forth in Sections 11.6 and 11.7, and other usual and customary closing conditions in acquisitions of paging businesses. 9.4 1997 FINANCIAL STATEMENTS. TSR Paging shall prepare its audited financial statements for the fiscal year ending on December 31, 1997 and deliver a copy thereof to TDS on or before May 1, 1998. ARTICLE X COVENANTS OF TDS TDS hereby covenants as follows: 10.1 NO SOLICITATION. 56 10.1.1 NO SOLICITATION. From the date hereof through the Closing or the earlier termination of this Agreement, TDS shall not, and shall use its best efforts to cause its Representatives not to, directly or indirectly, enter into, solicit, initiate or continue any discussions or negotiations with, or encourage or respond to any inquires or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any other way with, any Person, other than TSR Paging and its Representatives, concerning any sale of all or any substantial portion of the API Assets or the API Business, or of any shares of capital stock of API or its Subsidiaries, or any merger, consolidation, liquidation, dissolution or exclusive licensing arrangement or similar transaction involving API or its Subsidiaries (each such transaction being referred to herein as a "PROPOSED API ACQUISITION TRANSACTION"). 10.1.2 NOTIFICATION. TDS shall promptly notify TSR Paging if any discussions or negotiations are sought to be initiated, any inquiry or proposal is made, or any information is requested with respect to any Proposed API Acquisition Transaction and notify TSR Paging of the terms of any proposal which it may receive in respect of any such Proposed API Acquisition Transaction, including, without limitation, the identity of the prospective purchaser or soliciting party, except to the extent that any such notification would violate any now existing agreement of TDS or API. 10.2 ACCESS TO INFORMATION. 10.2.1 From the date hereof through the Closing, TDS shall, and shall cause API and their respective officers, directors and employees to, afford TSR Paging and its Representatives, during normal business hours and upon reasonable notice to TDS and API and in a manner which will not interfere with the operation of the API Business, complete access at all reasonable times to the API Assets and the API Business for the purpose of inspecting the same, and to the officers and employees of API, and shall furnish TSR Paging and its authorized representatives all financial, operating and other data and information as TSR Paging may reasonably request, except to the extent that such access would violate any governmental regulation, law or order to which TDS, API, their employees or the API Assets are subject; PROVIDED that API shall have the right to have Representatives present at all such times; and PROVIDED FURTHER that such access shall be at the expense of TSR Paging. Notwithstanding such access and the information provided to TSR Paging after the date hereof, TSR Paging and TSR Wireless acknowledge and agree that TDS makes no representations or warranties, express or implied, at common law, by statute or otherwise, except as specifically set forth in this Agreement. 10.2.2 TSR Paging shall have the right, at its sole cost and expense to (i) after consultation with and with the consent of API (not to be unreasonably withheld or delayed) conduct tests of the soil surface or subsurface waters and air quality at, in, on, beneath or about the API Leased Real Property, and such other procedures as may be recommended by an independent environmental consultant selected by TSR Paging (the "CONSULTANT") based on its reasonable professional judgment, in a manner consistent with good engineering practice, (ii) 57 inspect records, reports, permits, applications, monitoring results, studies, correspondence, data and any other information or documents relevant to environmental conditions or environmental noncompliance, and (iii) inspect all buildings and equipment at the API Facilities, including without limitation the visual inspection of the API Facilities for asbestos-containing construction materials; PROVIDED, in each case, such tests and inspections shall be conducted only (a) during regular business hours; and (b) in a manner which will not interfere with the operation of the API Business and/or the use of, access to or egress from the API Facilities. 10.2.3 TSR Paging's right to conduct tests, inspect records and other documents, and visually inspect all buildings and equipment at the API Facilities shall also be subject to the following terms and conditions: (i) All testing performed on TSR Paging's behalf shall be conducted by the Consultant; (ii) A Representative of TDS shall have the right to accompany the Consultant as it performs testing; (iii) Except as otherwise required by law, any information concerning the API Leased Real Property gathered by TSR Paging or the Consultant as the result of, or in connection with, the testing shall be kept confidential in accordance with subsection (iv) below and shall not be revealed to, or discussed with, anyone other than Representatives of TSR Paging or Representatives of TDS who agree to comply with the provisions of subsection (iv) below; and (iv) In the event that any party to this Agreement or any party set forth in subsection 10.2.3(iii) is requested or required to disclose information described in subsection 10.2.2, TSR Paging shall provide TDS or TDS shall provide TSR Paging, as the case may be, with prompt notice of such request so that TDS or TSR Paging, as the case may be, may seek an appropriate protective order or waiver by the other party's compliance with this Agreement. If, in the absence of a protective order or the receipt of a waiver hereunder, such party is nonetheless, in the opinion of its counsel, compelled to disclose such information to any tribunal or else stand liable for contempt or suffer other censure or penalty, such party will furnish only that portion of the information which is legally required and will exercise its reasonable efforts to obtain reliable assurance that confidential treatment will be afforded to the disclosed information. The requirements of this subsection 10.2.3(iv) shall not apply to information in the public domain or lawfully acquired on a nonconfidential basis from others. 10.3 CONDUCT OF BUSINESS. From the date hereof through the Closing TDS shall cause API, except as contemplated by this Agreement, or as consented to by TSR Paging in writing to operate its business in the ordinary course and substantially in accordance with past practice (except with respect to certain API FCC Licenses and API FCC License Applications and certain reductions in planned License build-outs as described in TDS Disclosure Letter 58 Schedule 6.13.7) and will use its best efforts not to take any action inconsistent with this Agreement. Without limiting the generality of the foregoing, TDS shall not, and shall cause API and each of its Subsidiaries not to, except as specifically contemplated by this Agreement: 10.3.1 change or amend the Certificate of Incorporation or Bylaws of API or any of API's Subsidiaries, except as otherwise required by law; 10.3.2 enter into, extend, modify, terminate or renew any API Contract disclosed, or which would have been required to be disclosed on TDS Disclosure Letter Schedule 6.7 if entered into, extended or modified prior to the date of this Agreement, or any API Real Property Lease; 10.3.3 sell, assign, transfer, convey, lease, mortgage, pledge or otherwise dispose of or encumber any API FCC License, API FCC License Application except those previously identified in TDS Disclosure Letter Schedule 10.3.3 or any other API Assets, or any interests therein other than sales and leases of Inventory in the ordinary course of business; 10.3.4 acquire by merger or consolidation with, or merge or consolidate with, or purchase substantially all of the assets of, or otherwise acquire any material assets or business of any Person; 10.3.5 fail to expend funds for budgeted capital expenditures or commitments as set forth in the budget of API attached hereto as Exhibit I including, without limitation, maintaining levels of spare parts sufficient to maintain and upgrade the network infrastructure as reasonably necessary and maintain the present level of Pagers in Service; 10.3.6 fail to maintain the API Assets in substantially their current state of repair, excepting normal wear and tear, or fail to replace consistent with API's past practice inoperable, worn-out or obsolete or destroyed API Assets or fail to maintain the Inventory levels of API and its Subsidiaries at the levels on the Interim Balance Sheet Date (subject to reductions in Inventory not exceeding ten (10) percent of such Inventory on the Interim Balance Sheet Date in accordance with prudent business practice); 10.3.7 make any loans or advances to any Person, except for normal advances in respect of expenses incurred by employees in the ordinary course of business. 10.3.8 for one year from the date of this Agreement, Transfer or agree to Transfer all or any part of the API Note or any interest therein to any Person otherwise than pursuant to the Option Agreement. 10.3.9 take or omit to take any action which will result in the further default under (not otherwise waived) or any acceleration of any API Intercompany Liabilities or any other Financing Obligations; 59 10.3.10 fail to take all commercially reasonable actions reasonably necessary to retain employees of API and its Subsidiaries in the employment of API or the applicable Subsidiary through the Closing. 10.3.11 do any other act which would cause any representation or warranty of TDS in this Agreement to be or become untrue in any material respect; or 10.3.12 enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder. 10.4 1997 FINANCIAL STATEMENTS. TDS shall cause API to prepare its audited financial statements for the fiscal year ending on December 31, 1997 and deliver a copy thereof to TSR Paging on or before May 1, 1998. 10.5 THE MERGER. In support of and in furtherance of TDS' obligations in Article VIII in connection with the Merger and this Article X to cause API to take and refrain from taking certain acts and obligations, TDS shall ensure that any merger agreement entered into with API (i) provides for the direct or indirect acquisition by TDS of all outstanding shares of capital stock of API not presently owned by TDS or its Affiliates in exchange for consideration other than capital stock of API; and (ii) imposes similar covenants on API as are imposed on TDS in this Article X in respect of API. 10.6 SUPPORT OF API. TDS shall continue to provide API with such financial support and assistance as it requires to continue operating the API Business in the ordinary course of business, including without limitation under the API Intercompany Indebtedness (taking into account the waiver of certain defaults dated March 5, 1997). 10.7 TRANSITIONAL SERVICES AGREEMENT. At the Closing, TDS and TSR Wireless shall enter into a transitional services agreement (the "TRANSITIONAL SERVICES AGREEMENT") in the form attached hereto as Exhibit G, pursuant to which TDS or its Affiliates, including API, shall provide certain transitional services in connection with information systems and lock-box services for such charges, periods and other terms as set forth therein. 10.8 EMPLOYEES. The Transferors and TSR Wireless shall agree upon appropriate procedures with respect to the allocation of costs of employees of API and its Subsidiaries (the "API EMPLOYEES"). Notwithstanding the foregoing, neither TSR Wireless or TSR Paging shall become liable for any Liabilities or any benefits to which the API Employees are entitled in respect of their employment prior to the employment of any API Employees by TSR Wireless to the extent not included in current liabilities of API assumed pursuant to Section 2.4.2. 10.9 MONTHLY CERTIFICATES. If the Closing shall not have occurred by the following applicable dates: (i) on or before July 15, 1998, TDS shall deliver a certificate (the "JUNE CERTIFICATE") to TSR Paging setting forth the Pagers in Service and the Net Recurring Pager Revenues of API and its Subsidiaries as at and for the month ended June 30, 1998 and, if 60 applicable, the API Pager Shortfall and the API Revenue Shortfall as at and for the month ended June 30, 1998; (ii) on or before August 15, 1998, TDS shall deliver a certificate (the "JULY CERTIFICATE") to TSR Paging setting forth the Pagers in Service and the Net Revenues of API and its Subsidiaries as at and for the month ended July 31, 1998 and, if applicable, the API Pager Shortfall and the API Revenue Shortfall as at and for the month ended July 31, 1998 and (iii) on or before September 15, 1998, TDS shall deliver a certificate (the "AUGUST CERTIFICATE") to TSR Paging setting forth the Pagers in Service and the Net Revenues of API and its Subsidiaries as at and for the month ended August 31, 1998 and, if applicable, the API Pager Shortfall and the API Revenue Shortfall as at and for the month ended August 31, 1998. ARTICLE XI CONDITIONS TO OBLIGATIONS OF TSR PAGING The obligation of TSR Paging to effect the Closing is subject to the satisfaction, on or prior to the Closing, of each of the following conditions, any of which may be waived by TSR Paging in the discretion of TSR Paging: 11.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of TDS contained in this Agreement shall be true and correct in all respects (in the case of any representation or warranty containing a materiality qualification) or in all material respects (in the case of any representation or warranty not containing any materiality qualification) at and as of the date of this Agreement and at and as of the Closing, and TDS shall have performed and satisfied all material agreements and covenants required hereby to be performed by it, and shall have caused API to perform all material actions to be performed by API, prior to the Closing. 11.2 NO INJUNCTION, ETC.. Consummation of the transactions contemplated hereby and by the Ancillary Agreement, the Merger Agreement and the Option Agreement shall not have been restrained, enjoined or otherwise prohibited by any applicable law, including any order, injunction, decree or judgment of any court or other Governmental Authority. No court or other Governmental Authority shall have enacted any applicable law which would make illegal the consummation of the transactions contemplated hereby and thereby and no proceeding with respect to the application of any such applicable law to such effect shall be pending. 11.3 OPINION OF COUNSEL. TDS shall have delivered to TSR Paging opinions of Sidley and Austin and Koteen & Naftalin, L.L.P., respectively, counsel and special regulatory counsel to TDS, dated as of the Closing Date, in substantially the forms attached hereto as Exhibits E-1 and E-2, respectively. 11.4 CERTIFICATES. TDS shall furnish TSR Paging with such certificates of its duly authorized officers and others to evidence compliance with the conditions set forth in this Article XI as may be reasonably requested by TSR Paging. 61 11.5 CORPORATE DOCUMENTS. TSR Paging shall have received from TDS resolutions adopted by the boards of directors of TDS, any corporation which is a constituent corporation in the Merger and API as applicable, approving this Agreement, the Ancillary Agreements, the Merger and the Option Agreement and the transactions contemplated hereby and thereby, certified by the corporate secretary of each Person, as applicable. 11.6 CONSENTS. All Authorizations, Consents and Permits necessary to effect the transfer of the API Assets to TSR Wireless and the performance of the other obligations of TDS hereunder shall have been obtained except (other than in the case of Authorizations, Consents and Permits of the FCC) where the failure to obtain any such Authorization, Consent or Permit would not reasonably be expected to have a Material Adverse Effect. 11.7 MERGER. The Merger shall have been consummated. 11.8 MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have occurred in respect of the API Business. For the purposes of this Section 11.8, Material Adverse Change shall include, without limitation, a reduction in the number of Pagers in Service of API and its Subsidiaries or the Net Monthly Pager Revenues of API and its Subsidiaries as at the last day of and for the month prior to the month in which the Closing occurs below 581,250 and $4,350,000, respectively. Not less than three (3) Business Days prior to the Closing Date, TDS shall deliver a certificate to TSR Paging setting forth the information described above, which shall take effect as an additional representation and warranty of TDS hereunder. No certification pursuant to this Section 11.8 shall affect the rights and obligations of the parties pursuant to Section 3.2, nor shall any waiver by TSR Paging of its rights under this Section 11.8 constitute a waiver of its rights under Section 3.2. If TSR Paging shall have exercised the Option Extension, this Section 11.8 shall no longer apply. 11.9 OTHER AGREEMENTS. TDS and TSR Wireless shall have executed and delivered the Ancillary Agreements to which they are each a party in the forms attached as exhibits hereto. 11.10 INTENTIONALLY OMITTED. 11.11 INTENTIONALLY OMITTED. 11.12 TENANT ESTOPPEL CERTIFICATES. TSR Paging shall have received tenant estoppel certificates addressed to TSR Wireless with respect to the API Leased Real Property indicated with a (*) on TDS Disclosure Letter Schedule 6.6, which certificates shall be reasonably satisfactory to TSR Paging or in the form required by the applicable lease of such API Leased Real Property. 11.13 CLOSING CURRENT ASSETS. The API Inventory, the cash and cash equivalents of API and the receivables of API as at the Closing Date to be transferred to TSR Wireless hereunder shall have an aggregate value of at least ninety percent (90%) of that shown on the 62 Interim Balance Sheet of API, determined in a manner consistent with GAAP and with the preparation of the Interim Balance Sheet of API. Upon the Closing, TDS shall deliver a certificate to TSR Paging setting forth the information described above, which shall take effect as an additional representation and warranty of TDS hereunder. ARTICLE XII CONDITIONS TO OBLIGATIONS OF TDS The obligation of TDS to effect the Closing is subject to the satisfaction, on or prior to the Closing, of each of the following conditions, any of which may be waived by TDS in the discretion of TDS: 12.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties of TSR Paging and TSR Wireless contained in this Agreement shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) in all material respects (in the case of any representation or warranty not containing any materiality qualification) at and as of the date of this Agreement and at and as of the Closing (other than any breaches of any such representations or warranties as result from any Claims by stockholders of API), and TSR Paging and TSR Wireless shall have performed and satisfied all material agreements and covenants required hereby to be performed by them prior to the Closing. 12.2 NO INJUNCTION, ETC.. Consummation of the transactions contemplated hereby and by the Ancillary Agreements, the Merger Agreement and the Option Agreement shall not have been restrained, enjoined or otherwise prohibited by any applicable law, including any order, injunction, decree or judgment of any court or other Governmental Authority. No court or other Governmental Authority shall have enacted any applicable law which would make illegal the consummation of the transactions contemplated hereby and thereby and no proceeding with respect to the application of any such applicable law to such effect shall be pending. 12.3 OPINIONS OF COUNSEL. TSR Paging shall have delivered to TDS opinions of Latham & Watkins and Richard S. Becker & Associates, respectively counsel and special regulatory counsel to TSR Paging, dated as of the Closing Date, in substantially the forms attached hereto as Exhibits F-1 and F-2, respectively. 12.4 CERTIFICATES. TSR Paging shall furnish TDS with such certificates of its duly authorized officers and others to evidence compliance with the conditions set forth in this Article XII as may be reasonably requested by TDS. 12.5 CORPORATE DOCUMENTS. TDS shall have received from TSR Paging resolutions adopted by the board of directors of TSR Paging and resolutions of TSR Wireless, as 63 applicable, approving this Agreement, the Ancillary Agreements and the Option Agreement and the transactions contemplated hereby and thereby, certified by the corporate secretary or Managing Member of each Person, as applicable. 12.6 CONSENTS. All Authorizations, Consents and Permits necessary to effect the transfer of the TSR Paging Assets to TSR Wireless and the performance of the other obligations of TSR Paging hereunder shall have been obtained except (other than in the case of Authorizations, Consents and Permits of the FCC) where the failure to obtain any such Authorization, Consent or Permit would not reasonably be expected to have a Material Adverse Effect. 12.7 MERGER. The Merger shall have been consummated. 12.8 MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have occurred in respect of the TSR Paging Business. For the purposes of this Section 12.8, Material Adverse Change shall include, without limitation, a reduction in the number of Pagers in Service of TSR Paging or the Net Monthly Pager Revenues of TSR Paging as at and for the last day of the month prior to the month in which the Closing occurs below 945,000 and $4,125,000, respectively. Not less than three (3) Business Days prior to the Closing Date, TSR Paging shall deliver a certificate to TDS setting forth the information described above, which shall take effect as an additional representation and warranty of TSR Paging hereunder. No certification pursuant to this Section shall affect the rights and obligations of the parties pursuant to Section 3.2, nor shall any waiver by TSR Paging of its rights under this Section constitute a waiver of its rights under Section 3.2. If TSR Paging shall have exercised the Extension Option, this Section 12.8 shall no longer apply. 12.9 OTHER AGREEMENTS. TSR Paging, TSR Wireless, the stockholders of TSR Paging and the Investors shall have executed and delivered the Ancillary Agreements to which they are party in the forms attached as exhibits hereto. 12.10 INTENTIONALLY OMITTED. 12.11 CLOSING CURRENT ASSETS. The TSR Paging Inventory, the cash and cash equivalents of TSR Paging and the receivables of TSR Paging as at the Closing Date to be transferred to TSR Wireless hereunder shall have an aggregate value of not at least ninety percent (90%) of that shown on the Interim Balance Sheet of TSR Paging, determined in a manner consistent with GAAP and with the preparation of the Interim Balance Sheet of TSR Paging. Upon the Closing, TSR Paging shall deliver a certificate to TDS setting forth the information described above, which shall take effect as an additional representation and warranty of TSR Paging hereunder. 64 ARTICLE XIII RISK OF LOSS; CONSENTS TO ASSIGNMENT OF CONTRACTS, REAL PROPERTY LEASES AND PERSONAL PROPERTY LEASES 13.1 RISK OF LOSS. From the date hereof through the Closing Date, all risk of loss or damage to the property included (i) in the API Assets shall be borne by TDS; and (ii) in the TSR Paging Assets shall be borne by TSR Paging; and thereafter in each case shall be borne by TSR Wireless. If any material portion of the API Assets or the TSR Paging Assets (collectively, "ASSETS") is destroyed or damaged by fire or any other cause on or prior to the Closing Date, the applicable Transferor shall give written notice to TSR Wireless and the other Transferor as soon as practicable after, but in any event within five (5) calendar days of, discovery of such damage or destruction, including specification of the amount of insurance, if any, covering such Assets and the amount, if any, which the applicable Transferor is otherwise entitled to receive as a consequence of such damage or destruction. Prior to the Closing, the other Transferor shall have the option, which shall be exercised by written notice to the applicable Transferor within ten (10) calendar days after receipt of the applicable Transferor's notice or if there are not ten (10) calendar days prior to the Closing Date, as soon as practicable prior to the Closing Date, of (a) accepting such Assets in their destroyed or damaged condition in which event TSR Wireless shall be entitled to the proceeds of any insurance or other proceeds payable with respect to such loss, or the cash equivalent thereof and to indemnification for any uninsured portion of such loss pursuant to Section 14.4, and the full Units shall be issued to the applicable Transferor, (b) if agreed by the Applicable Transferor, excluding such Assets from this Agreement, in which event the allocation of Units shall be adjusted proportionately, as mutually agreed between the parties or (c) after providing the Applicable Transferor with a reasonable opportunity to cure, terminating this Agreement in accordance with Section 15.1, if such damage or destruction is a Material Adverse Effect. 13.2 CONSENTS TO ASSIGNMENT OF CONTRACTS, REAL PROPERTY LEASES AND PERSONAL PROPERTY LEASES. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract, Real Property Lease or Personal Property Lease, or any claim or right or any benefit arising thereunder or resulting therefrom, if an attempted assignment thereof, without the Consent of a third party thereto, would constitute a breach thereof or in any way adversely affect the rights of TSR Wireless thereunder. If such Consent is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights thereunder so that TSR Wireless would not receive all such rights, the Transferors and TSR Wireless will cooperate, in all reasonable respects, to obtain such Consent as soon as practicable and, until such Consent is obtained, to provide to TSR Wireless the benefits under any of the foregoing to which such Consent relates (with TSR Wireless responsible for all the liabilities and obligations thereunder). In particular, in the event that any such Authorization or Consent is not obtained prior to Closing, then TSR Wireless and the Transferors shall enter into such arrangements (including subleasing or subcontracting if permitted) to provide to the parties the economic and operational equivalent of obtaining such Consent and assigning such Contract, Real Property Lease or Personal 65 Property Lease, including enforcement for the benefit of TSR Wireless of all claims or rights arising thereunder, and the performance by TSR Wireless of the obligations thereunder. ARTICLE XIV ACTIONS BY TSR WIRELESS AND TRANSFERORS AFTER THE CLOSING 14.1 FURTHER ACTIONS. On and after the Closing Date, TSR Wireless and the Transferors will take all appropriate actions and execute all documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to confirm or effect TSR Wireless's ownership, possession and control (in accordance with this Agreement) of the Assets and assumption of the TSR Paging Assumed Liabilities and the API Assumed Liabilities. 14.2 SURVIVAL OF REPRESENTATIONS, ETC.. The representations, warranties, covenants and agreements of the Transferors and TSR Wireless contained herein shall survive the Closing Date for the period set forth in this Section 14.2: (i) all such representations and warranties and all claims and causes of action with respect thereto shall terminate upon expiration of two (2) years after the Closing Date, except that the representations and warranties in Sections 5.1, 6.1 and 7.1 (Organization), 5.2, 6.2 and 7.2 (Authorization) 5.13 and 6.13 (Regulatory Matters) and 5.18 and 6.18 (No Brokers) and all claims and causes of action with respect thereto shall survive indefinitely and the representations and warranties in Sections 5.21 and 6.21 (Environmental Matters) and 5.22 and 6.22 (Tax Matters), and all claims and causes of action with respect thereto shall survive until the expiration of the applicable statute of limitations (with extensions) (including, in the case of any Taxes, the statute of limitations, as such may be extended, in respect of the collection of any Tax) with respect to the matters addressed in such Sections; and (ii) each such covenant and agreement shall survive the Closing and remain in full force and effect unless otherwise limited by its terms. The termination of the representations and warranties provided herein shall not affect the rights of a party in respect of any Claim made by such party in a writing received by the other party prior to the expiration of the applicable survival period provided herein. 14.3 BOOKS AND RECORDS. TSR Wireless agrees that it will cooperate with and make available to the Transferors during normal business hours, all Books and Records, information and employees (without substantial disruption of employment) which are necessary or useful in connection with any tax inquiry, audit, investigation or dispute, any litigation or investigation or any other matter requiring any such Books and Records, information or employees for any reasonable business purpose (including any matter concerning a potential breach of any representation or warranty or covenant of a party under this Agreement); IT BEING UNDERSTOOD that all Books and Records shall be maintained by TSR Wireless for seven (7) years following the Closing. Except as otherwise required in Section 14.4, the investigating Transferor shall bear all of the out-of-pocket costs and expenses (including, without limitation, attorneys' fees, but excluding reimbursement for salaries and employee benefits) reasonably incurred in 66 connection with providing such Books and Records, information or employees. TSR Wireless will give TDS notice of any breach or potential breach by TSR Paging of any representation or warranty. All information received pursuant to this Section 14.3 shall be subject to the confidentiality provisions of Section 14.6. 14.4 INDEMNIFICATION. 14.4.1 BY TSR PAGING. TSR Paging shall indemnify, save and hold harmless, on an After Tax Basis, (x) TSR Wireless and its Subsidiaries, and their respective directors, officers and employees (other than the Transferred Employees) (the "TSR WIRELESS INDEMNITEES") and (y) TDS and its Affiliates and Subsidiaries, and their respective directors, officers, shareholders and employees (the "TDS INDEMNITEES") from and against any and all costs, losses, Taxes, Liabilities, damages, lawsuits, deficiencies, claims, demands, and expenses (whether or not arising out of third-party claims), including, without limitation, reasonable attorneys' fees and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing herein, (collectively, "DAMAGES"), incurred in connection with, arising out of, resulting from (i) subject to Section 14.4.7(i), Section 14.4.7 (iv) and Section 14.4.7(vi), any breach of any representation or warranty made by TSR Paging in this Agreement or (ii) subject to Section 14.4.7(i), Section 14.4.7(iv) and Section 14.4.7(vi), any breach of any covenant or agreement made by TSR Paging in this Agreement. 14.4.2 BY TDS. TDS shall indemnify, save and hold harmless, on an After Tax Basis, (x) TSR Paging, its Affiliates and Subsidiaries, and their respective directors, officers, shareholders and employees (the "TSR PAGING INDEMNITEES" and together with the TDS Indemnitees, the TSR Wireless Indemnitees and the Investor Indemnitees, the "INDEMNITEES") and (y) the TSR Wireless Indemnitees from and against any and all Damages incurred in connection with, arising out of, resulting from (i) subject to Section 14.4.7(ii) and Section 14.4.7(iv) and Section 14.4.7 (vii), any breach of any representation or warranty made by TDS, API or any Subsidiary of API in this Agreement; (ii) subject to Section 14.4.7(ii) and Section 14.4.7(iv) and Section 14.4.7 (vii), any breach of any covenant or agreement made by TDS in this Agreement; (iii) any API Excluded Liability and (iv) any Claim by any shareholder of TDS or API other than MIS Charges. TDS shall indemnify, save and hold harmless the Investors and their respective members, investors, funds, directors, officers, partners and employees (the "INVESTOR INDEMNITEES") from and against any and all Damages incurred in connection with, arising out of, or resulting from any Claim by any shareholder of TDS or API. 14.4.3 BY TSR WIRELESS. TSR Wireless shall indemnify, save and hold harmless, on an After Tax Basis, the TSR Paging Indemnitees and the TDS Indemnitees from and against any and all Damages incurred in connection with, arising out of, resulting from (i) subject to Section 14.4.7(iii) and Section 14.47(iv), any breach of any representation or warranty made by TSR Wireless in this Agreement; (ii) subject to Section 14.4.7(iii) and Section 14.4.7(iv), any breach of any covenant or agreement made by TSR Wireless in this Agreement; (iii) any TSR Paging Assumed Liability; and (iv) any API Assumed Liability; 67 14.4.4 DAMAGES. The term "Damages" as used in this Section 14.4 is not limited to matters asserted by third parties, but includes Damages incurred or sustained by an Indemnitee in the absence of third party claims. Payments by an Indemnitee of amounts for which such Indemnitee is indemnified hereunder shall not be a condition precedent to recovery. 14.4.5 DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to be made by an Indemnitee, such Indemnitee shall, subject to Section 14.2, give written notice (a "CLAIM NOTICE") to the indemnifying party as soon as practicable after such Indemnitee becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 14.4. If any lawsuit or enforcement action is filed against any Indemnitee hereunder, notice thereof (a "THIRD PARTY NOTICE") shall be given to the indemnifying party as promptly as practicable (and in any event within fifteen (15) calendar days after the service of the citation or summons). The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates actual damage caused by such failure. After receipt of a Third Party Notice, if the indemnifying party shall acknowledge in writing to the indemnified party that the indemnifying party shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be entitled, if it so elects, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage attorneys of its own choice to handle and defend the same, at the indemnifying party's cost, risk and expense unless the named parties to such action or proceeding include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, and (iii) to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the indemnified party, such consent not to be unreasonably withheld. The indemnified party shall cooperate in all reasonable respects with the indemnifying party and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; and the indemnified party may, at its own cost, participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The parties shall also cooperate with each other in any notifications to insurers. If the indemnifying party fails to assume the defense of such claim within fifteen (15) calendar days after receipt of the Third Party Notice, the indemnified party against which such claim has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake the defense, compromise or settlement of such claim and the indemnifying party shall have the right to participate therein at its own cost; PROVIDED, HOWEVER, that such claim shall not be compromised or settled without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. In the event the indemnified party assumes the defense of the claim, the indemnified party will keep the indemnifying party reasonably informed of the progress of any such defense, compromise or settlement. 68 14.4.6 BROKERS AND FINDERS. Pursuant to the provisions of this Section 14.4, each Selling Party and TSR Wireless shall indemnify, hold harmless and defend the other parties from the payment of any and all broker's and finder's expenses, commissions, fees or other forms of compensation which may be due or payable from or by the indemnifying party, or may have been earned by any third party acting on behalf of the indemnifying party in connection with the negotiation and execution hereof and the consummation of the transactions contemplated hereby. 14.4.7 LIMITATIONS. (i) TSR Paging shall not be liable to any TDS Indemnitee or any TSR Wireless Indemnitee for any Damages with respect to the matters contained in Section 14.4.1(i) or Section 14.4.1(ii) except to the extent the Damages therefrom exceed, in the aggregate, $1,000,000, provided however that once such Damages, in the aggregate, exceed such sum, TSR Paging shall be liable for all such Damages and not just the excess. (ii) TDS shall not be liable to any TSR Paging Indemnitee or any TSR Wireless Indemnitee for any Damages with respect to the matters contained in Section 14.4.2(i) or Section 14.4.2(ii) except to the extent the Damages therefrom exceed, in the aggregate, $1,000,000, provided however that once such Damages, in the aggregate, exceed such sum, TDS shall be liable for all such Damages and not just the excess. (iii) TSR Wireless shall not be liable to any TSR Paging Indemnitee or any TDS Indemnitee for any Damages with respect to the matters contained in Section 14.4.3(i) or Section 14.4.3(ii) except to the extent the Damages therefrom exceed, in the aggregate, $1,000,000, provided however that once such Damages, in the aggregate, exceed such sum, TSR Wireless shall be liable for all such Damages and not just the excess. (iv) The indemnification provided by this Section 14.4 shall be in addition to any other remedy of the parties hereto including damages, specific performance and injunctive relief, provided that the limitations set forth in Sections 14.4.7(i) through 14.4.7(iii) shall still apply with respect to the matters contained in Sections 14.4.1(i), 14.4.1(ii), 14.4.2(i), 14.4.2(ii), 14.4.3(i) and 14.4.3(ii). (v) No claim based on a breach of any representation or warranty shall be valid unless first made in writing within the survival periods set forth in Section 14.2. (vi) Unless TDS shall terminate this Agreement pursuant to Section 15.1.1(iv)(a) or (c), TSR Paging's liability with respect to any breach of any representation or warranty made by TSR Paging in this Agreement to the extent that any Damages constitute TSR Paging Assumed Liabilities shall be to indemnify, save and hold harmless TSR Wireless and its Affiliates and Subsidiaries and TSR Paging shall be liable to the TDS Indemnitees with respect to any such breach only to the extent of the costs of defending any Claim by a third party made against such Indemnitee arising out of or related to such breach in accordance with 69 Section 14.4.5, provided, (i) any Damages in connection therewith which are also suffered by TSR Wireless shall be satisfied by payments made to TSR Wireless and (ii) TSR Paging shall not be responsible to indemnify, save and hold harmless such TDS Indemnitees in respect of any Claim by any shareholder of TDS or API. (vii) Unless TSR Paging shall terminate this Agreement pursuant to Section 15.1.1(iii)(a) or (c), TDS' liability with respect to any breach of any representation or warranty made by TDS in this Agreement to the extent that any Damages constitute TDS Assumed Liabilities shall be to indemnify, save and hold harmless TSR Wireless and its Affiliates and Subsidiaries and TDS shall be liable to the TSR Paging's Indemnitees with respect to any such breach only to the extent of the costs of defending any Claim by a third party made against such Indemnitee arising out of or related to such breach in accordance with Section 14.4.5, provided, (i) any Damages in connection therewith which are also suffered by TSR Wireless shall be satisfied by payments made to TSR Wireless and (ii) TDS shall not be responsible to indemnify, save and hold harmless such TSR Paging Indemnitees in respect of any Claim by any shareholder of TSR Paging. 14.5 BULK SALES, TRANSFER TAXES. 14.5.1 It may not be practicable to comply or attempt to comply with the procedures of the "Bulk Sales Act" or similar law of any or all of the states in which the Assets are situated or of any other state which may be asserted to be applicable to the transactions contemplated hereby. Accordingly, TSR Wireless and the Transferors waive any requirements, to the extent they are entitled to benefits thereunder, for compliance with any or all of such laws. Each Transferor hereby agrees that the indemnity provisions of Section 14.4 hereof shall apply to any Damages of TSR Wireless arising out of or resulting from the failure of such Transferor to comply with any such laws. 14.5.2 Following the Closing, TSR Wireless shall be responsible for the timely payment of, and shall severally indemnify and hold harmless each Transferor against, all sales (including, without limitation, use, value added, documentary, stamp, gross receipts, registration, transfer, conveyance, excise, recording, license and other similar Taxes and fees ("TRANSFER TAXES")), arising out of or in connection with or attributable to the transactions effected by a Transferor pursuant to this Agreement and the Ancillary Agreements. Subject to the foregoing, each Transferor shall prepare and timely file all Tax returns required to be filed in respect of Transfer Taxes, PROVIDED that TSR Wireless shall be permitted to prepare any such Tax returns that are the primary responsibility of TSR Wireless under applicable law. 14.6 ASSISTANCE FOR FILING OF TAX RETURNS. Each Transferor and TSR Wireless agrees (i) to furnish or cause to be furnished to each other upon request, as promptly as practicable, such information and assistance (including access to books, records and correspondence received from any taxing authority) relating to the TSR Paging Business, the TSR Paging Assets, the API Business, and the API Assets as is reasonably necessary for the preparation and filing of any Tax return, claim for refund or audit, and the presentation or defense of any 70 Action relating to Taxes; (ii) to provide timely notice to each interested party in writing of any pending or threatened Tax audits or assessments relating to Taxes in respect of the TSR Paging Business, TSR Paging Assets, API Business or API Assets for which another party may have a liability under Section 14.4 and Section 14.5.2. ARTICLE XV MISCELLANEOUS 15.1 TERMINATION. 15.1.1 TERMINATION. This Agreement may be terminated at any time prior to Closing: (i) By mutual written consent of the Transferors; (ii) By TSR Paging or TDS by written notice to the other parties if the Closing shall not have occurred on or before 5:00 p.m. New York City time on September 30, 1998; PROVIDED HOWEVER, that this provision shall not be available to TDS if TSR Paging has the right to terminate this Agreement under clause (iii) of this Section 15.1.1, and this provision shall not be available to TSR Paging if TDS has the right to terminate this Agreement under clause (iv) of this Section 15.1.1; (iii) By TSR Paging by written notice to TDS if (a) the representations and warranties of TDS shall not have been true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) as of the date when made, (b) if any of the conditions set forth in Article XI shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by 5:00 p.m. New York City time on September 30, 1998, (c) TDS shall fail to comply with or perform any covenant or agreement to be complied with or performed by TDS pursuant to this Agreement unless such failure described in (b) or (c) shall be due to the failure of TSR Paging to perform or comply with any of the conditions, agreements or covenants hereof to be performed or complied with by it prior to the Closing or (d) the special committee of independent directors of API appointed to consider the acquisition by TDS of the Common Stock of API not owned by TDS shall fail to approve the Merger on or before February 12, 1998 or shall subsequently withdraw its recommendation of the Merger other than as a result of a breach of a representation or covenant of TSR Paging hereunder; or (iv) By TDS by written notice to TSR Paging if (a) the representations and warranties of TSR Paging shall not have been true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality 71 qualification) as of the date when made, (b) if any of the conditions set forth in Article XII shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by 5:00 p.m. New York City time on September 30, 1998 or (c) TSR Paging shall fail to comply with or perform any covenant or agreement to be complied with or performed by TSR Paging pursuant to this Agreement unless such failure described in (b) or (c) shall be due to the failure of TDS to perform or comply with any of the conditions, agreements or covenants hereof to be performed or complied with by it prior to the Closing. (v) By TDS by written notice delivered to TSR Paging within ten (10) Business Days following delivery of the June Certificate to TSR Paging if the number of Pagers in Service of API and its Subsidiaries or the Net Monthly Pager Revenues of API and its Subsidiaries set forth on the June Certificate as at and for the month ending June 30, 1998 are below 581,250 and $4,350,000, respectively, unless TSR Paging pays $1,500,000 to TDS by wire transfer of immediately available funds as set forth in the wire instructions attached hereto as Exhibit H ("WIRE TRANSFER") within fifteen (15) Business Days of receipt by TSR Paging of such written notice of termination from TDS (the "EXTENSION OPTION"). Any notice to terminate this Agreement under this Section 15.1.1(v) may not be withdrawn, unless permitted by TSR Paging, and shall take effect on the sixteenth (16th) Business Day following receipt by TSR Paging of the written notice of termination from TDS, unless TSR Paging shall first have exercised the Extension Option, PROVIDED, HOWEVER, that TDS shall not be able to exercise its right to terminate this agreement pursuant to clause 15.1.1(v) if, at the time it would otherwise exercise such right, TDS is in material breach of a representation or warranty (in the case of a representation or warranty not qualified as to materiality) or is in breach of a representation or warranty (in the case of a representation or warranty qualified as to materiality). Solely for purposes of Section 15.1.1(v) and Section 15.1.1(vi), TDS shall not be deemed in breach of the Agreement if TDS has acted in good faith with respect to its obligations under Sections 10.3.5, 10.3.10 and 10.6. (vi) If TSR Paging has exercised the Extension Option, by TDS by written notice delivered within ten (10) Business Days following delivery of each of the July Certificate and the August Certificate, unless TSR Paging pays $1,500,000 to TDS by Wire Transfer with fifteen (15) Business Days of receipt by TSR Paging of such written notice of termination from TDS. Any notice to terminate this Agreement under this Section 15.1.1(vi) may not be withdrawn unless permitted by TSR Paging, and shall take effect on the sixteenth (16th) Business Day following receipt by TSR Paging of the relevant written notice of termination from TDS, unless TSR Paging shall first have paid $1,500,000 to TDS as set forth above, PROVIDED, HOWEVER, that TDS shall not be able to exercise its right to terminate this agreement pursuant to clause 15.1.1(v) if, at the time it would otherwise exercise such right, TDS is in material breach of a representation or warranty (in the case of a representation or warranty not qualified as to materiality) or is in breach of a representation or warranty (in the case of a representation or warranty qualified as to materiality). Solely for purposes of Section 15.1.1(v) and Section 15.1.1(vi), TDS shall not be deemed in breach of the Agreement if TDS has acted in good faith with respect to its obligations under Sections 10.3.5, 10.3.10 and 10.6. 72 (vii) By TSR Paging at any time after it has exercised the Extension Option. 15.1.2 IN THE EVENT OF TERMINATION. In the event of termination of this Agreement: (i) Each party will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same; (ii) The provisions of Sections 15.10 and 15.12 shall continue in full force and effect; (iii) No party hereto shall have any liability or further obligation to any other party to this Agreement, except as stated in this Section 15.1.2, and Section 14.4.6 and 15.7, except for any breach of this Agreement by such party occurring prior to the proper termination of this Agreement; and (iv) The provision of Section 10.3.8 shall continue in full force and effect if TSR Paging terminates the Agreement pursuant to Section 15.1.1(iii)(d). 15.2 ASSIGNMENT. Neither this Agreement, the Ancillary Agreements nor any of the rights or obligations hereunder or thereunder may be assigned by any party without the prior written consent of the other parties thereto; except that TSR Wireless may, without such consent, assign all such rights to any lender as collateral security and assign all such rights and obligations to a wholly-owned subsidiary (or a partnership controlled by TSR Wireless) of TSR Wireless or, after the Closing, to a successor in interest to TSR Wireless which shall assume all obligations and liabilities of TSR Wireless under this Agreement (PROVIDED that no assignment shall release the assigning party from responsibility for its obligations hereunder). Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and no other Person shall have any right, benefit or obligation under this Agreement as a third party beneficiary or otherwise. 15.3 NOTICES. All notices under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method provided that such transmission is confirmed by telephone; the day after it is sent, if sent for next day delivery to a domestic address by overnight mail; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: If to TDS, addressed to: 30 North LaSalle Street 73 Suite 4000 Chicago, Illinois 60602 Fax: (312) 630-9299 Attention: Chief Financial Officer With copies to: Sidley & Austin 1 First National Plaza Chicago, Illinois 60603 Fax: (312) 456-5352 Attention: Michael G. Hron Sidley & Austin 875 Third Avenue New York, New York 10022 Fax: (212) 906-2021 Attention: James G. Archer If to TSR Paging, addressed to: TSR Paging Inc. 400 Kelby Street, 8th Floor Fort Lee, New Jersey 07024 Fax: (201) 947-7145 Attention: Mitchell L. Sacks With copies to: Latham & Watkins 885 Third Avenue Suite 1000 New York, New York 10022 Fax: (212) 751-4864 Attention: Roger H. Kimmel, Esq. TA Associates, Inc. High Street Tower Suite 2500 Boston, Massachusetts 02110 Fax:(617) 574-6728 Attention: Kenneth T. Schiciano and to 74 Spectrum Equity Investors 125 High Street, 26th Floor Boston, Massachusetts 02110 Fax: (617) 464-4601 Attention: William P. Collatos If to TSR Wireless, addressed to: TSR Wireless, LLC 400 Kelby Street, 8th Floor Fort Lee, New Jersey 07024 Fax: (201) 947-7145 Attention: Mitchell L. Sacks With copies to: Latham & Watkins 885 Third Avenue Suite 1000 New York, New York 10022 Fax: (212) 751-4864 Attention: Roger H. Kimmel, Esq. Sidley & Austin 875 Third Avenue New York, New York 10022 Fax: (212) 906-2021 Attention: James G. Archer TA Associates, Inc. High Street Tower Suite 2500 Boston, Massachusetts 02110 Fax:(617) 574-6728 Attention: Kenneth T. Schiciano and to Spectrum Equity Investors 125 High Street, 26th Floor Boston, Massachusetts 02110 Fax: (617) 464-4601 Attention: William P. Collatos 75 or to such other place and with such other copies as either party may designate as to itself by written notice to the others. 15.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the internal law, and not the law of conflicts, of the State of New York. 15.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, the Ancillary Agreements, together with all exhibits and schedules hereto and thereto (including the Disclosure Schedule) and the Option Agreement and the Confidentiality Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended or supplemented except by an instrument in writing signed on behalf of each of the parties hereto. No modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 15.6 MULTIPLE COUNTERPARTS. 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 instrument. 15.7 EXPENSES. Except as otherwise specified in this Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement and to any action taken by such party in preparation for carrying this Agreement into effect. 15.8 INVALIDITY. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 15.9 TITLES. The titles, captions or headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 15.10 PUBLIC STATEMENTS AND PRESS RELEASES. The parties hereto covenant and agree that, except as provided for below, each will not from and after the date hereof make, issue or release any public announcement, press release, statement or acknowledgment of the existence of, or reveal publicly the terms, conditions and status of, the transactions provided for herein, without the prior written consent of the other parties as to the content and time of release of and the media in which such statement or announcement is to be made; PROVIDED, HOWEVER, 76 that in the case of announcements, statements, acknowledgements or revelations which any party is required by law to make, issue or release, the making, issuing or releasing of any such announcement, statement, acknowledgment or revelation by the party so required to do so by law shall not constitute a breach of this Agreement if such party shall have given, to the extent reasonably possible, not less than two (2) calendar days prior notice to the other parties, and shall have attempted, to the extent reasonably possible, to clear such announcement, statement, acknowledgment or revelation with the other parties. Each party hereto agrees that it will not unreasonably withhold any such consent or clearances. 15.11 KNOWLEDGE. Whenever this Agreement refers to the "knowledge of TSR Paging", or a similar phrase, it refers to the collective actual and constructive knowledge of Leonard DiSavino, Philip Sacks and Mitchell L. Sacks after reasonable inquiry. Wherever this Agreement refers to the "knowledge of TDS" or a similar phrase, it refers to the collective actual and constructive knowledge of the key management employees of TDS and API and its Subsidiaries including Terrence Sullivan, Leroy T. Carlson, Jr., Scott Williamson and Murray Swanson after reasonable inquiry. 15.12 CONFIDENTIAL INFORMATION. 15.12.1 In connection with the negotiation of this Agreement, the preparation for the consummation of the transactions contemplated hereby, and the performance of obligations hereunder, each party acknowledges that it has had and will have access to confidential information relating to the other parties, including technical or marketing information, ideas, methods, developments, inventions, improvements, business plans, trade secrets, statistical data, diagrams, drawings, specifications or other proprietary information relating thereto, together with all analyses, compilations, studies, customer lists, pricing information or other documents, records or data prepared by each party or their respective Subsidiaries (if any) or Representatives which contain or otherwise reflect or are generated from such information ("CONFIDENTIAL INFORMATION"). The term "Confidential Information" does not include information received by any party or its Subsidiaries in connection with the transactions contemplated hereby which (i) is or becomes generally available to the public other than as a result of a disclosure by such party or its Subsidiaries or Representatives, (ii) was within any such party's possession prior to its being furnished to such party by or on behalf of one of the other parties in connection with the transactions contemplated hereby, provided that the source of such information was not known by the party now possessing the Confidential Information to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to any party or any other Person with respect to such information or (iii) becomes available to any party on a non-confidential basis from a source other than one of the other parties and their Subsidiaries, if any, or any of their respective Representatives, provided that such source is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to such other parties or any other Person with respect to such information. 77 15.12.2 TSR Paging and TDS and TSR Wireless and their respective Subsidiaries shall treat all Confidential Information as confidential, preserve the confidentiality thereof and not disclose any Confidential Information, except to their respective Representatives and Affiliates who need to know such Confidential Information in connection with the transactions contemplated hereby and except to the board of directors of API and their Representatives. Each party shall, and shall cause its Subsidiaries to use all reasonable efforts to cause its Representatives to treat all Confidential Information as confidential, preserve the confidentiality thereof and not disclose any Confidential Information. Each party shall be responsible for any breach of this Agreement by any of its Subsidiaries or Representatives. If, however, Confidential Information is disclosed, such party shall immediately notify the other parties in writing and take all reasonable steps required to prevent further disclosure. 15.12.3 Until the Closing or the termination of this Agreement, all Confidential Information shall remain the property of the party who originally possessed such information. In the event of the termination of this Agreement for any reason whatsoever, each party shall, and shall cause its Subsidiaries and Representatives to destroy or return to the other parties all Confidential Information (including all copies, summaries and extracts thereof) furnished to it by the other parties in connection with the transactions contemplated hereby. 15.12.4 If any of the parties or their Subsidiaries, Representatives or Affiliates is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) or is required by operation of law to disclose any Confidential Information, such party shall provide the other parties with prompt written notice of such request or requirement, which notice shall, if practicable, be at least 48 hours prior to making such disclosure, so that the other parties may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of such a waiver, any party and/or any of its Subsidiaries and Representatives is nonetheless, in the opinion of counsel, legally compelled to disclose Confidential Information, then that party may disclose that portion of the Confidential Information which such counsel advises is legally required to be disclosed, provided that the party uses its reasonable efforts to preserve the confidentiality of the Confidential Information, whereupon such disclosure shall not constitute a breach of this Agreement. 15.12.5 This Agreement shall supersede the confidentiality agreement dated as of May 8, 1997 between TSR Paging and TDS. 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the day and year first above written. TSR PAGING INC. By /s/ Mitchell L. Sacks -------------------------------------------- Name Mitchell L. Sacks -------------------------------------------- Its President -------------------------------------------- TELEPHONE AND DATA SYSTEMS, INC. By /s/ Scott H. Williamson -------------------------------------------- Name Scott H. Williamson -------------------------------------------- Its Vice President - Acquisitions -------------------------------------------- TSR WIRELESS LLC By /s/ Mitchell L. Sacks -------------------------------------------- Name Mitchell L. Sacks -------------------------------------------- Its President ------------------------------------------- 79 SCHEDULE 1.1 1. Contract dated 3/13/97 with Microspace Communications for Stream 3, 64 KBS segment. 2. All contracts with Subscriber Computing. 3. All agreements between API and its employees. 4. The following Agreements between API and TDS: a. Exchange Agreement, dated January 1, 1994, between TDS and API. b. Registration Rights Agreement, dated January 1, 1994, between TDS and API. c. Revolving Credit Agreement, dated January 1, 1994, between TDS and API. d. Intercompany Agreement, dated January 1, 1994, between TDS and API. e. Tax Allocation Agreement, dated January 1, 1994, between TDS and API. f. Employee Benefit Plans Agreement, dated January 1, 1994, between TDS and API. g. Cash Management Agreement, dated January 1, 1994, between TDS and API. h. Insurance Cost Sharing Agreement, dated January 1, 1994, between TDS and API. 5. Licenses for SAP and Ceridian Software (licensed to TDS). See Schedule 6.7(i)(f). 80 EX-99.(C)(3) 4 OPTION AGREEMENT OPTION AGREEMENT OPTION AGREEMENT (this "AGREEMENT") dated as of December 22, 1997, by and among TELEPHONE AND DATA SYSTEMS, INC. ("GRANTOR"), and TSR WIRELESS LLC ("TSR WIRELESS"). RECITALS: A. Grantor is the holder of certain indebtedness of American Paging, Inc. (the "COMPANY"). B. On the date hereof TSR Paging Inc. ("TSR PAGING") owns 100% of TSR Wireless. C. Grantor desires to sell and grant to TSR Wireless, and TSR Wireless desires to purchase and acquire from Grantor, an option (the "OPTION") to purchase from Grantor all of Grantor's right, title and interest in and to or arising under or in connection with the Indebtedness (as defined below). AGREEMENT In consideration of the mutual agreements contained herein, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. 1.1 In addition to terms defined elsewhere in this Agreement, the following terms shall have the following meanings herein. "ASSET CONTRIBUTION AGREEMENT": Asset Contribution Agreement dated as of December 22, 1997 by and among TSR Wireless, Grantor and TSR Paging. "BUSINESS DAY": Any day when commercial banks are open for regular banking business in New York City. "CALL NOTICE": A written notice from TSR Wireless to Grantor in the form attached hereto as EXHIBIT A. "COMPANY": American Paging, Inc. "DISTRIBUTIONS": Any and all cash, interest, fees, securities, dividends and other property or consideration which may be exchanged for, distributed or collected in respect of the Indebtedness. "EXERCISE DATE": Any Business Day during the Exercise Period on which TSR Wireless exercises the Option in whole or in part. "EXERCISE PERIOD": Any Business Day occurring during the period from (A) the earlier to occur of (i) February 12, 1998, but only if the Special Committee of the Board of Directors of the Company has failed to approve the merger contemplated in the Asset Contribution Agreement, (ii) the date on which the Special Committee of the Board of Directors of the Company withdraws its approval of the Merger contemplated by the Asset Contribution Agreement, (iii) the date the Company takes board action or the Company's stockholders take action to liquidate the Company and (iv) the date on which Grantor has entered into an agreement for the sale of all or substantially all of the capital stock of the Company owned by Grantor or the Company has entered into an agreement for the merger, consolidation or other combination of the Company or the sale of all or substantially all of the assets of the Company, other than to TSR Wireless, to and including (B) the earlier of (x) 5:00 p.m. New York City time on September 30, 1998 and (y) the date on which the Asset Contribution Agreement is terminated pursuant to Section 15.1.1(iv)(a) or (c) and (z) the Closing occurs under the Asset Contribution Agreement. "FURTHER LLC INTEREST": An LLC Interest equal to 18.1% of the LLC Interest which would have been issued to Grantor pursuant to Section 3.1.2 of the Asset Contribution Agreement had Grantor contributed the Cracker Jack Assets to TSR Wireless upon the Closing without regard to any Post-Closing Adjustment provided by Article III of the Asset Contribution Agreement. "INDEBTEDNESS": The outstanding principal amount of advances made by Grantor to the Company under that certain Revolving Credit Agreement, dated as of January 1, 1994, between Grantor and the Company, as amended, supplemented or otherwise modified to date (the "CREDIT AGREEMENT"), PLUS all interest, fees and other amounts owing thereunder. "INITIAL LLC INTEREST": An LLC Interest equal to 81.9% of the LLC Interest which would have been issued to Grantor pursuant to Section 3.1.2 of the Asset Contribution Agreement had Grantor contributed the Cracker Jack Assets to TSR Wireless upon the Closing without regard to any Post-Closing Adjustment provided by Article III of the Asset Contribution Agreement. "LLC INTEREST": A member interest in TSR Wireless. "TSR ASSET CONTRIBUTION": As defined in Section 2. "TSR WIRELESS": TSR Wireless LLC, a Delaware limited liability company in which, as of the date hereof, TSR Paging holds all LLC Interests. 1.2 Other capitalized terms used in this Agreement, but not defined herein, shall bear the meanings given to them in the Asset Contribution Agreement. 2. OPTION. Grantor hereby irrevocably grants and sells to TSR Wireless, and TSR Wireless hereby purchases and accepts from Grantor, the Option. The Option may be exercised on any Exercise Date selected by TSR Wireless, by delivery to Grantor of a duly 2 executed Call Notice; provided that the Option may only be exercised if (i) all of the assets and liabilities of TSR Paging have been contributed by TSR Paging to TSR Wireless ("TSR ASSET CONTRIBUTION") in exchange for LLC Interests in TSR Wireless, (ii) the condition set forth in Section 12.6 of the Asset Contribution Agreement has been satisfied and the Exchange and Registration Rights Agreement and the TSR Wireless LLC Agreement each has been duly executed by the parties except Grantor. Within five Business Days after Grantor's receipt from TSR Wireless of a duly executed Call Notice, Grantor shall transfer the Indebtedness to TSR Wireless or TSR Wireless's designee, pursuant to an Assignment and Acceptance Agreement substantially in the form of EXHIBIT B, in exchange for an assignment of the Initial LLC Interest and shall deliver the Exchange and Registration Rights Agreement and the TSR Wireless LLC Agreement, each duly executed by Grantor. 3. PREMIUM. Upon delivery by Grantor and TSR Wireless to the other of executed counterparts of this Agreement, TSR Wireless shall pay $1.00 (the "PREMIUM") to Grantor. 4. REPRESENTATIONS AND WARRANTIES. (a) Each party hereto represents, warrants and acknowledges to the other parties hereto that: (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and all documents required to be executed and delivered by it hereunder (collectively, the "OPTION DOCUMENTS"), and to fulfill its obligations under the Option Documents, and to consummate the transactions contemplated by the Option Documents; (ii) the making and performance by it of the Option Documents, and the fulfillment of its obligations under the Option Documents, does not and will not violate any law or regulation of the jurisdiction under which it exists, any other law or regulation applicable to it or any other agreement to which it is a party or by which it is bound; (iii) the Option Documents have been duly executed and delivered by it and constitute its legal, valid and binding obligation, enforceable against it in accordance with the respective terms thereof; and (iv) all approvals, authorizations or other actions by, or filings with, any governmental authority necessary for the validity or enforceability of its obligations under the Option Documents have been obtained. (b) Grantor further represents, warrants and acknowledges to TSR Wireless as of the date hereof and as of the Exercise Date that: (i) it is the sole legal and beneficial owner and holder of the Indebtedness, and will transfer the Indebtedness to TSR Wireless, and TSR Wireless will acquire the Indebtedness, free and clear of any liens, claims, charges, encumbrances, or other security or ownership interests and the Indebtedness is fully and freely transferable to TSR Wireless; (ii) Grantor has not pledged or encumbered, nor has it granted any security interests in or liens upon the Indebtedness; 3 (iii) the Company is indebted to Grantor in respect of the Indebtedness in principal amounts equal to not less than $170,000,000, and the Indebtedness is not subject to any claim or right of setoff, reduction, recoupment, avoidance, disallowance or subordination; (iv) Grantor has not engaged in any act, conduct or omission which could reasonably be expected to result in the Indebtedness being subject to (and it has not received any notice that the Indebtedness may be subject to) subordination, reduction, disallowance, setoff, right of recoupment, avoidance, defense, counterclaims or impairment of any kind except as set forth in that certain letter from Grantor to the Company dated as of March 5, 1997; (v) no litigation, arbitration or adversarial proceeding is pending against it or the Company or, to its actual knowledge, is threatened against it or the Company, which could reasonably be expected to in any case have a material adverse effect on the Indebtedness; and (vii) without in any way implying that the Option is a "security" within the meaning of applicable securities laws, no offer to sell or solicitation of any offer to buy any portion of the Option or the Indebtedness has been made by it in a manner that would violate or require registration under such applicable securities laws. (c) TSR Wireless further represents, warrants and acknowledges to Grantor that: (i) Grantor has not given any investment advice or rendered any opinion to TSR Wireless as to whether the sale of the Option is prudent and TSR Wireless is not relying on any representation or warranty by Grantor except as expressly set forth in this Agreement or the Asset Contribution Agreement; (ii) TSR Wireless has received, reviewed and relied upon such information concerning the legal, business and financial condition of the Company as it considers adequate to make an informed decision regarding the purchase of the Option; and (iii) without implying that the Option is a "security" within the meaning of applicable securities laws, TSR Wireless is a sophisticated investor with respect to the Option, was not formed for the purpose of purchasing the Option and is not purchasing the Option with a view to any public distribution thereof which would violate applicable securities laws. 5. FURTHER LLC INTEREST. Following the exercise of the Option, upon the earlier to occur of (i) the transfer by the Company of all of the Company's Assets (except for Excluded Assets) to TSR Wireless, whether by foreclosure, conveyance or other transfer and (ii) 4 the entire principal amount of the outstanding Indebtedness is repaid to TSR in cash, TSR Wireless shall issue the Further LLC Interest to Grantor. 6. DISTRIBUTIONS. If Grantor receives any Distributions in respect of the Indebtedness on or after an Exercise Date, it will pay the same over to TSR Wireless or TSR Wireless's designee in the currency received by it or, in the case of securities (to the extent permissible by law and relevant documentation), endorse or cause to be registered in TSR Wireless's names or such names as TSR Wireless may direct in writing (at TSR Wireless's sole expense) and deliver to TSR Wireless or such persons as TSR Wireless may direct such securities within three (3) business days after receipt of any such Distribution. If any cash Distribution is not paid to TSR Wireless within such time period Grantor will pay interest on such Distribution for the period from the day on which such Distribution was actually received by Grantor to (but excluding) the day such Distribution is actually paid to TSR Wireless, at a rate per annum equal to the London Interbank Offering Rate plus two (2) percent, as calculated and published from time to time on page 3750 of the Telerate Screen. Until any Distributions are transferred to TSR Wireless pursuant to this Section 6, Grantor shall hold the same in trust for the benefit of TSR Wireless. 7. COVENANT; INFORMATION; ACTIONS. Grantor shall not amend, supplement or otherwise modify the terms of the Credit Agreement without the prior written consent of TSR Wireless, PROVIDED, HOWEVER, that this shall not prevent an increase by Grantor of the Indebtedness so long as such increase and a draw in an amount equal to such increase occur simultaneously. If Grantor receives any documents, notice or correspondence under the Credit Agreement or in respect of the Indebtedness from and after the date hereof it shall promptly forward the same to TSR Wireless. TSR Wireless shall have sole authority to exercise all voting and other rights and remedies under the Credit Agreement and in respect of the Indebtedness from and after the Exercise Date. If for any reason, Grantor is entitled to exercise any such rights after the Exercise Date (including, without limitation, the right to vote), Grantor shall exercise such rights only in accordance with TSR Wireless's written instructions. 8. NOTICE. Notice (including any Call Notice) will be given by fax, if to TSR Wireless at: TSR Wireless LLC 400 Kelly Street 15th Floor Fort Lee, NJ 07024 Attention: Mitchell L. Sacks Fax: (201) 947-7145 5 With copies to: Latham & Watkins 885 Third Avenue Suite 1000 New York, New York 10022 Attention: Roger H. Kimmel Fax: (212) 751-4864 Grantor, at: Telephone and Data Systems, Inc. 30 North LaSalle Street Suite 4000 Chicago, IL 60602 Attention: Chief Financial Officer Fax: (312) 630-9299 With copies to: Sidley & Austin 1 First National Plaza Chicago, Illinois 60603 Attention: Michael G. Hron Fax: (312) 456-5352 Copies of all notices so sent will also be sent by overnight courier to the parties' respective addresses set forth above (or such other addresses as any party hereto may specify in writing from time to time). All notices shall be deemed effective when received. 9. INDEMNIFICATION. (a) Grantor shall indemnify and hold each of TSR Wireless and TSR Paging (and TSR Wireless's and TSR's fiduciaries, officers, managers, directors, partners, employees and agents) harmless from any actual losses, costs or expenses, including reasonable legal fees and expenses, which are incurred as a result of breaches of any of the representations, warranties, covenants or agreements made by Grantor in this Agreement; (b) TSR Wireless shall indemnify and hold Grantor and TSR Paging (and Grantor's and TSR's officers, directors, trustees, fiduciaries, managers, employees and agents) harmless from any actual losses, costs or expenses, including reasonable legal fees and expenses, which are incurred as a result of breaches of any of the representations, warranties, covenants or agreements made by TSR Wireless in this Agreement; and (c) TSR Paging shall indemnify and hold Grantor and TSR Wireless (and Grantor's and TSR Wireless's officers, directors, trustees, fiduciaries, managers, employees and agents) harmless from any actual losses, costs or expenses, including 6 reasonable legal fees and expenses, which are incurred as a result of breaches of any of the representations, warranties, covenants or agreements made by TSR Paging in this Agreement. 10. COSTS AND EXPENSES. Each party hereto shall be responsible for its own fees and expenses (including legal fees and costs) in connection with the preparation, review and execution of this Agreement. 11. MISCELLANEOUS. This Agreement shall be binding upon, enforceable by and inure to the benefit of the parties hereto and their respective successors, but shall not be assignable by any party hereto without the consent of the other parties. The representations, warranties, covenants, agreements and indemnities contained herein shall survive the execution, delivery and performance of this Agreement and all other Option Documents. Any amendments to, or waivers of, this Agreement shall be in writing and signed by Grantor, TSR Wireless and TSR Paging. This Agreement, together with Asset Contribution Agreement, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute one agreement binding on the parties hereto. Transmission by telecopier of an executed counterpart of this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart, PROVIDED that the party so delivering such counterpart shall, promptly after such delivery, deliver the original of such counterpart of this Agreement to the other parties hereto. 12. GOVERNING LAW. This Agreement shall be construed and the obligations of the parties hereunder shall be determined in accordance with the laws of the State of New York. 7 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. Grantor: TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Scott H. Williamson ---------------------------------- Name: Scott H. Williamson Title: Vice President-Acquistions TSR Wireless: TSR WIRELESS LLC By: TSR PAGING INC., its sole member By: /s/ Mitchell L. Sacks ------------------------------- Name: Mitchell L. Sacks Title: President 8 EXHIBIT A FORM OF CALL NOTICE Telephone and Data Systems, Inc. 30 North LaSalle Street Suite 4000 Chicago, IL 60602 Attention: Re: EXERCISE OF OPTION Ladies and Gentlemen: The undersigned hereby irrevocably elects to exercise the right, set forth in that certain Option Agreement dated as of December 22, 1997 (the "Option Agreement"), to purchase from Telephone and Data Systems, Inc. ("Grantor") all of Grantor's right, title and interest in and to or arising under or in connection with the Indebtedness, as set forth in the Option Agreement. Capitalized terms used herein without definition have the same meanings as in the Option Agreement. The undersigned has attached the Assignment and Acceptance, and requests that a Note representing the Indebtedness be made in favor of the Assignee named therein. The undersigned agrees to cause to be transferred to Grantor, upon receipt the Note and a counterpart of the Assignment and Acceptance, the LLC Interest. Very truly yours, TSR WIRELESS LLC By: ------------------------------------ Name: Title: Date: 9 EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT Dated _______, 19__ Reference is made to the Revolving Credit Agreement, dated as of January 1, 1994, between Telephone and Data Systems, Inc. and American Paging, Inc. (the "Company") (as amended, modified and supplemented to date, the "Credit Agreement"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein with the same meanings. Telephone and Data Systems, Inc. (the "Assignor") and __________________ (the "Assignee") agree as follows: 1. Subject to Section 3 below, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, [all] [a portion] of Assignor's rights and obligations under the Credit Agreement on the Effective Date (as defined Section 4 below), equal to __________% of the advances owing to, and the Note held by, the Assignor on the Effective Date. 2. The Assignor: (i) represents and warrants that, (A) as of the date hereof, its commitment to extend credit under the Credit Agreement (without giving effect to assignments thereof which have not yet become effective) is $0.00; and (B) the Credit Agreement has been duly authorized and validly executed by the Company and constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms (assuming the due execution and delivery hereof by the other parties thereto), subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought at law or in equity), and except as rights to indemnity and contribution thereunder may be limited by public policy considerations underlying such laws; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company or any subsidiary of the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) attaches the Note referred to in paragraph 1 above. 3. The Assignee: (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 7(a)(l) of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Assignor, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are 10 required to be performed by it; and (iv) specifies as its address for notices the office set forth beneath its name on the signature pages hereof. 4. The effective date of this Assignment and Acceptance shall be ___________, 19___ (the "Effective Date").(1) Following the execution of this Assignment and Acceptance, a copy will be delivered to the Company. 5. As of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations which Assignor had thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement [and cease to be a party thereto].(2) 6. From and after the Effective Date, the Company shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect to the Note) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves. 7. MISCELLANEOUS. (i) NOTICES. Notices shall be given under this Assignment and Acceptance in the manner set forth in the Credit Agreement. The addresses for notice shall be those set forth below the respective signatures of the Assignor and the Assignee on this Agreement. (ii) HEADINGS. Headings are for reference only and are to be ignored in interpreting this Assignment and Acceptance. (iii) GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (iv) FURTHER ASSURANCES. The Assignor and the Assignee hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in furtherance of the transactions contemplated by this Assignment and Acceptance. - ------------------------- (1) Such date shall be at least [5] Business Days after the execution of this Assignment and Acceptance. (2) Insert if Assignment and Acceptance covers all or the remaining portion of the Assignor's rights and obligations under the Credit Agreement. 11 (v) COUNTERPARTS. This Assignment and Acceptance may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below shall constitute a single binding agreement. 12 IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Acceptance Agreement by their duly authorized officers as of the date first above written. TELEPHONE AND DATA SYSTEMS, INC. By: ------------------------------------ Name: Title: Notice Address: [NAME OF ASSIGNEE] By: ------------------------------------- Name: Title: Notice Address: Acknowledged this ____ day of __________________, 19___ AMERICAN PAGING, INC. By: ----------------------------------- Name: Title: 13 EX-99.(C)(4) 5 RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF AMERICAN PAGING, INC. AMERICAN PAGING, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is AMERICAN PAGING, INC. The date of filing of its original Certificate of Incorporation with the Secretary of State was April 10, 1980. 2. This Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of this corporation by revising such document in its entirety. 3. This text of the Certificate of Incorporation as amended or supplemented heretofore is further amended hereby to read as herein set forth in full: ARTICLE I The name of the corporation is AMERICAN PAGING, INC. ARTICLE II The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware; PROVIDED, HOWEVER, that the corporation, without the written consent of TDS, shall not, directly or indirectly (through a Subsidiary of the corporation or any other person or otherwise) for its own account or that of another, own, invest or otherwise have an interest in, lease, operate or manage any business other than a business engaged solely in the construction of, the ownership of interests in and/or the management of radio paging systems. ARTICLE IV CAPITALIZATION (a) AUTHORIZED SHARES. The total number of shares of all classes of stock which the corporation shall have authority to issue is one hundred sixty million (160,000,000) shares, consisting of fifty million (50,000,000) Common Shares with a par value of $1.00 per share; fifty million (50,000,000) Series A Common Shares with a par value of $1.00 per share; fifty million (50,000,000) Series B Common Shares with a par value of $1.00 per share; and ten million (10,000,000) shares of Preferred Stock with a par value of $1.00 per share. (b) COMMON SHARES, SERIES A COMMON SHARES AND SERIES B COMMON SHARES. (1) The powers, preferences and rights of the Common Shares, Series A Common Shares and Series B Common Shares, and the qualifications, limitations or restrictions thereof, shall be in all respects identical, except as expressly provided in this Restated Certificate of Incorporation, as amended, or as otherwise required by law. (2) At each annual or special meeting of stockholders, each holder of Common Shares shall be entitled to one (1) vote in person or by proxy for each Common Share standing in such holder's name on the stock transfer records of the corporation in connection with all actions submitted to a vote of stockholders, each holder of Series A Common Shares shall be entitled to fifteen (15) votes for each Series A Common Share standing in such holder's name, and holders of Series B Common Shares shall not vote on any matter, except as expressly provided in this Restated Certificate of Incorporation, as amended, or as otherwise required by the Delaware General Corporation Law. (3) The number of authorized Common Shares and Series B Common Shares may be increased or decreased (but not below the number of such shares then outstanding in such class, respectively) by the affirmative vote of a majority of the Series A Common Shares by the holders thereof. (c) DIVIDENDS. Dividends may be declared and paid to the holders of the Common Shares, Series A Common Shares and Series B Common Shares in cash, property, or other securities of the corporation out of any net profits or net assets of the corporation legally available therefor. If and when dividends on the Common Shares, Series A Common Shares and Series B Common -2- Shares are declared by the board of directors, whether payable in cash, in property or in shares of stock of the corporation, the holders of Common Shares, Series A Common Shares and Series B Common Shares shall be entitled to share equally, on a per share basis, in such dividends; PROVIDED, HOWEVER, that if at any time a dividend or other distribution is to be paid in capital stock of the corporation on capital stock of the corporation, such dividend or other distribution shall be paid to all holders of common stock of the corporation and may only be paid as follows: (1) Common Shares may be paid to holders of Common Shares and proportionately to holders of Series A Common Shares and Series B Common Shares; (2) Common Shares may be paid to holders of Common Shares at the same time that Series A Common Shares are paid proportionately to holders of Series A Common Shares and Series B Common Shares are paid proportionately to holders of Series B Common Shares; (3) Series A Common Shares may be paid to holders of Series A Common Shares and proportionately to holders of Common Shares and Series B Common Shares; or (4) Series B Common Shares may be paid to holders of Series B Common Shares and proportionately to holders of Common Shares and Series A Common Shares; and in the case of any such dividend or other distribution the board of directors may permit the holders of any class of common stock to elect to receive cash in lieu of stock. (d) STOCK SPLITS, SUBDIVISIONS AND COMBINATIONS. If the corporation shall in any manner split, subdivide or combine the outstanding shares of any class of common stock, the outstanding shares of each other class of common stock shall be proportionately split, subdivided or combined in the same manner and on the same basis. (e) LIQUIDATION. The holders of Common Shares, Series A Common Shares and Series B Common Shares shall be entitled to receive the same amount or distribution per share upon the liquidation, dissolution or winding up of the affairs of the corporation. A consolidation, merger or reorganization of the corporation with any other corporation or corporations, or a sale of all or substantially all of the assets of the corporation, shall not be considered a liquidation, dissolution or winding up of the corporation within the meaning of these provisions. -3- (f) DISTRIBUTIONS OF SUBSIDIARIES. Notwithstanding the provisions of subsections (c) and (e) of Article IV, if the corporation at any time distributes to the holders of common stock of the corporation the stock of a Subsidiary (as hereinafter defined) having two or more classes of common stock outstanding that have relative rights, preferences and limitations vis-a-vis each other that, in the judgment of the board of directors, are similar in all material respects to the relative rights, preferences and limitations of two or more classes of common stock of the corporation vis-a-vis each other (except for any variations in rights, preferences and limitations that are (1) necessary to enable a class of common stock of the Subsidiary to be traded on an exchange or through the National Association of Securities Dealers, Inc. Automated Quotation System (the "NASDAQ System"); (2) due to differences in the laws of the states of incorporation of the corporation and the Subsidiary; or (3) equally applicable to two or more classes of common stock of the Subsidiary), then each class of common stock of the Subsidiary shall be distributed to the extent practicable to the holders of the corresponding class of common stock of the corporation, PROVIDED that the same number of shares on a per share basis shall be distributed with respect to shares of each applicable class of common stock of the corporation. (g) PRE-EMPTIVE RIGHTS. No holder of stock of the corporation shall have any pre-emptive right to subscribe for or acquire any unissued or treasury stock or other securities of the corporation, whether such stock or securities be hereby or hereafter authorized, except as may be specifically granted pursuant to a contract with the corporation approved by the board of directors and except that holders of Series A Common Shares shall have a pre-emptive right to acquire unissued or treasury Series A Common Shares or securities convertible into or exchangeable for, or carrying a right to subscribe to or acquire, Series A Common Shares; PROVIDED, HOWEVER, that no pre-emptive right shall exist to acquire any Series A Common Shares sold otherwise than for cash. The pre-emptive right of each holder of Series A Common Shares may be exercised in full, or in part to the extent determined by each holder, and in no event shall the exercise of such right be conditioned on subscribing for or acquiring any minimum amount or proportion of stock or other securities. (h) CONVERSION OF SERIES A COMMON SHARES. Each outstanding Series A Common Share shall be convertible into one Common Share. Series A Common Shares so converted shall not be reissued. Any such conversion shall be effected by the presentation and surrender of the certificates representing the Series A Common Shares to be converted, at the office of the corporation or at such other place as may from time to time be designated by the corporation, in such form and accompanied by all transfer taxes (or proof of payment thereof), if any, as -4- shall be required for such transfer, and upon such surrender, the holder of such shares shall be entitled to receive in exchange therefor certificates for fully paid and nonassessable Common Shares of the corporation at the rate aforesaid, and such holder shall be registered as the holder of such Common Shares. (i) MANDATORY REDEMPTION. Notwithstanding any other provision of this Restated Certificate of Incorporation to the contrary, any outstanding shares of stock of the corporation shall be subject to redemption by the corporation, by action of the board of directors, if in the judgment of the board of directors such action should be taken, pursuant to Section 151(b) of Title 8 of the Delaware Code or any other applicable provision of law, to the extent necessary to prevent the loss or secure the reinstatement of any license or franchise from any governmental agency held by the corporation or any of its Subsidiaries to conduct any portion of the business of the corporation or any of its Subsidiaries, which license or franchise is conditioned upon some or all of the holders of the corporation's stock possessing prescribed qualifications. The terms and conditions of such redemption shall be as follows: (1) the redemption price of the shares to be redeemed pursuant to this subsection (i) shall be equal to the lesser of (A) the Fair Market Value (as hereinafter defined) of such shares or (B) if such shares were purchased by a Disqualified Holder (as hereinafter defined) within one year of the Redemption Date (as hereinafter defined), such Disqualified Holder's purchase price for such shares; (2) the redemption price of such shares may be paid in cash, Redemption Securities (as hereinafter defined) or any combination thereof; (3) if less than all the shares held by Disqualified Holders are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the board of directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the board of directors; (4) at least 30 days' written notice of the Redemption Date shall be given to the record holders of the shares selected to be redeemed (unless waived in writing by any such -5- holder), PROVIDED that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; (5) from and after the Redemption Date, any and all rights of whatever nature, which may be held by the owners of shares selected for redemption (including without limitation any rights to vote or participate in dividends declared on stock of the same class or series as such shares), shall cease and terminate and they shall thenceforth be entitled only to receive the cash or Redemption Securities payable upon redemption; and (6) such other terms and conditions as the board of directors shall determine. (j) MINORITY PROTECTION OFFERS. (1) If, after the Effective Time (as hereinafter defined), any person or group acquires beneficial ownership of 10% or more of the then issued and outstanding Common Shares (other than upon original issuance by the corporation, by operation of law, by will or the laws of descent and distribution, by gift or by foreclosure of a bona fide loan), and such person or group (a "Related Person") does not own an equal or greater percentage of the Series B Common Shares acquired after the record date for the first issuance of Series B Common Shares (the "Distribution Date"), such person or group shall, within a 90-day period beginning the day after becoming a Related Person, make a public tender offer in compliance with all applicable laws and regulations to acquire Series B Common Shares as provided in this subsection (j) of Article IV (a "Minority Protection Offer"). (2) In each Minority Protection Offer, the Related Person shall make a public tender offer to acquire that number of Series B Common Shares determined by (A) multiplying the percentage of outstanding Common Shares beneficially owned on the date such person or group became a Related Person and acquired after the Effective Time by such Related Person by the total number of Series B Common Shares outstanding on such date, and (B) subtracting therefrom the total number of Series B Common Shares beneficially owned on such date and acquired after the Distribution Date by such Related Person (including shares acquired on such date at or prior to the time such person or group became a Related Person). The Related Person shall acquire -6- all of such shares validly tendered; PROVIDED, HOWEVER, that if the number of Series B Common Shares tendered to the Related Person exceeds the number of shares required to be acquired pursuant to the formula set forth in this clause (2), the number of Common Shares acquired from each tendering holder shall be pro rata in proportion to the total number of Series B Common Shares tendered by all tendering holders. (3) The offer price for any Series B Common Shares required to be purchased by the Related Person pursuant to this provision shall be the greater of (A) the highest price per share paid by the Related Person for any Common Share in the six-month period ending on the date such person or group became a Related Person, or (B) the highest reported sales price of a Common Share or Series B Common Share on the NASDAQ System (or such securities exchange or other quotation system as is then the principal trading market for such shares) on the date such person or group became a Related Person or, in case no such sale takes place, the Closing Price (as hereinafter defined) on the prior trading day. For purposes of clause (4) below, the applicable date for the calculations required by the preceding sentence shall be the date on which the Related Person becomes required to engage in a Minority Protection Offer. In the event that the Related Person has acquired Common Shares in the six-month period ending on the date such person or group becomes a Related Person for consideration other than cash, the value of such consideration per Common Share shall be as determined in good faith by the board of directors. (4) A Minority Protection Offer shall also be required to be effected by any Related Person that acquires beneficial ownership of the next higher integral multiple of 5% (e.g. 15%, 20%, 25%, etc.) of the outstanding Common Shares after the Effective Time (other than upon issuance or sale by the corporation, by operation of law, by will or the laws of descent and distribution, by gift, or by foreclosure of a bona fide loan) if such Related Person does not then own an equal or greater percentage of the Series B Common Shares acquired after the Distribution Date. Such Related Person shall be required to make a public tender offer to acquire that number of Series B Common Shares prescribed by the formula set forth in clause (2) above, and shall acquire all shares validly tendered or a pro rata portion thereof, as specified in said clause (2), at a price determined pursuant to clause (3) above. (5) If any Related Person fails to make an offer required by this subsection (j) of Article IV, or to purchase shares validly tendered and not withdrawn (after proration, if any), such Related Person shall not be entitled to vote any Common Shares beneficially owned by such Related Person and acquired by such Related Person after the Effective Time unless and until such requirements are complied with or unless and until -7- all Common Shares causing such offer requirement to be effective are no longer beneficially owned by such Related Person. (6) The Minority Protection Offer requirement shall not apply to any increase in percentage ownership of Common Shares resulting solely from a change in the total number of Common Shares outstanding, PROVIDED that any acquisition after such change which results in any person or group owning 10% or more of the Common Shares, excluding, in the case of the numerator but not of the denominator of the calculation of such percentage, Common Shares held by such Related Person immediately after the Effective Time, shall be subject to any Minority Protection Offer requirement that would be imposed with respect to a Related Person pursuant to this subsection (j) of Article IV. (7) All calculations with respect to percentage ownership of issued and outstanding Common Shares or Series B Common Shares shall be based upon the numbers of issued and outstanding shares reported by the corporation on the last filed of (A) the corporation's most recent annual report on Form 10-K, (B) its most recent Quarterly Report on Form 10-Q, or (C) if any, its most recent Current Report on Form 8-K. (8) For purposes of this subsection (j) of Article IV, the term "person" means a natural person, company, government, or political subdivision, agency or instrumentality of a government, or other entity, "beneficial ownership" shall be determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor regulation and the formation or existence of a "group" shall be determined pursuant to Rule 13d-5(b) under the 1934 Act or any successor regulation. (9) In the event of a merger or consolidation of the corporation with or into another entity (whether or not the corporation is the surviving entity), the holders of Series B Common Shares shall be entitled to receive the same per share consideration as the per share consideration, if any, received by any holders of the Common Shares in such merger or consolidation. (k) POWER TO SELL STOCK. The board of directors shall have the power to issue and sell all or any part of any class of stock herein or hereafter authorized to such person, firm, association or corporation, and for such consideration as the board of directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class, and as otherwise permitted by law. (l) POWER TO REPURCHASE STOCK. The board of directors shall have the power to purchase shares of any class of stock -8- herein or hereafter authorized from such person, firm, association or corporation, and for such consideration as the board of directors shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class, and as otherwise permitted by law. (m) PREFERRED STOCK. The board of directors is expressly authorized to adopt, from time to time, a resolution or resolutions providing for the issue of one or more series of Preferred Stock, with such voting powers, full or limited, or no voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, in addition to and not inconsistent with those specifically set forth in this Restated Certificate of Incorporation and as shall be stated and expressed in the resolution or resolutions adopted by the board of directors; PROVIDED, HOWEVER, that no shares of any series of Preferred Stock shall be issued for consideration of less than $100 per share, have more than one (1) vote per share with respect to any matter, or have separate class-voting rights with respect to the election of directors or any other matter. In no event shall Preferred Stock of any series be split or divided in any manner, nor shall any dividends or other distributions payable in stock of the corporation of any class or series be paid or payable on Preferred Stock. (n) EFFECTIVE TIME. Effective as of the filing of this Restated Certificate of Incorporation with the Secretary of State of the State of Delaware pursuant to Section 103 of Title 8 of the Delaware Code (the "Effective Time"), the 100 shares of capital stock, par value $1.00 per share, of the corporation, representing all the issued and outstanding capital stock of the corporation ("Outstanding Common Stock") shall, without any action on the part of the holder thereof, be converted into 1,500,000 Common Shares and 15,000,000 Series A Common Shares, all of which shall be fully paid and nonassessable. Upon the surrender of certificates representing shares of Outstanding Common Stock, the corporation or any agent of the corporation appointed for such purpose shall issue in exchange therefor one or more certificates representing the shares into which the shares of Outstanding Common Stock have been converted in accordance with the foregoing. ARTICLE V Any and all right, title, interest and claim in or to any dividends declared by the corporation, whether in cash, stock or otherwise, which are unclaimed by the stockholder entitled thereto for a period of six years after the close of business on -9- the payment date, shall be and be deemed to be extinguished and abandoned; and such unclaimed dividends in the possession of the corporation, its transfer agents or other agents or depositaries shall at such time become the absolute property of the corporation, free and clear of any and all claims of any persons whatsoever. ARTICLE VI DIRECTORS (a) NUMBER; CLASSES; CHANGES. The number of directors of the corporation shall be fixed by or pursuant to the bylaws of the corporation, but shall not be less than three, and, commencing with the 1994 annual meeting of stockholders, the directors shall be divided into three classes, which shall be as nearly equal in number as possible; the term of office of those of the first class to expire at the annual meeting next ensuing; of the second class one year thereafter; of the third class two years thereafter; and at each annual election held after such classification and election, directors shall be chosen for a full three-year term to succeed those whose terms expire. If the number of directors fixed by or pursuant to the bylaws of the corporation is changed at any time, any newly created directorships or any decrease in directorships shall be so apportioned among the classes by the board of directors so as to make all classes as nearly equal in number as possible; PROVIDED, HOWEVER, that no decrease in the number of directors shall shorten the term of any incumbent director. (b) VOTING IN ELECTIONS. With respect to the election of directors, the holders of Common Shares, voting as a class, shall be entitled to elect at each annual meeting that number of directors which (together with all directors whose terms do not expire at the time of such election and who were previously elected by such holders) constitutes 25% of the number of directors of the corporation fixed by or pursuant to the bylaws of the corporation (rounded up to the nearest whole number). After the holders of Common Shares have voted with respect to the election of directors, the holders of (A) Preferred Stock entitled to vote thereon, and (B) Series A Common Shares, both voting together as one class, shall be entitled to elect at each annual meeting that number of directors which (together with all directors whose terms do not expire at the time of such election and who were previously elected by such holders) constitutes 75% of the number of directors fixed by or pursuant to the bylaws of the corporation (rounded down to the nearest whole number); PROVIDED, HOWEVER, that in the event the number of issued and outstanding Series A Common Shares at the time of an annual meeting is less than 500,000, then the holders of Common Shares shall be entitled to vote with the holders of Series A Common -10- Shares and Preferred Stock entitled to vote thereon for the directors such holders are entitled to elect at such meeting, in which case the holders of Common Shares, Series A Common Shares, and Preferred Stock entitled to vote thereon, shall vote together without regard to class. (c) VACANCIES. Vacancies and newly created directorships of the Preferred Stock and Series A Common Shares shall be filled by the holders of such classes. Vacancies and newly created directorships of the Common Shares shall be filled by the holders of such class, if a vacancy or newly created directorship is to be filled at an annual meeting of stockholders, or by a majority of the directors then in office, if the vacancy or newly created directorship is to be filled between annual meetings of stockholders. Vacancies and newly created directorships with respect to directors elected by the holders of Common Shares, Series A Common Shares, and Preferred Stock entitled to vote thereon, voting together without regard to class, shall be filled by the holders of such classes, if a vacancy or newly created directorship is to be filled at an annual meeting of stockholders, or by a majority of the directors then in office, if the vacancy or newly created directorship is to be filled between annual meetings of stockholders. A director chosen by a majority of the directors then in office to fill a vacancy or a newly created directorship shall cease to hold office at the next annual meeting of stockholders held thereafter, whether the term of office of the class for which the director was chosen expires at that meeting or not. In all other cases, directors chosen to fill vacancies and newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified. (d) BALLOTS. Election of directors need not be by written ballot unless the bylaws of the corporation so provide. ARTICLE VII In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter, amend or repeal the bylaws of the corporation. ARTICLE VIII No opportunity, transaction, agreement or other arrangement to which TDS, or any other person in which TDS has or acquires a financial interest, is or shall become a party, shall be the property or a corporate opportunity of the corporation or its Subsidiaries, unless (a) not less than 500,000 Series A -11- Common Shares are outstanding, and (b) such opportunity, transaction, agreement or other arrangement relates solely to the construction of, the ownership of interests in and/or the management of radio paging systems, other than such a system that is ancillary to and integrated with another communications system. ARTICLE IX A director of the corporation shall not in the absence of fraud be disqualified by his office from dealing or contracting with the corporation either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a director of the corporation be liable to account to the corporation for any profit realized by him from or through any transaction or contract of the corporation by reason of the fact that he, or any firm of which he is a member, or any corporation of which he is an officer, director or stockholder, was interested in such transaction or contract if such transaction or contract has been authorized, approved or ratified in the manner provided in the General Corporation Law of Delaware for authorization, approval or ratification of transactions or contracts between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest. ARTICLE X For purposes of this Restated Certificate of Incorporation: "DISQUALIFIED HOLDER" shall mean any holder of shares of stock of the corporation whose holding of such stock, either individually or when taken together with the holding of shares of stock of the corporation by any other holders, may result, in the judgment of the board of directors, in the loss of, or the failure to secure the reinstatement of, any license or franchise from any governmental agency held by the corporation or any of its Subsidiaries to conduct any portion of the business of the corporation or any of its Subsidiaries. "FAIR MARKET VALUE" of a share of the corporation's stock of any class or series shall mean the average Closing Price for such a share for each of the 20 most recent days on which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall be given pursuant to subsection (i)(4) of Article IV; PROVIDED, HOWEVER, that if shares of stock of such class or -12- series are not traded on any securities exchange or on the NASDAQ System, "Fair Market Value" shall be determined by the board of directors in good faith. "CLOSING PRICE" on any day means the last reported sales price or, in case no such sale takes place, the average of the reported closing bid and asked prices on the principal United States securities exchange registered under the 1934 Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sales price or bid quotation for such stock on the NASDAQ System or any system then in use, or if no such prices or quotations are available, the fair market value on the day in question as determined by the board of directors in good faith. A "PERSON" shall mean an individual, a corporation, a partnership, a joint venture, a trust or unincorporated organization, a joint stock company or similar organization, a government or any political subdivision thereof, or any other legal entity. "REDEMPTION DATE" shall mean the date fixed by the board of directors for the redemption of shares of stock of the corporation pursuant to subsection (i) of Article IV. "REDEMPTION SECURITIES" shall mean any debt or equity securities (other than Series A Common Shares or securities convertible into or exchangeable for, or carrying a right to subscribe to or acquire, Series A Common Shares) of the corporation, any of its Subsidiaries or any other corporation, or any combination thereof, having such terms and conditions as shall be approved by the board of directors and which, together with any cash to be paid as part of the redemption price, in the opinion of any nationally recognized investment banking firm selected by the board of directors (which may be a firm which provides other investment banking, brokerage or other services to the corporation), has a value, at the time notice of redemption is given pursuant to subsection (i)(4) of Article IV, at least equal to the price required to be paid pursuant to subsection (i)(1) of Article IV (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity). "SUBSIDIARY", with respect to a specified person, shall mean any person whose accounts are included in the consolidated financial statements of the specified person and its Subsidiaries prepared in accordance with generally accepted accounting principles at the time. -13- "TDS" means Telephone and Data Systems, Inc., an Iowa corporation, and any successor by merger, consolidation or otherwise to such corporation. ARTICLE XI (a) LIMITATION ON LIABILITY. A director or officer of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except for liability (1) for any breach of the director's or officer's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of Title 8 of the Delaware Code, or (4) for any transaction from which the director or officer is found by a court of law to have derived an improper personal benefit. (b) INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in subsection (c) of Article XI, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors. The right to indemnification conferred in this Article XI shall be a contract -14- right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; PROVIDED, HOWEVER, that, if the General Corporation Law of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article XI or otherwise. The corporation may, by action of its board of directors, provide indemnification to other employees or agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. (c) CLAIMS FOR INDEMNIFICATION. If a claim under subsection (b) of Article XI is not paid in full by the corporation within 30 days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (d) NON-EXCLUSIVITY. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article XI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this -15- Restated Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. (e) INSURANCE. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against the expense, liability or loss under the General Corporation Law of Delaware. ARTICLE XII The corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. * * * * * This Restated Certificate of Incorporation was duly adopted by unanimous written consent of the stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said AMERICAN PAGING, INC. has caused this Certificate to be signed by John R. Schaaf, its President and attested by Michael G. Hron, its Secretary, this 4th day of February, 1994. AMERICAN PAGING, INC. By: /s/ John R. Schaaf ---------------------------- John R. Schaaf President ATTEST: By: /s/ Michael G. Hron ------------------------- Michael G. Hron Secretary -16- EX-99.(C)(5) 6 VOTING TRUST AGREEMENT VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 TABLE OF CONTENTS Page ARTICLE I DEPOSIT OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Deposit to Trustees . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 Additional Deposits . . . . . . . . . . . . . . . . . . . . . . 4 1.4 Series A Common . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE II VOTING TRUST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . 5 2.1 Issuance of Voting Trust Certificates . . . . . . . . . . . . . 5 2.2 Form of Certificates. . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III WITHDRAWAL OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1 Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.2 Option to Acquire . . . . . . . . . . . . . . . . . . . . . . . 13 3.3 Request for Reregistration. . . . . . . . . . . . . . . . . . . 20 3.4 Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.5 Establishment of Price If Company Shares Not Traded . . . . . . 21 ARTICLE IV TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.1 Permissible Transfers . . . . . . . . . . . . . . . . . . . . . 21 4.2 Permitted Transferees . . . . . . . . . . . . . . . . . . . . . 22 4.3 Limitation of Voting Rights of Certain Permitted Transferees. . 30 4.4 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.5 Transferees Bound by Agreement. . . . . . . . . . . . . . . . . 31 4.6 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE V DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.1 Trustees to Pass Through Cash Dividends . . . . . . . . . . . . 33 5.2 Direct Payment of Dividends . . . . . . . . . . . . . . . . . . 33 5.3 Hold on Dividends at Termination. . . . . . . . . . . . . . . . 34 5.4 Stock Dividends, Stock Splits and Recapitalizations . . . . . . 34 5.5 Other Forms of Dividends. . . . . . . . . . . . . . . . . . . . 34 5.6 Receipt of Voting Securities of Separate Entity . . . . . . . . 35 5.7 Subscription Offer. . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.1 Trustees to Vote Shares . . . . . . . . . . . . . . . . . . . . 38 6.2 Series A Common to be Voted as a Unit . . . . . . . . . . . . . 39 6.3 Failure to Achieve a Six-Vote Majority. . . . . . . . . . . . . 39 6.4 Certain Transactions to Require Joint Consent of Trustees and Certificate Holders . . . . . . . . . . . . . . . . . . . . 39 6.5 Voting Rights of Certificate Holders . . . . . . . . . . . . . 44 ARTICLE VII THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 7.1 Meetings and Procedures . . . . . . . . . . . . . . . . . . . . 46 7.2 Voting of Trustees. . . . . . . . . . . . . . . . . . . . . . . 48 7.3 Election of Trustees. . . . . . . . . . . . . . . . . . . . . . 49 7.4 Removal of Trustees . . . . . . . . . . . . . . . . . . . . . . 51 7.5 Johnson Family Trustee. . . . . . . . . . . . . . . . . . . . . 52 7.6 Resignation of Trustees . . . . . . . . . . . . . . . . . . . . 55 7.7 Change of Control . . . . . . . . . . . . . . . . . . . . . . . 55 7.8 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . 55 7.9 Other Relationships Between Trustees and Company. . . . . . . . 56 7.10 Trustees May be Shareholders, Certificate Holders and May Acquire and Dispose of Shares . . . . . . . . . . . . . . . . . 56 7.11 Compensation of Trustees. . . . . . . . . . . . . . . . . . . . 57 7.12 Limitation of Liability . . . . . . . . . . . . . . . . . . . . 57 ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 58 8.1 Adjustment for Stock Splits . . . . . . . . . . . . . . . . . . 58 8.2 Scope of Agreement. . . . . . . . . . . . . . . . . . . . . . . 58 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 8.4 Reliance by Trustee . . . . . . . . . . . . . . . . . . . . . . 60 8.5 Amendment of Agreement. . . . . . . . . . . . . . . . . . . . . 60 8.6 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.7 Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.8 De Minimis Holdings . . . . . . . . . . . . . . . . . . . . . . 62 8.9 Severability of Provisions. . . . . . . . . . . . . . . . . . . 62 8.10 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 63 8.11 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . 64 8.12 Construction of Agreement . . . . . . . . . . . . . . . . . . . 64 8.13 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . 64 8.14 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 64 EXHIBIT A - VOTING TRUST CERTIFICATE. . . . . . . . . . . . . . 72 EXHIBIT B - WITHDRAWAL REQUEST. . . . . . . . . . . . . . . . . 79 EXHIBIT C - SUMMARY OF REQUIREMENT FOR CERTAIN ACTIONS BY TRUSTEES AND CERTIFICATE HOLDERS . . . . . . . . . . . . . . . . . . . . . . 82 VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 THIS VOTING TRUST AGREEMENT is made as of the thirtieth day of June, 1989, between such holders of the Series A Common Shares, par value $1.00 per share ("Series A Common"), of TELEPHONE AND DATA SYSTEMS, INC., an Iowa corporation (the "Company"), as may become parties to this Agreement (the "Depositing "Certificate Holders" or the "Certificate Holders"), and WALTER C.D. CARLSON, LETITIA G.C. CARLSON, LEROY T. CARLSON, JR., MELANIE J. HEALD and DONALD C. NEBERGALL, or their successors (the "Trustees"). The Depositing Shareholders are owners of Series A Common and deem it to be in their mutual best interests to confer upon the Trustees the right to vote and to act with respect to such shares, subject to the terms and conditions of this Agreement. In consideration of the mutual promises and covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed between the parties as follows: ARTICLE I DEPOSIT OF SHARES 1.1 DEPOSIT TO TRUSTEES. Each shareholder of the Company who becomes a party hereto by signing this Agreement agrees to deposit or cause to be deposited with the Trustees, to be held by them pursuant to the provisions of this Agreement, one or more stock certificates representing shares of Series A Common now owned by him or her, duly endorsed in blank or to the Trustees, or accompanied by proper instruments of assignment and transfer duly executed in blank or to the Trustees, and accompanied by any revenue stamps required for the transfer, or shares of Series A Common held in non-certificated form pursuant to the Company's dividend reinvestment plan, represented by appropriate transfer documents, and to accept in lieu thereof a Voting Trust Certificate or Certificates issued hereunder in the form herein provided. 1.2 TERM. Each deposit made pursuant to Section 1.1 shall continue from the date this Agreement becomes effective until June 30, 2009, unless sooner terminated as herein provided. This Agreement shall be effective at 12:01 a.m. on the day following the day on which the last of the following events occurs: 2 (a) the Federal Communications Commission order giving consent to the implementation of this Agreement becomes effective or the Trustees determine no such order is required; or (b) the signing of this Agreement by those Certificate Holders who deposit or agree to deposit, in the aggregate, a majority of the Company's then issued and outstanding Series A Common Shares, par value $1.00 per share; provided, however, that the Trustees appointed hereunder may delay the effective date as required to prevent the implementation of the Agreement from interfering with any RSA or MSA applications pending before the Federal Communications Commission. 1.3 ADDITIONAL DEPOSITS. Any owner of shares of Series A Common may at any time apply to the Trustees for permission to deposit stock certificates representing shares of Series A Common, accepting in lieu thereof Voting Trust Certificates issued hereunder in the form hereinafter provided. In consideration of the original deposit of Series A Common by the Depositing Shareholders, the Trustees, by an "eight-vote majority" (as defined in Subsection 7.2(b)), may accept for deposit and receive in trust hereunder any additional stock certificates representing shares of Series A Common owned by any shareholder whomsoever and hold any certificates so deposited in trust under the terms and 3 conditions of this Agreement. Such deposit of additional stock certificates representing shares of Series A Common and the acceptance of Voting Trust Certificates by the depositor thereof shall have the same force and effect as though such depositor had in fact subscribed his or her name to this Agreement. The Trustees, by an eight-vote majority, may also accept for deposit any Common Shares of the Company ("Common Shares"). 1.4 SERIES A COMMON. (a) The term "Series A Common" as hereafter used in this Agreement shall also be deemed to include: (i) any shares of a class other than the Company's existing class of Series A Common Shares, par value $1.00 per share, held or to be held by the Trustees pursuant to this Agreement; (ii) any securities convertible into shares of Series A Common, including any shares or securities deemed to be Series A Common pursuant to this Section 1.4; (iii) any rights to subscribe to Series A Common, including any shares or securities deemed to be Series A Common pursuant to this Section 1.4; 4 (b) Wherever reference is made in this Agreement to shares of Series A Common "beneficially owned," such reference shall be to those shares of Series A Common represented by the Voting Trust Certificates and to those shares of Series A Common acquired in respect of an existing Voting Trust Certificate by reason of participation in the Company's dividend reinvestment plan. (c) Wherever reference is made in this Agreement to votes "beneficially held" by a Certificate Holder, such reference shall be to votes described in Subsection 6.5(c). ARTICLE II VOTING TRUST CERTIFICATES 2.1 ISSUANCE OF VOTING TRUST CERTIFICATES. All stock certificates for shares of Series A Common at any time delivered to the Trustees hereunder or thereafter acquired by the Trustees as provided in this Agreement shall be held and disposed of by the Trustees under and pursuant to the terms and conditions of this Agreement. The Trustees, in exchange for the stock certificates so deposited hereunder, shall cause to be issued and delivered to the Certificate Holders Voting Trust Certificates 5 for the appropriate number of shares of Series A Common in substantially the form set forth in Exhibit A attached hereto or as revised to reflect the deposit of any shares other than the Company's existing issue of Series A Common Shares, par value $1.00 per share. The Trustees shall not issue Voting Trust Certificates with respect to shares purchased through the Company's dividend reinvestment plan until such shares are reduced to stock certificate form, but such shares shall nevertheless be subject to this Agreement if purchased with dividends earned with respect to shares which are subject to this Agreement. 2.2 FORM OF CERTIFICATES. The Trustees may issue temporary typewritten or printed Voting Trust Certificates conforming generally to the form set forth on Exhibit A and may cause the same to be exchanged for definitive Voting Trust Certificates in substantially such form when the same are prepared. The Voting Trust Certificates shall be executed by no fewer than three Trustees, with copies of such Certificates sent to all nonexecuting Trustees. The Trustees, under such rules as they in their discretion may prescribe with respect to indemnity or otherwise, shall provide for the issuance and delivery of new Voting Trust Certificates in lieu of lost, stolen or destroyed Certificates or in exchange for mutilated Certificates. 6 ARTICLE III WITHDRAWAL OF SHARES 3.1 WITHDRAWAL. Any Certificate Holder shall be permitted to withdraw Common Shares, from time to time, upon the surrender Certificates, of the corresponding Voting Trust Certificate or Certificates, subject to the provisions of this Article. The following conditions, limitations and procedures shall apply to any such withdrawal: (a) AUTHORITY TO CONVERT. Any Certificate Holder electing to withdraw Common Shares shall be deemed to have instructed, directed and authorized the Trustees to convert a sufficient number of shares of his or her beneficially owned Series A Common into Common Shares to the extent necessary to effect such withdrawal. (b) WITHDRAWALS UPON TWENTY DAYS' NOTICE. Any Certificate Holder may make aggregate withdrawals during any calendar year of not more than 7,500 Common Shares (as adjusted by Section 8.1), provided written notice of such intended withdrawal is given to the Trustees no less than twenty days prior to the date of withdrawal specified in such written notice. No such withdrawal notice shall be revoked except as provided in Subsection 3.1(i). 7 (c) WITHDRAWALS UPON SIXTY DAYS' NOTICE. Any Certificate Holder may make aggregate withdrawals during any calendar year of more than 7,500 Common Shares (as adjusted by Section 8.1), but not more than five percent (5%) of the number of shares of his or her beneficially owned Series A Common as of the beginning of the calendar year in which such withdrawal occurs (as adjusted by Section 8.1 for capital changes occurring during such calendar year), provided written notice of such intended withdrawal is given to the Trustees no less than sixty days prior to the date of withdrawal specified in such written notice. No such withdrawal notice shall be revoked except as provided in Subsection 3.1(i). (d) WITHDRAWALS UPON NINE MONTHS' NOTICE. In addition to any withdrawals permitted pursuant to Subsections 3.1(b) and 3.1(c), any Certificate Holder may make additional withdrawals during any calendar year which cause his or her aggregate withdrawals for such year to be not more than 300,000 Common Shares (as adjusted by Section 8.1), provided written notice of such intended withdrawal is given to the Trustees no less than nine months prior to the date of withdrawal specified in such written notice. No such withdrawal notice shall be revoked unless cancelled by written notice received at least 105 or more 8 days prior to the specified date of withdrawal or except as provided in Subsection 3.1(i). (e) WITHDRAWALS SUBSEQUENT TO TRANSFER. During any calendar year in which a Certificate Holder makes a gratuitous intervivos transfer of a Voting Trust Certificate, neither such transferor nor any transferee of such Certificate may make a withdrawal to the extent that the number of Common Shares withdrawn by such transferor during such year, when added to the number of Common Shares represented by Voting Trust Certificates transferred by such transferor during such year and deemed to be withdrawn by a transferee during such year, would exceed the limitation set forth in Subsection 3.1(d) For purposes of this Subsection 3.1(e), any such transferee shall be deemed to withdraw Common Shares represented by Voting Trust Certificates transferred by a transferor only after such transferee has withdrawn shares equal in number to (i) the number of shares of Series A Common beneficially-owned by and withdrawable by such transferee as of the beginning of such year plus (ii) the number of shares of Series A Common represented by Voting Trust Certificates acquired for value by such transferee during such year prior to the date of withdrawal. If the transferee receives a gratuitous intervivos transfer of Voting Trust Certificates from more than one transferor during such year, he or she shall be deemed to have withdrawn Common Shares represented by Voting 9 Trust Certificates transferred by each such transferor, if at all (after application of the preceding sentence), on the following basis: (i) to the extent withdrawals are permitted with respect to each such transferor, in proportion to the number of shares of Series A Common represented by Voting Trust Certificates received during such year by such transferee from each such transferor, and (ii) to the extent withdrawals would not be permitted with respect to any transferor because of the limitations imposed by this Subsection 3.1(e), in proportion to the number of shares of Series A Common represented by the Voting Trust Certificates received during such year by such transferee from each transferor with respect to whom withdrawals would be permitted. The ability to make a withdrawal shall be determined as of the date such withdrawal is requested, taking into account all prior withdrawal requests whether or not such withdrawal has been completed. A transferee of a Voting Trust Certificate from a deceased Certificate Holder may not make a withdrawal of any Common Shares represented by such Certificate during the year in which such decedent dies, except for that number of shares which -10- bears the same proportion to the number of shares which such decedent was eligible to withdraw immediately prior to his or her death as the number of shares represented by such Certificate bears to the total number of shares beneficially-owned by such decedent immediately prior to his or her death. No such withdrawals shall cause such transferee's withdrawals for the year to exceed the limitation imposed by Subsection 3.1(d). (f) PERMITTED WITHDRAWALS IN RESPECT OF A DECEDENT. Notwithstanding the limitations on withdrawals set forth in the preceding subsections of this Article III, upon the death of a Certificate Holder, each transferee of such decedent's Voting Trust Certificates may withdraw additional Common Shares so long as the aggregate value of all withdrawals made pursuant to this Subsection 3.1(f) does not exceed the total amount of transfer and succession taxes payable by reason of decedent's death plus the amount of administration expenses deductible (whether or not actually deducted) pursuant to Sections 2053 and 2054 of the Internal Revenue Code of 1986, as amended, or any amended or successor provisions, which such transferee is legally obligated to pay. Any such withdrawals with respect to transfer and succession taxes must be made prior to the due date or dates of such taxes, and any such withdrawals with respect to administration expenses must be made within nine-months of the decedent's death, provided written notice of such intended withdrawal is given to -11- the Trustees no less than sixty days prior to the date of withdrawal as specified in such written notice. For purposes of this Subsection 3.1(f), the value of any withdrawn shares shall be deemed to be the value determined with respect to such shares pursuant to Subsection 3.2(g). No such withdrawal notice shall be revoked except as provided in Subsection 3.1(i). (g) NOTICE OF WITHDRAWAL. The written notice of withdrawal required pursuant to Subsections 3.1(b), (c), (d) or (f) shall be substantially in the form prescribed in Exhibit B attached hereto. (h) WAIVER OF NOTICE. Any notice required pursuant to Section 3.1 may be reduced to sixty days by the "six-vote majority" (as defined in Subsection 7.2(b)) of the Trustees; provided, however, that the required six votes shall be reduced by the number of votes held by any Trustee who is the Certificate Holder requesting such waiver, such Trustee being excluded from voting with respect to such matter. (i) CANCELLATION OF OTHERWISE IRREVOCABLE NOTICE OF WITHDRAWAL. Notwithstanding that any notice of withdrawal may be irrevocable pursuant to the preceding provisions of this Section 3.1, the Trustees may, without liability to any person, permit the cancellation of such withdrawal notice up to fifteen -12- days prior to the specified date of withdrawal, provided that the cancelling Certificate Holder reimburses the Trustees for all expenses incurred by the Trustees with respect to such withdrawal. Such cancellation shall be approved by a six vote majority of the Trustees; provided, however, that the required six votes shall be reduced by the number of votes held by the Trustee who is the Certificate Holder wishing to cancel such withdrawal notice, such Trustee being excluded from voting with respect to such matter. In the event any such cancellation is permitted by the Trustees, neither the Certificate Holder requesting such withdrawal nor the Trustees shall be liable to any other Certificate Holder for any expenses or damages, consequential or otherwise, that such other party or other Certificate Holder may allege to have been incurred in reliance on or otherwise as a result of such notice of withdrawal or cancellation. The Trustees shall not be required to permit or deny cancellation except in their sole and uncontrolled discretion. The Trustees shall, within five business days, provide written notice of any cancellation to all Optionees (as defined in Subsection 3.2(a)). 3.2 OPTION TO ACQUIRE. (a) NOTICE OF INTENT TO WITHDRAW TO OPTIONEES. Upon the Trustees' receipt of notice from a Certificate Holder of such person's intention to make a withdrawal pursuant to Section 3.1 -13- which would cause such person's aggregate withdrawals for the calendar year to equal or exceed 150 (as adjusted by Section 8.1) Common Shares the Trustees shall, within five business days after their receipt of such notice, provide written notice of the proposed withdrawal to each remaining Certificate Holder who beneficially owns 750 (as adjusted by Section 8.1) or more shares of Series A Common (the "Optionee"), which notice shall include all the information that the Trustees received. The withdrawing Certificate Holder may require the Optionees exercising the options hereinafter described to acquire the shares of Series A Common proposed to be converted and withdrawn by an exchange of Common Stock in lieu of a cash purchase. Any such requirement shall be set forth in the withdrawal request. (b) EXERCISE OF FIRST OPTION. Each Optionee shall have the option, exercisable until thirty days prior to the specified date of withdrawal (sixty days in the case of a withdrawal requiring more than ninety days' notice), to elect to acquire his or her proportionate part (as hereinafter defined) of the shares of Series A Common proposed to be converted and withdrawn. Such acquisition may be by cash purchase or by exchange of Common Stock. The notice of intent to exercise such option shall be delivered to the Trustees not less than thirty days prior to the specified date of withdrawal (sixty days in the case of a withdrawal requiring more than ninety days' notice). The closing -14- date of such transaction shall be the specified date of withdrawal. An Optionee's proportionate part pursuant to this option shall be that number of shares which bears the same proportion to the total number of shares proposed to be withdrawn as the number of votes beneficially held by such Optionee at the time the notice of intent to withdraw is given bears to the total number of votes then beneficially held by all Optionees. An Optionee may elect to acquire less than his or her proportionate part of the shares proposed to be withdrawn. (c) NOTICE AND EXERCISE OF SECOND OPTION. In the event all of the shares proposed to be withdrawn are not acquired pursuant to the first option, each Optionee shall be notified within five days after the last date to exercise such option that he or she has a second option exercisable until twenty days prior to the specified date of withdrawal (forty days in the case of withdrawal requiring more than ninety days' notice). Such second option shall entitle each Optionee to acquire his or her proportionate part of the shares of Series A Common not being acquired pursuant to the first option. Such proportionate part shall be that number of shares which bears the same proportion to the total number of shares not acquired pursuant to the first option as the number of votes beneficially held by such Optionee at the time the notice of intent to withdraw is given bears to the total number of votes then beneficially held by all Optionees. An -15- Optionee may elect to acquire less than his or her proportionate part pursuant to this second option. (d) NOTICE AND EXERCISE OF THIRD OPTION. In the event all of the shares of Series A Common proposed to be withdrawn are not acquired pursuant to the first and second options, each Optionee shall be notified within five days after the last date to exercise the second option that he or she has a third option exercisable until ten days prior to the specified date of withdrawal (twenty days in the case of a withdrawal requiring more than ninety days' notice). The third option shall entitle each Optionee to acquire part of any shares not acquired pursuant to such preceding options. Each Optionee wishing to exercise the third option shall be required to specify the maximum number of shares he or she is willing to acquire. An Optionee may elect to acquire less than his or her proportionate part pursuant to this third option. The Trustees shall allocate the unacquired shares so that each such Optionee is entitled to acquire the lesser of (i) that number of unacquired shares which bears the same proportion to the total number of unacquired shares as the number of votes beneficially held by such Optionee at the time the notice of intent to withdraw is given bears to the total number of votes then beneficially held by all Optionees wishing to exercise the third option, and (ii) the number of shares specified by the Optionee pursuant to his or her exercise of this third option. -16- The Trustees shall allocate any shares still unacquired so that each Optionee having specified a number of shares greater than were allocated to him or her pursuant to the preceding allocation is entitled to acquire the lesser of (i) that number of remaining unacquired shares which bears the same proportion to the total number of unacquired shares as the number of votes beneficially held by such Optionee at the time the notice of intent to withdraw is given bears to the total number of votes then beneficially held by all Optionees who specified a number of shares greater than were allocated to him or her pursuant to the preceding allocation, and (ii) the number of shares specified by the Optionee pursuant to his or her exercise of this third option but not yet allocated to him or her. The Trustees shall continue to allocate any unacquired shares in accordance with the preceding sentence until all shares are allocated or until no more shares are specified by the Optionees. (e) ALTERNATE PROCEDURE AND REDUCED NOTICE PERIOD FOR SMALL WITHDRAWALS. Notwithstanding the preceding provisions of this Section 3.2, in the event of any notice of intended withdrawal described in Section 3.2(a) with respect to 7,500 (as adjusted by Section 8.1) Common Shares or less, only the option procedure described in Subsection 3.2(d) shall be used, to be extended to all Optionees. The Trustees may, in their discretion, reduce the period required between notice and withdrawal -17- for purposes of Subsection 3.1(b) so long as notice is given to all Optionees and each such Optionee is given no less than five days after receipt of such notice to respond. Such reduction shall be approved by a six-vote majority of the Trustees; provided, however, that the required six votes shall be reduced by the number of votes held by any Trustee who is the Certificate Holder desiring a reduction of such period, such Trustee being excluded from voting with respect to such matter. If the date of withdrawal is accelerated, the accelerated date of withdrawal shall be used to establish the cash price to be paid determined pursuant to Subsection 3.2(f). (f) PAYMENT OF ACQUISITION PRICE. Each Optionee electing to purchase shares shall deliver to the Trustees on the closing date either (i) cash for each share so purchased in an amount equal to the average closing price of the Common Shares of the Company in their primary marketplace on the first ten of the most recent eleven business days on which they were traded preceding the specified date of withdrawal, (ii) a stock certificate representing that number of Common Shares equal to the number of shares so purchased (and such stock certificate may have been previously deposited hereunder, in which case no delivery shall be required, but the Optionee shall direct the Trustees to use such shares in the exercise of such option), or (iii) a combination of (i) and (ii). To the extent the withdrawing Certif- -18- icate Holder requires that the acquisition be made by an exchange of Common Shares, each Optionee must deposit that number of Common Shares which bears the same proportion to the total number of Common Shares so required as the number of shares to be acquired by such Optionee bears to the total number of shares to be acquired by all Optionees, except to the extent the Optionees may agree to otherwise apportion the requirement to tender Common Shares. (g) WITHDRAWAL OF UNACQUIRED SHARES. To the extent any shares are not acquired pursuant to the preceding provisions of this Section 3.2, the Certificate Holder who intends to withdraw Common Shares may do so, free of the terms of this Agreement, as provided in Section 3.3. (h) ACQUIRED SHARES TO REMAIN SUBJECT TO AGREEMENT. Any Certificate Holder acquiring shares of Series A Common pursuant to the exercise of the option granted under this Section 3.2 shall be deemed to have simultaneously deposited such shares with the Trustees, which shares shall remain subject to this Agreement, and shall be issued a Voting Trust Certificate or Certificates as provided in Section 2.1. -19 (i) OPTION RIGHTS DO NOT APPLY TO SALE BY TRUSTEES. The provisions of this Section 3.2 do not apply to a sale by the Trustees pursuant to Subsection 6.4(a). 3.3 REQUEST FOR REGISTRATION. With respect to any withdrawal of Common Shares pursuant to Subsection 3.2(g) or the withdrawal of Common Shares delivered by an Optionee pursuant to the exercise of an option, the Certificate Holder making such withdrawal shall, not less than five business days prior to the date on which the Common Shares are to be withdrawn, deliver to the Trustees and to any transfer agent for the Common shares appointed by the Company (the "Transfer Agent"), a request, in customary form, setting forth the denominations in which stock certificates for the Common Shares are to be delivered and the names in which such stock certificates are to be registered. A similar request shall be made by an Optionee with respect to the registration of any Voting Trust Certificates issued pursuant to Subsection 3.2(h). To the extent such requests are not made, the Trustees shall issue a single stock certificate in the name of the withdrawing Certificate Holder for all shares to be withdrawn or a single Voting Trust Certificate in the name of the Optionee representing all beneficially-owned shares acquired the exercise of an option. -20- 3.4 CONVERSION. The Trustees shall not convert any shares of Series A Common deposited hereunder except in conjunction with a withdrawal of shares permitted by this Article III. 3.5 ESTABLISHMENT OF PRICE IF COMPANY SHARES NOT TRADED. If a value for withdrawn shares cannot be established for purposes of Subsection 3.2(f) because the Company's Common Shares are no longer traded in a public marketplace or because no trading has occurred on any of the first ten of the most recent eleven business days preceding the specified date of withdrawal, such value shall be established pursuant to such reasonable procedures as the Trustees may from time to time establish, including, without limitation, the securing of one or more appraisals or the use of prices at which the Company's Common Shares were sold prior to the said ten-day period or in non-public transactions. ARTICLE IV TRANSFERS 4.1 PERMISSIBLE TRANSFERS. The Voting Trust Certificates shall not be transferred or disposed of, whether by sale, assignment, gift, bequest, appointment, or otherwise, except to a Permitted Transferee (as that term is defined in Section 4.2), and -21- the Voting Trustees shall not register any transfer except in compliance therewith. 4.2 PERMITTED TRANSFEREES. (a) PERMITTED TRANSFEREE OF A NATURAL PERSON. The following persons shall be "Permitted Transferees" of each Certificate Holder who is a natural person: (i) the Certificate Holder's descendants and siblings, the descendants of such siblings, the spouse of any of the foregoing persons, the Certificate Holder's spouse, and the parents of a Certificate Holder (all hereinafter referred to as such Certificate Holder's "Family Members"); (ii) any organization to which a Certificate Holder transfers Voting Trust Certificates and which is an organization contributions to which are deductible for federal income, estate or gift tax purposes or any split-interest trust described in Section 4947 of the Internal Revenue Code of 1986, as amended, or any successor or amended section ("Charitable Organization"); (iii) the trustee of a trust (including, but not limited to, a voting trust subject to the provisions of Sub- -22 section 6.5(a)(iv), but not including a trust described in Subsection 4.2(a)(ii)) to which a Certificate Holder transfers Voting Trust Certificates and which is a trust solely for the benefit of any person who is the transferring Certificate Holder, a Family Member of such Certificate Holder, the Family Member of any Family Member of the Certificate Holder, or the Family Member of any Family Member of any Family Member of the Certificate Holder; (iv) the court-appointed fiduciary of the estate of a Certificate Holder who is deceased, incompetent, bankrupt or insolvent; (v) a corporation or partnership to which a Certificate Holder transfers Voting Trust Certificates, provided that the articles of incorporation of such corporation or the partnership agreement of such partnership shall irrevocably provide that voting control of such entity, including, without limitation, control of the exercise of all duties, rights and powers with respect to the Voting Trust Certificates so transferred, is vested in a person who is the transferring Certificate Holder or a Permitted Transferee of such Certificate Holder; (vi) to the extent permitted by law and regulation, a qualified retirement plan for the benefit of and under the sole control of the transferring Certificate Holder during his or her -23- lifetime (meaning a plan described in either Section 401(a) or Section 408 and exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended, or any successor or amended provisions); (vii) a Permitted Transferee (determined without regard to this Subsection 4.2(a)(vii)) of a Permitted Transferee; and (viii) a Permitted Transferee (determined without regard to either Subsection 4.2(a)(vii) or this Subsection 4.2(a)(viii)) of a person or entity described in Subsection 4.2(a)(vii). (b) PERMITTED TRANSFEREES OF ENTITIES. With respect to any Certificate Holder which is not a natural person: (i) In the case of any Charitable Organization that is a Certificate Holder, "Permitted Transferee" means (1) with respect to each Voting Trust Certificate transferred to such Charitable Organization, the Certificate Holder who made such transfer and any Permitted Transferee of such Certificate Holder, and (2) with respect to each Subsequent Voting Trust Certificate held by such Charitable Organization, the Certificate -24- Holder who transferred the Voting Trust Certificate in respect of which such Subsequent Voting Trust Certificate was issued and any Permitted Transferee of such Certificate Holder. (ii) In the case of a Certificate Holder who is trustee of any trust other than a Charitable Organization or a trust described in Subsection 4.2(b)(iii), "Permitted Transferee" means (1) with respect to each Voting Trust Certificate transferred to such trust, the Certificate Holder who made such transfer and any Permitted Transferee of such Certificate Holder, and (2) with respect to each Subsequent Voting Trust Certificate held by such trust, the Certificate Holder who transferred the Voting Trust Certificate in respect of which such Subsequent Voting Trust Certificate was issued and any Permitted Transferee of such Certificate Holder. (iii) In the case of a Certificate Holder who is trustee pursuant to a trust (other than a Charitable Organization) which was irrevocable on the effective date of this Agreement, "Permitted Transferee" means any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise. -25- (iv) In the case of a Certificate Holder that is the court-appointed fiduciary of the estate of a deceased, incompetent, bankrupt or insolvent Certificate Holder, "Permitted Transferee" means a Permitted Transferee of such deceased, incompetent, bankrupt or insolvent Certificate Holder. (v) In the case of a Certificate Holder that is a corporation, partnership or qualified retirement plan (other than a Charitable Organization),"Permitted Transferee" means (1) with respect to each Voting Trust Certificate transferred to such entity, the Certificate Holder who made such transfer and any Permitted Transferee of such Certificate Holder, and (2) with respect to each Subsequent Voting Trust Certificate held by such entity, the Certificate Holder who transferred the Voting Trust Certificate in respect of which such Subsequent Voting Trust Certificate was issued and any Permitted Transferee of such Certificate Holder. (vi) Notwithstanding anything to the contrary set forth herein, any Certificate Holder may pledge his or her Voting Trust Certificates to a pledgee pursuant to a bona fide pledge of such Certificates as collateral security for indebtedness due to the pledgee, provided that such Certificates shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section 4.2. -26- In the event of foreclosure or other similar action with respect to such Certificates by the pledgee, such pledged Certificates may only be transferred to a Permitted Transferee of the pledgor or converted into Common Shares and withdrawn subject to the terms of Section 3.1, and with respect to any withdrawal not described in Subsections 3.1(b), 3.1(c) or 3.1(f), written notice of such intended withdrawal must be given to the Trustees no less than six months prior to the date of withdrawal specified in such written notice. Any withdrawal pursuant to this Subsection 4.2(b)(vi) shall be treated as a withdrawal to which Section 3.2 applies. (c) DEFINITIONS AND INTERPRETATION. For purposes of Section 4.2: (i) The term "Subsequent Voting Trust Certificate shall mean any Voting Trust Certificate issued or acquired in respect of an existing Voting Trust Certificate (1) by reason of Section 5.4, (2) by reason of participation in the Company's dividend reinvestment plan, whether or not a Voting Trust Certificate is actually issued, or (3) by reason of the exercise of any option granted pursuant to Section 3.2, such acquired Voting Trust Certificates to be deemed to be in respect of the Voting Trust Certificates which enabled such person to be granted such option. -27- (ii) A spouse shall include a widow or widower. A former spouse by reason of a dissolution of marriage all purposes of Subsection shall remain a Permitted Transferee for all purposes of Subsection 4.2(b) to the extent that person was a Permitted Transferee on the date such marriage was dissolved, but, notwithstanding the provisions of Subsections 4.2(a)(vii) and 4.2(a)(viii), shall cease to be a Permitted Transferee for all other purposes of this Agreement. (iii) The relationship of any person that is derived by or through legal adoption shall be considered a natural one, but only if the person adopted had not attained the age of twenty-one years at the time the adoption became effective. (iv) A custodian under a Uniform Gifts to Minors Act, as in effect in any state, or any similar law, shall be treated as if such custodian were a trustee of a trust for the sole benefit of the donee of any transfer made pursuant to such Act. (v) Unless otherwise specified, the term "person" means both natural persons and legal entities. -28- (vi) The Permitted Transferees of a Certificate Holder shall be the same irrespective of whether such Certificate Holder (or any natural person linking such Certificate Holder to his or her Permitted Transferees by reason of subsections 4.2(a)(vii) or (viii)) is alive or dead and shall include Permitted Transferees born after such Certificate Holder's death. (vii) A Certificate Holder may register or reregister his or her Voting Trust Certificates in the names of one or more persons only if each person in whose name the Voting Trust Certificates are to be registered is the Certificate Holder or a Permitted Transferee of the Certificate Holder. If Voting Trust Certificates are registered in the names of more than one person in accordance with this Subsection 4.2(c)(vii), then such Voting Trust Certificates may be transferred to any Permitted Transferee of any person in whose name such shares are registered. (viii) Notwithstanding any provision of this Agreement to the contrary, no person shall be a Permitted Transferee or act in a fiduciary capacity with respect to any Permitted Transferee if, because of such person's status as an alien or because of his or her criminal record, the Company would be denied the right to provide a material service which it could -29- have otherwise provided consistent with its normal business practices. (ix) Any Certificate Holder or Permitted Transferee who acquires any Voting Trust Certificate for value (other than pursuant to a purchase through the Company's dividend reinvestment plan) shall represent, as a condition to such transfer, that he or she is acquiring such Voting Trust Certificates for his or her own personal account and not with a view to the transfer of such certificates or of the beneficially-owned shares of Series A Common to anyone other than a Permitted Transferee. (x) Any purported transfer of record or beneficial ownership of Voting Trust Certificates other than in accordance with the terms of this Section 4.2 shall be void. 4.3 LIMITATION OF VOTING RIGHTS OF CERTAIN PERMITTED TRANSFEREES. Notwithstanding any provision in this Agreement to the contrary, neither a Charitable Organization, nor a trust described in Subsection 4.2(a)(iii), nor an estate described in Subsection 4.2(a)(iv), nor a retirement plan described in Subsection 4.2(a)(vi) shall exercise any voting rights pursuant to this Agreement unless the majority control over the power to vote and dispose of Voting Trust Certificates held by such entity is -30- vested in a natural person who is either a Certificate Holder or a Permitted Transferee of a Certificate Holder. No such person vested with such control shall cease to be a Permitted Transferee for purposes of exercising such control pursuant to this Section 4.3 by reason of the death of any person. 4.4 TRANSFERS. Subject to the foregoing Sections 4.1 and 4.2, the Voting Trust Certificates shall be transferable on the books of the Trustees by the holders of record thereof in person or by duly authorized attorney, subject to such regulations as may be established by the Trustees for that purpose, upon surrender thereof at the office of the Trustees, properly endorsed for transfer, and the Trustees may treat the holders of record thereof, or when duly endorsed in blank the bearers thereof (so long as such bearers are Permitted Transferees), as the owners of Voting Trust Certificates for all purposes whatsoever. As a condition of making or permitting any transfer or delivery of stock certificates or Voting Trust Certificates, the Trustees may require the payment of a sum sufficient to pay or reimburse them for any stamp tax or other governmental charge in connection therewith or any other charge applicable to such transfer or delivery. 4.5 TRANSFEREES BOUND BY AGREEMENT. Every Permitted Transferee of Voting Trust Certificates shall, with respect thereto -31- and by the acceptance thereof, become a party hereto with like force and effect as though an original party hereto and shall be embraced within the meaning of the terms "Depositing Shareholder" or "Certificate Holder" wherever used herein; provided, however, that no such Permitted Transferee shall be required to deposit any certificates representing shares of Series A Common which he or she may otherwise own and which are not Subsequent Voting Trust Certificates. 4.6 RECORD DATE. The Trustees, in their discretion, may fix a record date as of which the Certificate Holders entitled to any payment or to take any action may be determined. Any record date fixed by the Company with respect to any payment shall be deemed to have been fixed by the Trustees as the record date for the purpose of determining the Certificate Holders entitled to such payment. Any other record date fixed by the Company shall be deemed to have been fixed by the Trustees unless the Trustees, within ten days after the fixing of such record date by the Company, fix and notify the Certificate Holders of a different record date. The Certificate Holders at the close of business on any such record date shall be deemed to be the persons so determined. -32- ARTICLE V DIVIDENDS 5.1 TRUSTEES TO PASS THROUGH CASH DIVIDENDS. Each Certificate Holder shall be entitled during the life of this Voting Trust, except as may be otherwise provided herein, to receive from time to time payments equal to the dividends payable in money, if any, received by the Trustees on a number of shares of Series A Common equal to that represented by such Voting Trust Certificate. 5.2 DIRECT PAYMENT OF DIVIDENDS. The Trustees, instead of themselves receiving and disbursing dividends, may request the Company to pay the amount of any dividends upon the shares of Series A Common held by such Trustees hereunder to which such Trustees from time to time become entitled directly to the Certificate Holders after deducting any charges and expenses authorized herein and any income or other taxes required by law to be deducted therefrom; payments in respect of each such dividend shall be made according to their respective interests to the Certificate Holders registered as such at the close of business on the record date determined pursuant to Section 4.6; provided, however, that the Trustees may at any time or from time to time thereafter request the Company to make payment in respect of such dividends to the Trustees. -33- 5.3 HOLD ON DIVIDENDS AT TERMINATION. At the termination of this Agreement the Trustees may continue to hold the shares of Series A Common represented by any Voting Trust Certificate issued and outstanding under this Agreement and any dividend received on such shares of Series A Common until the surrender of such Voting Trust Certificate by the holder thereof. 5.4 STOCK DIVIDENDS, STOCK SPLITS AND RECAPITALIZATIONS. Except as provided in Section 5.6, in the event the Trustees shall receive any fully-paid shares of Series A Common as a result of a dividend, stock split, recapitalization or other distribution in respect of the shares of Series A Common held hereunder, the Trustees shall hold such shares subject to this Agreement and shall issue Voting Trust Certificates, in proportion to their respective interests, to the Certificate Holders of record at the close of business on the date fixed by the Company as the record date for the determination of the shareholders entitled to receive distributions in respect of such dividend or split. 5.5 OTHER FORMS OF DIVIDENDS. Except as otherwise provided in Sections 5.4 and 5.6, if any dividend or other distribution in respect of the shares of Series A Common held by the Trustees hereunder shall be paid otherwise than in cash, the Trustees -34- shall distribute the same in kind ratably among the Certificate Holders entitled to receive such dividend or other distribution upon payment by each Certificate Holder of a sum sufficient to reimburse the Voting Trustees for any stamp tax, other governmental charge or other expense which the Voting Trustees shall have incurred, or for which they shall have or will become liable in connection therewith. 5.6 RECEIPT OF VOTING SECURITIES OF SEPARATE ENTITY. If, as the result of a merger, reorganization, spin-off, dissolution or other transaction, the Trustees receive any voting securities or property convertible into voting securities of any other entity, the Trustees shall retain such securities and property, holding and administering such securities and property pursuant to this Agreement. If the Trustees hold voting securities of two or more separate entities as a result of any of the transactions referred to in the preceding sentence, and if such securities or property provide the Trustees with more than ten percent (10%) of the voting power required to elect a majority of the board of directors of an entity other than the Company, the Trustees are hereby authorized and directed to create an additional trust or trusts identical to the trust created pursuant to this Agreement, having the same Trustees, such that the voting securities of each separate entity (including any property convertible into such voting securities) are held pursuant to the terms of a separate -35- trust. Any such additional trust must be ratified by no less than sixty-five percent (65%) in interest of the Certificate Holders who elect to exercise their right to vote pursuant to Section 5.6 before becoming effective. If such voting trust is not established, the Trustees shall distribute any such securities and property in accordance with Section 5.5. 5.7 SUBSCRIPTION OFFER. (a) MANNER OF EXERCISE OF SUBSCRIPTION RIGHTS. In the event any securities of the Company shall be offered for subscription to the holders of the shares of Series A Common, the Trustees, promptly upon receipt of notice of such offer, shall mail a copy of such notice to each Certificate Holder with a notice of the number of shares subscribable with respect to such Certificate Holder's beneficially-owned shares of Series A Common. Upon receipt by the Trustees, within such time as shall be fixed by the Trustees prior to the last date fixed by the Company for subscription and payment, of a request from any Certificate Holder to subscribe in his or her behalf and of the amount of money required to pay for a specified amount of such securities (not in excess of the amount of such securities subscribable in respect of such holder's beneficially-owned shares of Series A Common), the Trustees shall make such subscription and payment. Upon receiving from the Company the certificate for -36- the securities so subscribed for, the Trustees, if such securities be Series A Common having voting rights greater than those held by Common Shares, shall hold the same under this Agreement and shall issue to such holder a Voting Trust Certificate in respect thereof; and if such securities be other securities the Trustees may in their discretion hold such securities under this Agreement and shall issue to such holder a Voting Trust Certificate in respect thereof or may deliver the certificates for such other securities to such holder. In the event securities of a subsidiary of the Company shall be offered for subscription to the holders of the shares of Series A Common, the receipt of any voting securities or other property convertible into voting securities of such subsidiary shall be treated as a receipt to which the provisions of Section 5.6 apply. (b) TRANSFER OR WITHDRAWAL OF SUBSCRIPTION RIGHTS. The rights of any Certificate Holder to subscribe to additional shares of Series A Common as provided in Subsection 5.7(a) may be transferred only in accordance with the provisions of Article IV and may be withdrawn only in accordance with the provisions of Article III, except that the Trustees shall establish shorter time periods pursuant to Section 3.2 if reasonably necessary to deal with the terms of the subscription offer, and shall give reasonable notice of such change. -37- (c) SERIES A COMMON ACQUIRED PURSUANT TO SUBSCRIPTION RIGHT BY TRANSFEREE. Any shares of Series A Common acquired pursuant to subscription rights assigned to a transferee shall be held by the Trustees subject to all the terms and conditions of this Agreement. ARTICLE VI VOTING RIGHTS 6.1 TRUSTEES TO VOTE SHARES. Until the actual delivery to the Certificate Holder by or on behalf of the Trustees of a certificate issued by the Company representing the shares of Series A Common deposited hereunder in exchange for said Voting Trust Certificates, pursuant to the provisions hereof, the Trustees shall possess and shall be entitled to exercise all the rights and powers of owners of the shares of Series A Common of the Company deposited hereunder, to vote for every purpose and to consent to any and all corporate acts of the Company, it being expressly stipulated that no right to vote or to consent or to be consulted in respect to any such shares of Series A Common is created in or passes to any Certificate Holder by or under any Voting Trust Certificate, or by or under this Agreement, or by or under any other agreement, express or implied, except as provided in Sections 6.3 and 6.4. -38- 6.2 SERIES A COMMON TO BE VOTED AS A UNIT. Except as provided in Sections 6.3 and 6.4, the Trustees shall vote the shares of Series A Common held by them or take any other action with respect to such shares of Series A Common as a unit in accordance with the determination of the six-vote majority of the Trustees. 6.3 FAILURE TO ACHIEVE A SIX-VOTE MAJORITY. Except as otherwise provided in Section 6.4, in the event of the failure of the Trustees to achieve a six-vote majority with respect to the exercise of the right to vote the Series A Common on any proposal, the Trustees shall promptly notify all Certificate Holders of record and the Trustees shall vote all shares of Series A Common deposited hereunder with respect to each such proposal as more than fifty percent (50%) in interest of the Certificate Holders who elect to exercise their right to vote pursuant to this Section 6.3 shall direct in writing. 6.4 CERTAIN TRANSACTIONS TO REQUIRE JOINT CONSENT OF TRUSTEES AND CERTIFICATE HOLDERS. (a) (i) Upon any proposal for the sale of shares of Series A Common by the Trustees; -39- (ii) Upon any proposal submitted for shareholder approval for: (1) the merger or consolidation of the Company with or into any other corporation, or the merger or consolidation of any other corporation with or into the Company; (2) the sale, lease, exchange, mortgage or pledge of all, or substantially all, the property and assets of the Company; (3) the sale, exchange or other disposition of a significant subsidiary of the Company or of the voting control of such subsidiary (meaning, for purposes of this Section 6.4, a subsidiary whose fair market value, as estimated in the reasonable judgment of the Trustees, equals or exceeds twenty-five percent (25%) of the fair market value of the Company and all of its subsidiaries, similarly determined); (4) the merger or consolidation of a significant subsidiary of the Company with or into any other corporation, or the merger or consolidation of any other corporation with or into a significant subsidiary of the Company in a transaction which would leave the Company with fifty percent (50%) or less of the voting power of such significant subsidiary; -40- (5) the sale, lease, exchange, mortgage or pledge of all, or substantially all, the property and assets of a significant subsidiary of the Company; (6) the dissolution, winding up or liquidation of the Company or its business or of a significant subsidiary of the Company or of its business; (7) the amendment of the Company's Articles of Incorporation; or (8) the issuance of any securities having voting rights superior to those of Common Shares; (iii) Upon any proposal for any other transaction not previously described in this Section 6.4 which would be deemed a change of control under the rules and regulations of either the Securities and Exchange Commission or the Federal Communications Commission; the Trustees shall promptly notify all Certificate Holders and the Trustees shall not approve or implement any such action and shall not vote any shares of Series A Common in favor of any such proposal unless (1) the Trustees receive the written direction in -41- favor of the proposal from no less than seventy-five percent (75%) in interest of the Certificate Holders of record, and (2) a six-vote majority of the Trustees concur at a meeting of the Trustees. In the absence of both conditions (1) and (2) being satisfied, the Trustees shall, as the case may be, refrain from the sale of shares of Series A Common, vote against any proposal which would have the effect of approving any transaction described in Subsections 6.4(a)(ii)(1) through (8), or shall refrain from approving or implementing any proposal described in Subsection 6.4(a)(iii); provided, however, that the rights of each dissenting Certificate Holder shall be safeguarded as provided in Subsection 6.4(b) (b) With respect to any Certificate Holder who files a written direction opposing a proposal referred to in Subsection 6.4(a) (a "dissenting Certificate Holder"): (i) No shares of Series A Common held by the Trustees for the benefit of such dissenting Certificate Holder shall be sold without the express written consent of such Certificate Holder. If all shares of Series A Common except those held for the benefit of dissenting Certificate Holders are being sold, the Trustees shall distribute the shares not being sold to such dissenting Certificate Holders on the date the balance of the Series A Common is sold. -42- (ii) In the event of a transaction in which the law of the state of incorporation of the Company grants a dissenting shareholder appraisal rights, the Trustees shall, in accordance with and to the extent permitted by law, take such reasonable steps as are directed in writing by each dissenting Certificate Holder to perfect such dissenting Certificate Holder's appraisal rights with respect to his or her beneficially owned shares of Series A Common, the costs of which shall be borne by each such dissenting Certificate Holder in accordance with the reasonable allocation of such cost by the Trustees. To the extent the Trustees are not legally permitted to fully perfect such rights, the Trustees shall distribute such shares to their beneficial owners so that they may individually take the necessary steps to perfect such rights. (c) Notwithstanding any provision of this Agreement to the contrary, with respect to the sale of shares of Series A Common held by the Trustees pursuant to this Agreement: (i) no such sale shall be made by the Trustees unless the proceeds of such sale shall benefit all of the non-dissenting Certificate Holders proportionately to their beneficial ownership of each class of securities comprising the Series A Common hereunder; -43- (ii) no Trustee shall negotiate or consider any offer with respect to such sale without notice to all Trustees; (iii) except with the consent of a six-vote majority of the Trustees, no Trustee shall enter into any arrangement which commits the Trustee to vote either in his or her capacity as a Trustee or as a Certificate Holder in any specific manner; and (iv) the Trustees shall give reasonable consideration to any offer to purchase all or a portion of such shares which may be made by any one or more Certificate Holders representing five percent (5%) or more in interest hereunder, provided that the Trustees shall not be required to give any additional notice to such Certificate Holders other than the notice required pursuant to Subsection 6.4(a), nor shall the Trustees be required to grant any additional time to such Certificate Holders in which to present such offer. 6.5 VOTING RIGHTS OF CERTIFICATE HOLDERS. (a) The voting rights available to any Certificate Holder pursuant to Sections 6.3, 6.4 or 7.3: -44- (i) may be exercised in person; (ii) may be exercised by proxy, provided that the holder of such proxy must be another Certificate Holder or the Permitted Transferee of any Certificate Holder and provided the proxy is executed within one year before the date on which it is exercised; (iii) may be exercised by written ballot with respect to any matter placed before the Certificate Holders in a proxy statement or other written notice from the Trustees, in such form and subject to such time limits as the Trustees may reasonably require; (iv) may be assigned to a voting trust as provided in Subsection 4.2(a)(iii); provided that each voting trustee thereof shall be a Certificate Holder or the Permitted Transferee of a Certificate Holder. (b) Whenever a percentage in interest of the Certificate Holders is required with respect to any matter, it shall mean that percentage of the votes of all Certificate Holders eligible to vote after giving effect to the provisions of Section -45- 4.3, except as otherwise provided for purposes of Sections 5.6 and 6.3. (c) A Certificate Holder may cast one vote for each vote to which his or her beneficially-owned shares of Series A Common is entitled with respect to the Company's affairs. ARTICLE VII THE TRUSTEES 7.1 MEETINGS AND PROCEDURES. (a) ANNUAL MEETINGS. The Trustees shall meet annually on the first Saturday in April in Chicago, Illinois, or at such other time and place as they may otherwise determine, with such reasonable notice as their rules may provide, including notice to all Certificate Holders who shall be invited to attend each such annual meeting. (b) OTHER MEETINGS OF THE TRUSTEES. In addition to the annual meetings, the Trustees may meet at such time and place as they may determine, with such reasonable notice as their rules may provide (and such rules shall provide that any two trustees may call such a meeting). -46- (c) MEETING PROCEDURES. Except for actions required of the Trustees pursuant to Subsection 6.4(a), the Trustees may act without a meeting by a writing embodying their action executed by that number of Trustees holding the votes necessary to approve such action if there had been a meeting, with notice to each Trustee not executing such writing. The Trustees shall adopt their own rules of procedure. At any meeting of the Trustees any Trustee may vote in person or by proxy given to any other Trustee, and any Trustee may give powers of attorney to any other Trustee to sign any instrument expressing the actions of the Trustees. Trustees may participate in any meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. The Trustees may vote by proxy at any meeting of the Company, if they so elect, provided that such proxy be signed by at least those Trustees holding no fewer than six votes. (d) SPECIAL MEETINGS. Special meetings of the Certificate Holders and the Trustees, for any purpose or purposes, may be called by any two Trustees. Written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, signed by -47- two or more Trustees, shall be given not less than ten nor more than sixty days before the date of the meeting to each Certificate Holder entitled to vote at such meeting, with an information copy to any Certificate Holder not entitled to vote at the meeting by reason of the provisions of Section 4.3. 7.2 VOTING OF TRUSTEES. (a) TRUSTEES' VOTING POWER. The "Johnson Family Trustee" (as defined in Section 7.5) shall have one vote. All other Trustees acting hereunder shall each have two votes. (b) TYPES OF MAJORITIES. A "six-vote majority" shall require the affirmative vote by Trustees holding no fewer than six votes. An "eight-vote majority" shall require the affirmative vote by Trustees holding no fewer than eight votes. Any action requiring the approval of the Trustees for which no reference is made to either of the aforesaid majorities shall require a six-vote majority. The number of votes required shall not be reduced by reason of the temporary vacancy of any trusteeship, by the failure of any Trustee to be present at a meeting of the Trustees either in person or by proxy, by the cessation of the Johnson Family Trustee or for any other reason except as specifically set forth in Subsections 3.1(h), 3.1(i) or 3.2(e). -48- (c) EFFECT OF FAILURE TO ACHIEVE REQUIRED MAJORITY. In the event of the failure of the Trustees to achieve the required six-vote or eight-vote majority as to any proposal not described in Section 6.3 (i.e., a proposal not involving the right to vote the Series A Common), such proposal shall fail. (d) AUTHORITY OF ACTING AND SUCCESSOR TRUSTEES. Pending the election of a successor Trustee to fill any vacancy, the Trustees then acting shall possess and may exercise all the powers of the Trustees hereunder, provided they retain a sufficient number of votes to fulfill the applicable six-vote or eight-vote majorities. 7.3 ELECTION OF TRUSTEES. (a) TERMS OF OFFICE. The Trustees named or elected hereunder shall serve terms of offices, as follows: First Term: The effective date hereof - June 30, 1994 Second Term: July 1, 1994 - June 30, 1999 Third Term: July 1, 1999 - June 30, 2004 Fourth Term: July 1, 2004 - June 30, 2009 (b) REGULAR ELECTION. No less than sixty days prior to the expiration of a term of office, the Trustees shall hold an -49- election among the Certificate Holders to elect a new slate of Trustees. Each Certificate Holder shall have the right to vote, in person or by proxy, the number of votes he or she beneficially holds for as many persons as there are Trustees to be elected, or to accumulate such votes and give one candidate up to that number of votes determined by multiplying the number of Trustees to be elected by the number of shares of Series A Common he or she beneficially owns, or to distribute such votes on the same principle among as many candidates as such Certificate Holder shall think fit. The candidates receiving the highest number of votes up to the total number of Trustees to be elected shall be elected. (c) SPECIAL ELECTION. If one or more vacancies should occur during a term by reason of death, disability, resignation or removal, the Trustees shall, within sixty days of any vacancy, promptly hold a separate special election to elect each successor Trustee to complete the remainder of a term. Only those Voting Trust Certificates with respect to which votes were cast in favor of the Trustee who has died, become disabled, resigned or been removed may be cast with respect to the election of the successor Trustee. If the Trustee who has died, become disabled, resigned or been removed is an initial Trustee, only those Voting Trust Certificates deposited hereunder by such initial Trustee, either in his or her personal or fiduciary capacity, may be cast with -50- respect to the election of the successor Trustee, including any such Voting Trust Certificates then held by a Permitted Transferee who, even after the application of Section 4.3, is entitled to vote hereunder. The identification of those Voting Trust Certificates shall be made by the Trustees as they may reasonably determine. (d) SUCCESSOR TRUSTEES. Any successor Trustee elected hereunder shall be a natural person who is a Certificate Holder or a Permitted Transferee of a Certificate Holder. (e) TERMS FOLLOWING RENEWAL. Should this trust be renewed pursuant to Section 8.6, the Trustees serving during the last term shall serve until September 30 of the first year of the renewal term. All subsequent terms shall be for five years beginning October 1, except any Trustees serving at the termination of this trust because it is not renewed pursuant to Section 8.7 shall serve four years and nine months. 7.4 REMOVAL OF TRUSTEES. Any Trustee may be removed at any time by an instrument signed by no less than eighty-five percent (85%) in interest of the Certificate Holders of record and delivered to the Trustees, such removal to occur upon receipt of such instrument. Any Trustee shall be automatically removed at such time as the Trustees shall have knowledge of any law or -51- regulation to which the Company or this trust is subject which, because of the Trustee's status as an alien or because of the Trustee's criminal record, the Company would be denied the right to provide a material service which it could have otherwise provided consistent with its normal business practices. Upon the removal of any Trustee, the remaining Trustees shall, within sixty days, hold an election as provided in Section 7.3. 7.5 JOHNSON FAMILY TRUSTEE. Notwithstanding the provisions of Sections 7.3 and 7.4: (a) So long as Lester O. Johnson and his Family Members, together with any fiduciary of a Charitable Organization, trust, estate or qualified retirement plan who is a Permitted Transferee of any such person and who, after giving effect to the provisions of Section 4.3, is entitled to vote hereunder, (the "Johnson Family"), hold the percentage in interest required by Subsection 7.5(c), the following provisions shall apply: (i) the Trustee's position held by Melanie J. Heald or any successor elected in her place shall be known as the "Johnson Family Trustee;" (ii) the terms of the Johnson Family Trustee shall be concurrent with the terms of the other Trustees, and a -52- new Johnson Family Trustee shall be elected at the same time the other Trustees are elected; except such election shall be made by the majority in interest of the Johnson Family Certificate Holders of record subject to the approval of the remaining Trustees as provided in Subsection 7.5(a)(v); (iii) the Johnson Family Trustee may be removed only by a majority in interest of the Johnson Family Certificate Holders of record; (iv) if the Johnson Family Trustee should become unable to act by reason of death, disability, resignation or removal, a successor Trustee shall be elected by a majority in interest of the Johnson Family Certificate Holders of record, subject to the approval of the remaining Trustees as provided in Subsection 7.5(a)(v) and; (v) any successor Johnson Family Trustee shall give notice of his or her election to the remaining Trustees and shall be deemed approved (1) upon the consent of a six-vote majority or (2) upon the expiration of ten days from such notice unless four votes of the remaining Trustees have been cast against the approval of such successor Trustee; -53- (b) So long as the Johnson Family Trust is acting, the Johnson Family Certificate Holders shall not be entitled to vote with respect to the election or removal of any other Trustee, and all references to the election or removal of the Trustees shall refer only to the four Trustees other than the Johnson Family Trustee and all references to the Certificate Holders entitled to participate in the election or removal of any other Trustees hereunder shall be a reference only to the Certificate Holders other than the Johnson Family Certificate Holders. (c) Six months after the date on which the percentage in interest of the Johnson Family falls below (i) six percent (6%) at any time either or both of Lester O. Johnson and Frances M. Johnson are living or (ii) five percent (5%) following the death of the survivor of Lester O. Johnson and Frances M. Johnson, the Johnson Family Trustee shall cease to be a Voting Trustee and thereafter there shall be only four such Trustees; provided, however, if at any time during the one-year period following the expiration of the aforesaid six-month period the percentage in interest of the Johnson Family should be in excess of the applicable percentage test, the Johnson Family Trustee shall resume office subject to all of the provisions of this Agreement including the provisions of this Subsection 7.5(c). -54- 7.6 RESIGNATION OF TRUSTEES. Any of the Trustees may at any time resign, and thereby be relieved of all future obligations to act hereunder, by mailing his or her resignation to the Certificate Holders at their respective addresses appearing on the Trustee's records. Such resignation shall be deemed effective immediately upon its being mailed. 7.7 CHANGE OF CONTROL. Any change of trustees hereunder which constitutes a change of control which requires prior Federal Communications Commission approval shall not be effective until such approval is obtained. 7.8 REIMBURSEMENT OF EXPENSES. The Trustees may employ counsel or a depositary and incur other indebtedness or expenses deemed necessary by them for the proper discharge of their duties. In the discretion of the Trustees, by a six-vote majority, any such expenses or discharge of indebtedness may be invoiced among all Certificate Holders holding certificates representing 7,500 (as adjusted by Section 8.1) or more shares of Series A Common, to be paid by such Certificate Holders in proportion to their respective beneficial ownership of Series A Common. To the extent any such invoice is not paid within sixty days, the Trustees shall be entitled to deduct any such amount from the dividends received or receivable by the Trustees with respect to the shares of Series A Common beneficially owned by -55- the non-paying Certificate Holder before paying or causing such dividends to be paid to such Certificate Holder. 7.9 OTHER RELATIONSHIPS BETWEEN TRUSTEES AND COMPANY. Any Trustee shall be permitted to be, at the same time, an officer, director, consultant, agent, or employee of the Company or of any affiliate of the Company, and shall be permitted to be or become pecuniarily interested in his or her personal capacity, either directly or indirectly, in any matter or transaction to which the Company or any affiliate may be a party or in which the Company or any affiliate may be concerned to the same extent as though he or she were not a Trustee. Any Trustee shall be permitted to receive compensation, of whatever character, as is provided by their existing contracts, if any, with the Company or its affiliates, with complete propriety and without disqualifying themselves to act as Trustees hereunder; and upon the expiration of the existing contracts, if any, with the Trustees, or sooner by mutual agreement, the Company or its affiliates and such Trustees shall be permitted to enter into new contracts which may change their compensation. 7.10 TRUSTEES MAY BE SHAREHOLDERS, CERTIFICATE HOLDERS AND MAY ACQUIRE AND DISPOSE OF SHARES. Any Trustee shall be permitted, for his or her personal account or otherwise, subject to all the terms and conditions of this Agreement, to either acquire -56- from or sell to the Company or any shareholder shares of stock or other securities of the Company or Voting Trust Certificates to the same extent as though he or she were not a Trustee. Any Trustee shall be entitled to exercise all rights and options conferred upon Certificate Holders under this Agreement to the same extent as though he or she were not a Trustee. 7.11 COMPENSATION OF TRUSTEES. The Trustees shall not be entitled to compensation for their services as Trustees hereunder. 7.12 LIMITATION OF LIABILITY. In voting or giving directions for voting the shares of Series A Common deposited hereunder or in exercising any consent with respect thereto, the Trustees shall exercise their best judgment, from time to time, to select suitable directors and in voting or giving directions for voting and acting on other matters for shareholders' action the Trustees shall exercise like judgment; provided, however, that the Trustees assume no responsibility in respect of such management or in respect of any action taken by them or taken pursuant to their consent thereto, or pursuant to their votes, and no Trustee shall incur or be under any liability as the holder of securities of the Company in his or her capacity as Trustee, by reason of any error of law or any error in the construction of this Agreement or of any matter or thing done or suggested or omitted to be done -57- pursuant to this Agreement, except for his or her intentional misconduct. No bond shall be required of any Trustee for the performance of his or her services as such. ARTICLE VIII GENERAL PROVISIONS 8.1 ADJUSTMENT FOR STOCK SPLITS. Wherever under this Agreement a provision sets a limitation or requirement of an amount of shares, such number shall be adjusted from time to time as necessary to take into account any stock splits, stock dividends, issuance of other voting stock with voting rights superior to Common shares and other changes in the capital structure of the Company, so that such adjusted number bears the same proportion to the voting power of the Company held by this trust following such capital change as the number immediately prior to adjustment bore to the voting power of the Company held by this trust immediately prior to such capital change. 8.2 SCOPE OF AGREEMENT. This Agreement and all covenants herein contained shall inure to the benefit of and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns. -58- 8.3 NOTICES. Any notice required to be given under this Agreement shall be deemed to have been given and received if actually received, such as by telephone, telecopier, electronic mail, telegram, hand delivery, or other means, and the giver has reasonable evidence or acknowledgment of its receipt. Notice shall also be deemed to have been given if deposited in the United States mail in a postpaid wrapper, in which case it shall be deemed to have been received on the third business day after the date of such deposit, or if deposited with a commercial or government overnight carrier, in which case it shall be deemed to be received the first business day after the date of such deposit. The Trustees shall request a return receipt with each notice they mail or send by overnight carrier. (a) In the case of a Certificate Holder, such notice shall be addressed to such Certificate Holder at his or her last address appearing on the records of the Trustees. (b) In the case of a notice to the Trustees by a Certificate Holder, such notice shall be given to each of the Trustees, addressed to each Trustee at his or her address of record, as set forth at the end of this Agreement or as it may be changed from time to time by written notice to all such holders. -59- (c) In the case of a notice to a Trustee by another Trustee, notice shall be addressed to the Trustee at his or her address of record, as set forth at the end of this Agreement or and as may be changed from time to time by written notice to the remaining Trustees. The Trustees shall use their best efforts to transmit to the Certificate Holders, or to cause the Company to transmit, all information sent by the Company to the holders of Series A Common. 8.4 RELIANCE BY TRUSTEE. The Trustees shall be conclusively entitled to rely upon any notice or statement received by them from the Company or the holders of record of Voting Trust Certificates and believed by them in good faith to be genuine and shall act and shall be fully protected in acting in accordance therewith. 8.5 AMENDMENT OF AGREEMENT. This Agreement and the Certificates issued hereunder may be amended upon the consent in writing of an eight-vote majority of the Trustees and no less than ninety percent (90%) in interest of the Certificate Holders of record; provided, however, that no amendment which shall have the effect of extending the time for termination of this Voting Trust -60- Agreement shall be made without the consent in writing of all of the Certificate Holders. 8.6 TERMINATION. This Agreement shall be binding upon each of the parties executing the same from the date of its execution by such party. The trust created hereunder shall be effective as of the date hereof, and this Agreement and the trust created hereunder shall remain in full force and effect until January 31, 2009. This Agreement and the trust created hereunder may be terminated at any time with the consent in writing of an eight vote majority of the Trustees and by no less than seventy-five (75%) in interest of the Certificate Holders of record. 8.7 RENEWAL. Not earlier than January 1, 2009, nor later than March 31, 2009, the Trustees shall notify all Certificate Holders of their right to withdraw their shares of Series A Common upon termination of the trust on June 30, 2009, without regard to the provisions of Article III. All Certificate Holders shall have until May 15, 2009, to notify the Trustees of their preliminary intent to withdraw upon termination. The Trustees shall notify all Certificate Holders in writing before May 31, 2009, as to which Certificate Holders have presented such notice. The Certificate Holders shall notify the Trustees of their final election to withdraw upon termination on or before June 30, 2009. Each Certificate Holder shall be eligible to make -61- a final election to withdraw irrespective of whether or not he or she notified the Trustees of a preliminary intent to withdraw. If, as of the close of business on June 30, 2009, fifty percent (50%) or less in interest of the Certificate Holders have elected to withdraw, this trust shall be automatically renewed for an additional term of the lesser of twenty years or the maximum number of years permitted by controlling law. If more than fifty percent (50%) in interest of the Certificate Holders have elected to withdraw, a six-vote majority of the Trustees shall be required to renew the trust. If the trust is renewed, it shall be renewed only with respect to those Certificate Holders not electing to withdraw. This renewal provision shall be equally applicable at the end of each succeeding renewal term, with appropriate changes in dates to reflect the new termination date. 8.8 DE MINIMIS HOLDINGS. The Trustees may, in their discretion, distribute to any Certificate Holder who beneficially owns less than 150 (as adjusted by Section 8.1) shares of Series A Common the shares of Series A Common then held by the Trustees for the benefit of such Certificate Holder, which distribution shall not be subject to the provisions of Article III. 8.9 SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity of the remainder hereof. -62- 8.10 INTERPRETATION. (a) TRUSTEE. The term "Trustee" or "Trustees" wherever used herein means the person or persons from time to time acting in such capacity pursuant to the provisions of this Agreement. (b) HEREUNDER. Whenever the word "hereunder" is used in this instrument, it shall refer to the entire instrument, not merely to the article, section or subsection in which it appears. (c) BUSINESS DAY. A "business day" shall be any day on which the exchange constituting the primary marketplace for the Company's Common Shares is open for business or, if such shares are not listed for trading on an exchange, any day on which the New York Stock Exchange, or any successor exchange, is open for business. (d) GENDER AND NUMBER. As the context permits, the gender and number of words may be interchanged. (e) HEADINGS. The headings used herein are for convenience only, are not part of the article, section or subsection to which they relate, and are not to be used in construing the legal intent of this instrument. -63- 8.11 CONTROLLING LAW. All questions concerning the validity and administration of this Agreement and the trust created hereunder shall be determined under the law of the State of Iowa, except that the Trustees may, in their discretion, elect to change the law to be so used to that of the state in which the Company is incorporated as such state may change from time to time, upon notice to the Certificate Holders. This Agreement shall be subject to the applicable rules and regulations of the Federal Communications Commission. 8.12 CONSTRUCTION OF AGREEMENT. All questions concerning the interpretation or construction of this Agreement shall be determined by a six-vote majority of the Trustees, whose decision shall be final and binding on all parties. 8.13 MULTIPLE COUNTERPARTS. This Agreement may be executed by the parties herein, or any of them, in any number of counterparts, with the same force and effect as if they had all executed the same instrument. 8.14 ENTIRE AGREEMENT. This Agreement (including the exhibits attached hereto) contains the entire understanding among the parties hereto with respect to the subject matter hereof, and no -64- representation, warranty, covenant or condition other than those expressly set forth herein shall be of any force or effect. * * * * * -65- IN WITNESS WHEREOF, the Trustees and the Certificate Holders have executed this Agreement as of the day and year first above written. TRUSTEES AND ADDRESSES OF RECORD: /s/ Walter C.D. Carlson ----------------------- WALTER C.D. CARLSON 1041 Judson Evanston, Illinois 60202 Home telephone: (312) 864-6869 Office telephone: (312) 853-7734 /s/ Lettitia G.C. Carlson ------------------------- LETITIA G.C. CARLSON 2405 41st Avenue East, #303M Seattle, Washington 98112 Home telephone: (206) 329-6897 /s/ Le Roy T. Carlson, Jr. -------------------------- LE ROY T. CARLSON, JR. 1440 North Lake Shore Drive Apartment 19-C Chicago, Illinois 60610 Home telephone: (312) 266-1725 Office telephone: (312) 630-1900 /s/ Melanie J. Heald -------------------- MELANIE J. HEALD 7410 Longmeadow Road Madison, Wisconsin 53717 Home telephone: (608) 836-9653 /s/ Donald C. Nebergall ----------------------- DONALD C. NEBERGALL 2919 Applewood Place, N.E. Cedar Rapids, Iowa 52402 Home telephone: (319) 364-8386 Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -66-
No. of No. of Deposited Deposited Shares of Shares of Series A Series A Common in Signature of Common in Dividend Depositing Date of Certificate Reinvestment Shareholders Execution Form Plan ------------ --------- ------------- ------------- /s/ Arthur Anderson 10/12/89 2,250 ------------------- -------- Arthur Anderson, custodian for Jacob Anderson /s/ Arthur Anderson 10/12/89 1,800 ------------------- -------- Arthur Anderson, custodian for Samuel Keith /s/ Kendrick Anderson (undated) --------------------- --------- 2,250 Kendrick Anderson, custodian Eve Anderson /s/ Kendrick Anderson (undated) 2,250 ------------------- ---------- Kendrick Anderson, custodian for Jill Anderson /s/ K.C. August 9/5/89 20,180 --------------- ---------- K.C. August /s/ LeRoy T. Carlson 9/14/89 363,009 155.6591 -------------------- ---------- LeRoy T. Carlson /s/ LeRoy T. Carlson, Jr. 9/7/89 1,006,331 10,310.7146 ------------------------ ----------- LeRoy T. Carlson, Jr. /s/ LeRoy T. Carlson, Jr., custodian for Anthony J.M. Carlson 9/7/89 6,397 175.9203 ------------------------ ----------- LeRoy T. Carlson, Jr., custodian for Anthony Joseph Mouly Carlson /s/ LeRoy T. Carlson, Jr., custodian for Leo P.M. Carlson 9/7/89 475 0.7945 ------------------------- ------------ LeRoy T. Carlson, Jr., custodian for Leo Peter Mouly Carlson
Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -67-
No. of No. of Deposited Deposited Shares of Shares of Series A Series A Common in Signature of Common in Dividend Depositing Date of Certificate Reinvestment Shareholders Execution Form Plan ------------ --------- ------------ -------------- /s/ Letita G.C. Carlson 9/14/89 447,620 10,432.9115 ----------------------- ------- Letitia G.C. Carlson /s/ Margaret D. Carlson 9/14/89 620,725 MDC ----------------------- ------- <#>620,725 Margaret D. Carlson /s/ Prudence E. Carlson (undated) 604,718 ----------------------- --------- Prudence E. Carlson /s/ Ross V. Carlson 9/4/89 4,500 190.4848 ---------------- --------- Ross Carlson, custodian for Dana Dougherty /s/ Ross V. Carlson 9/4/89 4,500 190.4848 ---------------- --------- Ross Carlson, custodian for Adam Maldonado /s/ Ross V. Carlson 9/4/89 4,500 190.4848 ---------------- -------- Ross Carlson, custodian for Nicole Maldonado /s/ Walter C.D. Carlson 9/4/89 612,318 8,111.7163 ----------------------- -------- Walter C.D. Carlson /s/ Walter C.D. Carlson, custodian for Amanda Carlson * 9/4/89 11,612 60.0321 ----------------------- -------- Walter C.D. Carlson, custodian for Amanda Liv de Hoyos Carlson /s/ Walter C.D. Carlson, custodian for Greta Carlson * 9/4/89 1,765 --------------------- -------- custodian for Greta Marion de Hoyos Carlson
*as custodian Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -68-
No. of No. of Deposited Deposited Shares of Shares of Series A Series A Common in Signature of Common in Dividend Depositing Date of Certificate Reinvestment Shareholders Execution Form Plan ------------ --------- ------------ -------------- /s/ Yvonne M. Carlson 9/30/89 29,002 1,331.9570 --------------------- Yvonne M. Carlson 2,347 ---------------------- -------- Debora M. de Hoyos /s/ Melanie J. Heald 9/4/89 30,000 -------------------- ------- Melanie J. Heald /s/ Frances M. Johnson 9/4/89 81,324 ---------------------- -------- Frances M. Johnson, Trustee /s/ Graham Johnson 9/4/89 30,000 ------------------ -------- Graham Johnson /s/ Kent Johnson 9/4/89 30,000 ---------------- -------- Kent Johnson /s/ Laurel Ann Johnson 9/4/89 30,000 ---------------------- -------- Laurel Ann Johnson /s/ Lester O. Johnson 9/4/89 162,648 --------------------- -------- Lester O. Johnson, Trustee /s/ Dagmar Maldonado, custodian for Dana Dougherty 10/17/89 675 31.0652 -------------------- --------- Dagmar Maldonado, custodian for Dana Dougherty /s/ Dagmar Maldonado, custodian for Adam Maldonado 10/17/89 450 20.7109 -------------------- ---------- Dagmar Maldonado, custodian for Adam Maldonado /s/ Dagmar Maldonado, custodian for Nicole Maldonado 10/17/89 450 20.7109 -------------------- ---------- Dagmar Maldonado, custodian for Nicole Maldonado
Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -69-
No. of No. of Deposited Deposited Shares of Shares of Series A Series A Common in Signature of Common in Dividend Depositing Date of Certificate Reinvestment Shareholders Execution Form Plan ------------ --------- ------------ -------------- /s/ Catherine Mouly 9/13/89 2,347 29.2589 ------------------ --------- Catherine Mouly /s/ Catherine Mouly, custodian for Anthony J.M. Carlson 9/13/89 2,250 733.6283 ------------------------ ---------- Catherine Mouly, custodian for Anthony J.M. Carlson /s/ Donald C. Nebergall 9/6/89 28 1.0430 ----------------------- --------- Donald C. Nebergall /s/ Donald C. Nebergall, tr 9/6/89 395,827 476.7591 -------------------------------- --------- Donald C. Nebergall, Trustee U/A dated 1/1/56 for Prudence E. Carlson /s/ Donald C. Nebergall, tr 9/6/89 395,827 476.7591 -------------------------------- -------- Donald C. Nebergall, Trustee U/A dated 1/1/56 for Walter C.D. Carlson /s/ Donald C. Nebergall, tr 9/6/89 593,741 715.1386 -------------------------------- -------- Donald C. Nebergall, Trustee U/A dated 10/24/60 for Letitia G.C. Carlson /s/ Donald C. Nebergall, tr 9/6/89 315,062 -------------------------------- -------- Donald C. Nebergall, Trustee U/A dated 12/28/72 /s/ Donald C. Nebergall, tr 9/6/89 77,346 -------------------------------- -------- Donald C. Nebergall, Trustee U/A dated 12/31/76
Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -70-
No. of No. of Deposited Deposited Shares of Shares of Series A Series A Common in Signature of Common in Dividend Depositing Date of Certificate Reinvestment Shareholders Execution Form Plan ------------ --------- ------------ -------------- /s/ Donald C. Nebergall, tr 9/6/89 130,992 -------------------------------- ------- Donald C. Nebergall, Trustee Lead Annuity Trust for Wellesley College /s/ Byron Wertz, custodian for Allison M. Wertz 9/6/89 4,500 190.4848 -------------------------- -------- Byron Wertz, custodian for Allison M. Wertz /s/ Byron Wertz, custodian for Joseph E. Wertz 9/6/89 4,500 190.4848 --------------------------- -------- Byron Wertz, custodian for Joseph E. Wertz /s/ Florence Wertz, by John E. Wertz 9/9/89 11,925 ------------------ -------- Florence Wertz /s/ John Alan Wertz 10/-/89 2,577 ------------------- -------- John Alan Wertz /s/ Kristin Wertz 9/16/89 475 ----------------- --------- Kristin Wertz /s/ Paul Wertz, for Elizabeth 9/8/89 563 25.8909 -------------- -------- Paul Wertz, custodian for Elizabeth D. Wertz /s/ Paul Wertz, for Jessica 9/8/89 563 25.8909 -------------- -------- Paul Wertz, custodian for Jessica A. Wertz
-71- EXHIBIT A TO VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 VOTING TRUST CERTIFICATE No.___________ ______Shares of Series A Common TELEPHONE AND DATA SYSTEM, INC. Incorporated under the Laws of the State of Iowa THIS IS TO CERTIFY THAT, subject to the provisions hereof and of the Voting Trust Agreement hereinafter mentioned, on the surrender hereof, properly endorsed, _________________________ will be entitled to receive on June 30, 2009, or on the earlier termination of the Voting Trust Agreement, as therein provided, a stock certificate, expressed to be full-paid and non-assessable, for shares of Series A Common, represented by this Certificate, of Telephone and Data Systems, Inc. (the "Company"), a corporation organized and existing under the laws of the State of Iowa, or its successor. In the event of a withdrawal of Common Shares by the holder of this Certificate pursuant to a Withdrawal Request as contemplated by Article III of the Voting Trust Agreement, he or she will be entitled to receive a stock certificate for the Common Shares so withdrawn under the terms and conditions set forth in Article III or cash or a stock certificate for Common Shares to the extent the shares of Series A Common are acquired pursuant to the option available to certain participants in the Voting Trust Agreement. In the meantime, subject to the -72- provisions of the Voting Trust Agreement, the holder of this Certificate is entitled to receive payments equal and of like character to the dividends if any, received by the Trustees upon the number of shares of Series A Common held by the Trustees for such holder, less such charges and expenses as are authorized by the Voting Trust Agreement to be deducted therefrom and less any income or other taxes required by law to be deducted therefrom; provided, however, such dividends, if received by the Trustees in Series A Common shall be payable in Voting Trust Certificates for such stock. If the Trustees shall exercise on behalf of the holder of this Certificate any right to subscribe to shares of Series A Common, in accordance with the provisions of the Voting Trust Agreement, the Trustees shall issue Voting Trust Certificates in respect thereof. Until actual delivery of the stock certificates called for hereby following the termination of the Voting Trust Agreement (or in the case of Common Shares properly withdrawn pursuant to a Withdrawal Request until actual delivery of the stock certificates for such withdrawn Common Shares), the Trustees, upon the terms and subject to the provisions stated in the Voting Trust Agreement, shall possess and shall be entitled to exercise all rights and powers of the owners of such Series A Common to vote for every purpose and to consent to any and all corporate acts of the Company, except as such right is expressly limited by the terms of the Voting Trust Agreement; it being expressly stipu- -73- lated that except as expressly provided in the Voting Trust Agreement, no right to vote such Series A Common and no right to consent or be consulted in respect of such Series A Common is created or passes to any holder of this Certificate by or under this Certificate or by or under any agreement express or implied. This Certificate is issued under and pursuant to, and the rights of each successive holder hereof are subject to and limited by, the terms and provisions of a certain Voting Trust Agreement, dated as of the thirtieth day of June, 1989, between certain owners of Series A Common of the Company and the Trustees (herein referred to, and as it may be amended from time to time, the "Voting Trust Agreement"), one copy of which is on file with Walter C.D. Carlson, or any other successor Trustee acting in his place. Each holder of this Certificate by the acceptance hereof assents and agrees to be bound by all the provisions of the Voting Trust Agreement. This Certificate is not transferable whether by sale, assignment, gift, bequest, appointment or otherwise by the holder of record hereof except as provided in Article III or Article IV of the Voting Trust Agreement, subject to such regulations as may be established by the Trustees for that purpose, upon surrender hereof at the office of the Trustees, properly endorsed for transfer, and the Trustees may treat the holder of record hereof as the owner of this Certificate for all purposes. Any attempted transfer which is not permitted pursuant to the provisions of -74- Article IV shall be void. Every transferee of this Certificate shall by the acceptance hereof become subject to the provisions of this Voting Trust Agreement. Anyone who acquires this Certificate for value (other than pursuant to the Company's dividend reinvestment plan) represents that he or she is acquiring this Certificate for his or her own personal account and not with a view to the transfer of this Certificate or of the shares of Series A Common represented by this Certificate to anyone other than a Permitted Transferee (as defined in Article IV of the Voting Trust Agreement). As a condition of making or permitting any transfer or delivery of stock certificates or Voting Trust Certificates, the Trustees may require the payment of a sum sufficient to pay or reimburse them for any stamp tax or other governmental charge in connection therewith, or any other charges applicable to such transfer or delivery. The Voting Trust Agreement and this Certificate may be amended at any time and from time to time in the manner therein provided by the Trustees with the consent in writing of the Trustees holding no fewer than eight votes and by not less than ninety percent (90%) in interest of the holders of record of Voting Trust Certificates; provided, however, that no amendment which shall have the effect of extending the time for termination of the Voting Trust Agreement shall be made without the consent in writing of all of such participants. The Voting Trust Agree- -75- ment and the trust created thereunder may be terminated at any time with the consent in writing of the Trustees holding no fewer than eight votes and by not less than seventy-five percent (75%) in interest of the holders of record of Voting Trust Certificates. This Voting Trust Agreement may be renewed for additional terms with respect to the holder of this Certificate unless such holder notifies the Trustees prior to June 30, 2009 (in response to a required notice from the Trustees), of his or her election to withdraw. -76- IN WITNESS WHEREOF, the Trustees have executed this Certificate by affixing their hands this ____ day of _________________, 19___ ___________________ WALTER C.D. CARLSON ___________________ LETITIA G.C. CARLSON ____________________ MELANIE J. HEALD ____________________ DONALD C. NEBERGALL Signature Page to TDS Voting Trust Agreement dated as of June 30, 1989. -77- (FORM OF ASSIGNMENT FOR REVERSE SIDE OF VOTING TRUST CERTIFICATE) FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto ____________________ the within Certificate and all rights and interests thereby and does hereby irrevocably constitute and appoint attorney to transfer such certificate on the books of the Trustees under the Voting Trust Agreement within referred to, with full power of substitution in the premises. Dated: ______________________ ___________________________ In the presence of: _____________________________ -78- EXHIBIT B TO VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 A "Withdrawal Request," as referred to in Subsection 3.1(g) of the Voting Trust Agreement, shall be in the following form: NOTICE OF WITHDRAWAL Dated _______________ , _______________ To Trustees Under Voting Trust Agreement Dated as of June 30, 1989 ("Voting Trust Agreement") The undersigned hereby requests the withdrawal of ____________ Common Shares of Telephone and Data Systems, Inc. (the "Company"), into which all or part of the shares of Series A Common represented by the enclosed Voting Trust Certificate(s) No(s). ___________ registered in the undersigned's name are convertible. The aforesaid withdrawal is permitted pursuant to the provisions of [Subsection 3.1(b)] [Subsection 3.1(c)] [Subsection 3.1(d)][Subsection 3.1(f)] of the Voting Trust Agreement. You are authorized and directed by the undersigned to convert into the above stated number of Common Shares the requisite number of shares of Series A Common represented by the enclosed Voting Trust Certificate(s). The undersigned hereby stipulates and agrees with you, the Trustees, and the Transfer Agent for the Company's Common Shares that the date of withdrawal will be ____________, 19__, and 79 further information concerning the denominations and registrations of stock certificates to be delivered at that time in accordance with Section 3.3 of the Voting Trust Agreement, will be delivered to the Trustees and the Transfer Agent not less than five business days prior to such closing date; (iii) all conditions in Article III of the Voting Trust Agreement as to the withdrawal of the Common Shares requested hereby to be satisfied by the undersigned have been, or will prior to such closing be, satisfied, and all procedures set forth therein to be complied with by the undersigned have been, or prior to such closing will be, complied with; and (iv) any additional documents, opinions of legal counsel, or other materials reasonably required of the undersigned by you, the Company, the Depositary or the Transfer Agent in connection with the matters that are the subject of this Withdrawal Request will be furnished by the undersigned at or in advance of the closing. The undersigned acknowledges that this Withdrawal Request will cause the Trustees to grant to certain Certificate Holders ("Optionees") an option to acquire pursuant to Section 3.2 of the Voting Trust Agreement, and that this Withdrawal Request shall be or become irrevocable at any time there are 105 days or less prior to the date of withdrawal previously stipulated herein. To the extent the aforesaid option is exercised, the undersigned directs that [all of the shares to be withdrawn] [the first shares to be withdrawn] be acquired by the -80- Optionees' tendering of the Company's Common Shares in exchange for the Series A Shares represented by the enclosed Voting Trust Certificate(s) which the undersigned has authorized you to convert into Common Shares. _________________________________ -81-
EXHIBIT C TO VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 SUMMARY OF REQUIREMENTS FOR CERTAIN ACTIONS BY TRUSTEES AND CERTIFICATE HOLDERS (1) Required Required # in interest of Votes by of Certifi- Action Section* Trustees cate Holders ------ -------- ----------- -------------- Acceptance of additional deposits 1.3 Eight N/A Issuance of voting Three trust certificates 2.2 Trustees N/A Waiver of Notice 3.1(h) Six(2) N/A Cancellation of Withdrawal 3.1(1) Six(2) N/A Reduction of Notice Period 3.2(e) Six(2) N/A Approval of separate voting trust for 65% of those spun-off entity 5.6 N/A voting Voting of Series A 6.2, More than 50% Common 6.3 Six of those voting (only if Trustees dead- locked) Sale of Series A Common by Trustees and certain major corporate matters 6.4 Six 75% Exercise of appraisal Any Dissenting rights 6.4(b) N/A Certificate Holder Election of Trustees 7.3 N/A Cumulative Voting Removal of Trustee 7.4 N/A 85% Reimbursement of Trustees' expenses 7.7 Six N/A Amendment of agreement 8.5 Eight 90% Early termination 8.6 Eight 75% Renewal 8.7 Six or More than 50%
1. This summary is for convenience only and is not to be used in construing the legal intent of the instrument to which it is attached. In the event of any conflict between the information contained herein and the language of the instrument, the language of the instrument shall control. 2. Any Trustee who is the person requesting the waiver or cancellation is excluded from voting as to this matter. -82- EX-99.(C)(6) 7 EXCHANGE AGREEMENT EXCHANGE AGREEMENT This Exchange Agreement, dated as of January 1, 1994, is entered into between Telephone and Data Systems, Inc., an Iowa corporation (herein called "TDS"), and American Paging, Inc., a Delaware corporation (herein called "API"). WHEREAS, TDS owns all of the issued and outstanding shares of the capital stock of API; WHEREAS, in connection with the execution and delivery of this Agreement, API is selling in an underwritten public offering (the "Offering") a number of its Common Shares, par value $1.00 per share, as a result of which API will have a class of publicly held securities and API will be subject to the reporting and other requirements of the Securities Exchange Act of 1934, and the parties desire to provide for a recapitalization of API to accommodate the Offering; and WHEREAS, API and TDS desire to set forth certain agreements made between them with respect to such recapitalization and other matters; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the terms set forth below shall have the indicated meanings (such meanings apply equally to the singular and plural forms thereof): "ACT" shall mean the Securities Act of 1933, as amended. "FCC" shall mean the Federal Communications Commission. "SEC" shall mean the Securities and Exchange Commission. ARTICLE II RECAPITALIZATION Promptly upon obtaining stockholder approval of the adoption of a Restated Certificate of Incorporation for API in substantially the form attached hereto as Exhibit A, API shall file the Restated Certificate of Incorporation with the Secretary of State of Delaware pursuant to Section 103 of the General Corporation Law of Delaware, causing the 100 shares of capital stock owned by TDS to be converted into 1,500,000 Common Shares and 15,000,000 Series A Common Shares of API. ARTICLE III RIGHT TO ACQUIRE ADDITIONAL API SECURITIES Section 3.01. PURCHASE RIGHTS. In addition to the pre-emptive rights granted to TDS as a holder of Series A Common Shares of API pursuant to the Restated Certificate of Incorporation of API referred to in Article II, TDS shall have the right to subscribe to any issuance of Common Shares or any other voting securities of API, or of any securities convertible into or exchangeable for, or carrying a right to subscribe to or acquire, Common Shares or any other voting securities of API, other than the Common Shares being issued pursuant to the Offering. To the extent an issuance is to be made for consideration other than cash, the fair market value of the non-cash consideration shall be determined by resolution of the board of directors of API. The proportion of each such issuance that TDS shall have the right to subscribe to (which right may be exercised in full or in part) shall be equal to the proportion of the Common Shares that TDS would own immediately before the issuance if all securities of API that are convertible into Common Shares (including securities convertible into another class that is convertible into Common Shares and including securities that in the future will become convertible) were converted (successively, if necessary) into Common Shares. -3- Section 3.02. COMPLIANCE WITH SECURITIES LAWS. In connection with any issuance to which the purchase rights granted by Section 3.01 apply, API shall take all such action as shall be necessary to register the securities being issued, or to qualify them for an exemption from registration, under the Act and any applicable state securities or blue sky laws. Section 3.03. METHOD OF EXERCISE. The purchase rights granted by Section 3.01 are exercisable by TDS by delivering to the Secretary of API a written election to subscribe to a specified number (in conformity with Section 3.01) of the securities to be issued, within such reasonable period of time as may be established by the board of directors of API after the giving of written notice of the proposed issuance to TDS. The closing of such purchase shall take place at such time and place as shall be determined by the board of directors of API, upon at least 30 days' prior written notice to TDS. At the closing, TDS shall pay for all shares issued and sold to TDS with cash, the cancellation of indebtedness owed by API to TDS, such other consideration as shall be reasonably acceptable to API, or a combination of such forms of consideration. Section 3.04. TRANSFER OF RIGHTS. (a) The rights of TDS under this Article may be transferred to any one or more transferees from TDS of any Common Shares, Series A Common Shares, or any securities convertible into or exchangeable for, or carrying -4- a right to subscribe to or acquire, shares of either such class. Any transfer of rights pursuant to this Section 3.04 shall be effective only upon receipt by API of written notice from TDS stating the name and address of any transferee and identifying the securities being transferred. (b) The rights of a transferee shall be the same rights granted to TDS in Section 3.01 with respect to the securities transferred, subject to the same conditions as are applicable to TDS in Section 3.03. ARTICLE IV CERTAIN OTHER RIGHTS Section 4.01. AGREEMENTS REGARDING PAGING INTERESTS. (a) The parties acknowledge and agree that certain operating telephone and cellular companies and other entities that are subsidiaries or affiliates of TDS (other than API and subsidiaries of API) have FCC licenses to engage in radio paging services (collectively, "Paging Services") to certain areas as set forth on Exhibit B (the "Non-API Paging Interests"). With respect to the Non-API Paging Interests, the parties further acknowledge and agree that: -5- (1) the Non-API Paging Interests have previously been offered for sale to API and API has decided not to acquire the Non-API Paging Interests; and (2) consequently, TDS and such subsidiaries and affiliates will retain all of the Non-API Paging Interests as their own property. (b) The parties acknowledge and agree that TDS and subsidiaries of TDS (other than API and subsidiaries of API) may, in the future, (1) obtain FCC licenses to engage in Paging Services or (2) acquire control of entities that have or obtain FCC licenses to engage in Paging Services or have interests in other entities that provide Paging Services, in exchange for all or some of the Non-API Paging Interests or otherwise (collectively, the "Future Paging Interests"). The parties further acknowledge and agree that all such Future Paging Interests that are ancillary to and integrated with other communications systems shall be retained by TDS and such subsidiaries as their own property and the balance of such Future Paging Interests (the "Eligible Future Paging Interests") shall be subject to Section 4.02. Section 4.02. API RIGHT OF NEGOTIATION. TDS agrees to offer API the opportunity to negotiate regarding the purchase of the Eligible Future Paging Interests, subject to FCC approval of -6- any purchase, if required, PROVIDED that there are no restrictions on a sale of the interests, including without limitation any requirement that the interests be offered first to another person before being sold to API and PROVIDED, FURTHER, that, in the reasonable judgment of TDS, there are no material adverse consequences to TDS that may result therefrom. If API desires to acquire any such interests so offered, then for a period of 90 days (the "API Negotiating Period") beginning on the date of API's receipt of TDS's offer to negotiate, API shall have the right to negotiate with TDS about the price and other terms and conditions of the acquisition. If, notwithstanding the negotiations of the parties, TDS and API are not able to agree on the price and other terms and conditions of sale during the API Negotiating Period, then there shall be no restriction on TDS's ability to sell at any time thereafter any interest that was a subject of those negotiations, except that if, during the one-year period beginning on the last day of the API Negotiating Period, TDS proposes to sell to a third party any such interest for a price that is not more than the highest price API offered in writing for the interest during the API Negotiating Period, TDS shall first offer in writing to sell the interest to API upon the terms and conditions proposed for the sale to a third party. API shall have ten days within which to accept such offer by giving written notice of acceptance. If API does not timely accept such offer, TDS shall then be free to sell the interest to a third party during the remainder of the -7- one-year period, but only if the price and other terms and conditions of sale are in the aggregate, in the reasonable judgment of TDS, not less favorable to TDS than those proposed for the sale of the interest to API. After the expiration of the one-year period, there shall be no restrictions on TDS's ability to sell the interest. Section 4.03. FUTURE ISSUANCE OF SERIES A COMMON SHARES. The parties acknowledge and agree that there have been extensive and in depth discussions between the parties regarding the issuance of additional Series A Common Shares of API subsequent to the Offering to achieve the common goal of the parties of permitting such future issuance in any and all circumstances in which such issuance is requested by TDS and the board of directors of API determines, through the proper exercise of its business judgment, that such issuance would be for a proper corporate purpose. ARTICLE V REPRESENTATIONS AND WARRANTIES As an inducement to enter into this Agreement, each party represents to and agrees with the other that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state -8- of incorporation and has all requisite corporate power to own, lease and operate its properties, to carry on its business as presently conducted and to carry out the transactions contemplated by this Agreement; (b) it has duly and validly taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; (c) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally from time to time in effect, and subject to equitable limitations on the availability of the remedy of specific performance); and (d) none of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or the compliance with any of the provisions of this Agreement will (i) conflict with or -9- result in a breach of any provision of its corporate charter or bylaws, (ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it or affecting any of its properties or assets. ARTICLE VI MISCELLANEOUS Section 6.01. TERMINATION OF OBLIGATIONS. Article III of this Agreement shall terminate and cease to be of any force and effect in respect of TDS at such time as TDS shall cease beneficially to own any securities of API; PROVIDED, HOWEVER, that such termination shall not affect the rights of any transferee under Section 3.04. Article IV of this Agreement shall terminate and cease to be of any force and effect in respect of TDS if, at any time after TDS becomes the owner of Series A Common Shares, par value $1.00 per share, of API, less than 500,000 Series A Common Shares are outstanding. Section 6.02. INJUNCTIONS. Irreparable damage would occur in the event that any of the provisions of this Agreement -10- were not performed in accordance with their specific terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity. Section 6.03. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. In the event that any such term, provision, covenant or restriction is so held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. -11- Section 6.04. ASSIGNMENT. Except as provided otherwise in Section 3.04, and except by operation of law or in connection with the sale or transfer of all or substantially all the assets of a party hereto or of all or substantially all of the capital stock of API beneficially owned by TDS, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; PROVIDED, HOWEVER, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns. Section 6.05. FURTHER ASSURANCES. Subject to the provisions hereof, the parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the parties shall, in connection with entering into this Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or -12- similar authority and promptly provide the other with all such information as the other may reasonably request in order to be able to comply with the provisions of this sentence. Section 6.06. PARTIES IN INTEREST. Nothing in this Agreement expressed or implied is intended or shall be construed to confer any right or benefit upon any person, firm or corporation other than the parties and their respective permitted successors and assigns. Section 6.07. WAIVERS, ETC. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No amendment, modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing and signed by the chief executive officer or the chief financial officer of each party in the case of amendments or modifications, or by the chief executive officer or the chief financial officer of the waiving or consenting party, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. -13- Section 6.08. SETOFF. All payments to be made by either party under this Agreement shall be made without setoff, counterclaim or withholding except as specifically set forth herein with respect to cancellation by TDS of indebtedness owed by API, all of which are expressly waived. Section 6.09. CONFIDENTIALITY. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential and shall cause its employees and agents to keep strictly confidential, any information which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provision of this Agreement; PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not apply to information which (a) at the time of disclosure was in the public domain not as a result of acts by the receiving party or (b) was in the possession of the receiving party at the time of disclosure. Section 6.10. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby. -14- Section 6.11. HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Section 6.12. COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be, and shall be deemed to be, an original instrument. Section 6.13. NOTICES. All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, by telegram or sent by registered mail, postage prepaid to: TDS at: 30 North LaSalle Street Suite 4000 Chicago, IL 60602-2507 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary API at: 1300 Godward Street, N.E. Suite 3100 Minneapolis, MN 55413-1767 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary -15- or to such other address as any party may, from time to time, designate in a written notice given in a like manner. Any notice given under this Agreement shall be deemed delivered when received at the appropriate address. Section 6.14. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois applicable to contracts made and to be performed therein. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the day and year first above written. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. ----------------------------------------- Name: LeRoy T. Carlson, Jr. Title: President AMERICAN PAGING, INC. By:/s/ John R. Schaaf ----------------------------------------- Name: John R. Schaaf Title: President Signature Page of Exchange Agreement dated as of January 1, 1994. -16- EXHIBIT A RESTATED CERTIFICATE OF INCORPORATION EXHIBIT B NON-API PAGING INTERESTS HELD BY CELLULAR SUBSIDIARIES AND AFFILIATES OF TDS:
Licensee Callsign City State - -------------------------------- -------- ------------- ------ United States Cellular Operating KNKC392 Klamath Falls OR Company of Medford Medford OR United States Cellular Operating KNKC278 Richland WA Company of Richland United States Cellular Operating KNKC280 Yakima WA Company of Yakima Benton WA
HELD BY TELEPHONE COMPANY SUBSIDIARIES AND AFFILIATES OF TDS:
Licensee Callsign City State - -------------------------------- -------- ------------- ------ Arcadia Telephone Company KNKC637 Cridersville OH WRW272 Arcadia OH Badger Telecom, Inc. KUS256 Chili WI Barnardsville Telephone Company KNKC990 Asheville NC Bonduel Telephone Company KUS279 Bonduel WI Calhoun City Telephone Company, KUS373 Derma MS Inc. Camden Telephone & Telegraph KNKB475 Kingsland GA Company, Inc. KNKB494 Kingsland GA Communication Corporation of KDS416 Hickory Corners MI Michigan Communications Corporation of KWT929 Danville IN Indiana Concord Telephone Exchange, Inc. KWU286 Concord TN
LICENSEE CALLSIGN CITY STATE - -------------------------------- -------- ------------- ------ Delta County Tele-Comm, Inc. KNKJ597 Hotchkiss CO KNKO605 Telluride CO Eastcoast Telecom, Inc. KDS776 Howards Grove WI Goshen Telephone Company, Inc. KDS431 Goshen AL Grantland Telecom, Inc. KWT854 Pennimore WI Happy Valley Telephone Company KNKD534 Anderson CA Home Telephone Company-Waldron KWT872 Waldron IN Kearsarge Telephone Company KUS308 New London NH KMP Telephone Company WRD432 Kerkhoven MN Ludlow Telephone Company KNKD927 Ludlow VT Mid-State Telephone Company KUC940 Spicer MN Midway Telephone Company KNKI323 Medford WI Peoples Telephone Company KUS361 Leesburg AL Scandinavia Telephone Company KUS264 Scandinavia WI St. Stephen Telephone Company WRW295 St. Stephen SC Tennessee Telephone Company KNKC980 Halls Crossroads TN KNKD778 La Vergne TN
1 March 13, 1998 EX-99.(C)(7) 8 REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT This Revolving Credit Agreement, dated as of January 1, 1994, is entered into between Telephone and Data Systems, Inc., an Iowa corporation (herein called "TDS"), and American Paging, Inc., a Delaware corporation (herein called the "Company"). WHEREAS, TDS owns certain of the issued and outstanding shares of the capital stock of the Company; and WHEREAS, in order to provide the Company with certain funds for certain specified purposes, the Company has requested TDS to extend loans to the Company in an aggregate amount not to exceed sixty million dollars ($60,000,000) and TDS is willing to extend such loans upon the terms and conditions of this Revolving Credit Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: Section 1. COMMITMENT OF TDS. Subject to the terms and conditions of this Revolving Credit Agreement, TDS, either directly or through one or more of its subsidiaries, agrees to lend to the Company on a revolving basis, during the period from the date hereof to the earlier to occur of (a) January 1, 1999 or (b) the date on which ownership of stock of API by TDS would no longer meet the 80 percent requirement of Section 1504(a)(2) of the Internal Revenue Code of 1986, as amended, after replacing "80 percent" with "70 percent" (the "Early Termination Date"), such amounts (which shall be $100,000 or an integral multiple thereof) as the Company may from time to time request (but not more frequently than once every five Business Days and not more than $3,000,000 per request unless otherwise agreed to by TDS) upon written notice given not less than five Business Days before the date of the loan, but not exceeding the principal amount of $60,000,000 at any one time outstanding. All loans from TDS, either directly or through one or more of its subsidiaries, to the Company or any of its Subsidiaries that were outstanding on December 31, 1993 shall be converted into and regarded for all purposes as a loan made under this Revolving Credit Agreement on January 1, 1994. Notwithstanding any other provision of this Revolving Credit Agreement, no other loan shall be required to be made hereunder if any Event of Default has occurred, or if any Default has occurred and is continuing. Section 2. NOTE EVIDENCING BORROWINGS. The borrowings hereunder by the Company shall be evidenced by a Note of the Company substantially in the form set forth in Exhibit A, with appropriate insertions by TDS on Schedule I thereto, and shall mature on the earlier of (a) December 31, 1998 or (b) the date six months after the Early Termination Date, unless the Company in the written notice requesting a loan specifies that an earlier date on which an interest payment is due shall be the maturity date for that loan. With respect to each borrowing hereunder, TDS is authorized to enter the details thereof on Schedule I to the Note, including, without limitation, the date of the borrowing, the amount of the borrowing, the earlier maturity date specified by the Company, if any, and principal prepayments and payments thereof, and all such entries shall be presumed to be correct absent clear and manifest error. Section 3. PAYMENT OF INTEREST AND PRINCIPAL. The Company agrees to pay interest on the unpaid principal amount of each borrowing hereunder at a rate per annum equal to 1 1/2% above the Prime Lending Rate as in effect from time to time, payable on the first days of January, April, July and October until the principal amount becomes due (whether at maturity, by acceleration or otherwise); and to pay on demand interest on any overdue principal and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate per annum equal to 3 1/2% above the Prime Lending Rate as in effect from time to time. Interest shall be computed on the basis of a year of 360 days for the actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. Section 4. COMPANY'S RIGHT TO PREPAY BORROWINGS. The Company may from time to time and without premium prepay any -3- borrowing in whole or in part. The amount of any partial prepayment shall be $20,000 or an integral multiple thereof. Any prepayment of the full amount of any borrowing shall include accrued interest thereon. Each prepayment shall be applied first to outstanding interest due and then to principal beginning with the earliest borrowing. Any prepayment made upon any borrowing shall reinstate the Credit in the amount of such prepayment. Section 5. TERM OF REVOLVING CREDIT AGREEMENT. Unless sooner terminated as elsewhere provided herein, this Revolving Credit Agreement and TDS's obligation to furnish the Credit shall terminate on the earlier of (a) December 31, 1998 or (b) the Early Termination Date. Section 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce TDS to grant the Credit and make loans hereunder, the Company represents and warrants that: (a) The Company and its Subsidiaries are corporations, each duly organized and existing, in good standing, under the laws of the jurisdiction of its incorporation, and each has the corporate power to own its property and to carry on its business as now being conducted. The Company is duly qualified to do business and is in good standing in each jurisdiction, if any, in which the character of the properties owned or leased by it therein or in -4- which the transaction of its business makes such qualification necessary, except for such failures to qualify or to be in good standing, if any, as in the aggregate are not material to the business or financial condition of the Company and its Subsidiaries taken as a whole. (b) The Company has full corporate power and authority to enter into this Revolving Credit Agreement, to make the borrowings hereunder, to execute and deliver the Note, and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary corporate action. (c) All authorizations, consents, approvals, registrations, exemptions and licenses with or from governmental authorities which are necessary for the borrowings hereunder, the execution and delivery of this Revolving Credit Agreement and the Note and the performance by the Company of its obligations hereunder and thereunder have been effected or obtained and are in full force and effect. (d) This Revolving Credit Agreement constitutes and the Note, when executed and delivered pursuant hereto for value received, will constitute, the valid and legally binding obligations of the Company enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, -5- reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles. (e) There are no proceedings or investigations pending or threatened before any court or arbitrator or before or by any governmental authority in which there is a reasonable possibility of an adverse decision which would materially adversely affect the business or financial condition of the Company and its Subsidiaries taken as a whole or materially impair the ability of the Company to perform its obligations under this Revolving Credit Agreement or the Note. (f) There is no statute, regulation, rule, order or judgment, and no provision of any mortgage, indenture, contract, license, permit, agreement or other instrument or obligation binding on the Company or any Subsidiary or affecting their respective properties which would prohibit, conflict (except to the extent cured by waivers or consents or to the extent the consequences of such conflict would not, in the aggregate, be material to the financial condition of the Company and its Subsidiaries taken as a whole) with or in any way prevent the execution, delivery, or carrying out of the terms of this Revolving Credit Agreement and/or of the Note. -6- (g) The consolidated balance sheet of the Company and its Subsidiaries as of December 31, 1992, together with consolidated statements of income and expense, retained earnings, paid-in capital and surplus and changes in financial position for the fiscal year then ended, certified by Arthur Andersen & Co., and the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 1993, together with consolidated statements of income and expense and changes in financial position for the nine months then ended and the accompanying footnotes, heretofore delivered to TDS, fairly present the financial condition of the Company and its Subsidiaries and the results of their operations and transactions in their surplus accounts as of the dates and for the periods referred to and have been prepared in accordance with generally accepted accounting principles consistently maintained by the Company and its Subsidiaries throughout the periods involved, except as otherwise indicated in such financial statements. There has been no material adverse change in the business, properties or financial condition of the Company and its Subsidiaries, taken as a whole, since December 31, 1992. (h) The Company and its Subsidiaries, taken as a whole, have good, valid and marketable title to their respective real, personal and other properties and assets material to the conduct of the business of the Company and its Subsidiaries and reflected on -7- the unaudited consolidated balance sheet of the Company and its Subsidiaries as at September 30, 1993, free and clear of all mortgages, liens, pledges, charges or encumbrances, except for those listed on Exhibit B. Section 7. COVENANTS OF THE COMPANY. (a) Until the expiration or termination of the Credit and thereafter until the Note and other liabilities of the Company hereunder are paid in full, the Company shall: (1) furnish to TDS (i) within 120 days after each fiscal year of the Company, a copy of the annual audit report of the Company and its Subsidiaries, prepared on a consolidated basis and in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, and signed by independent certified public accountants satisfactory to TDS, together with financial statements consisting of consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year and consolidated statements of income and expense, retained earnings, paid-in capital and surplus and changes in financial position of the Company and its Subsidiaries for such fiscal year; (ii) as soon as available but in no event more than 120 days after the close of each fiscal year of the -8- Company, a letter or opinion of the accountants who prepared the annual audit report relating to the Company and its Subsidiaries stating whether anything in such accountants' examination has revealed the occurrence of any event which constitutes a Default or an Event of Default and, if so, stating the facts with respect thereto (PROVIDED that the furnishing of such letter or opinion shall not require expansion of the scope of such accountants' examination); (iii) within 60 days after each quarter (except the last quarter) of each fiscal year of the Company, a copy of its unaudited financial statements, similarly prepared, consisting of at least a balance sheet as at the close of such quarter and a profit and loss statement and a statement of changes in financial position and analysis of surplus for such quarter and for the period from the beginning of such fiscal year to the close of such quarter, and signed by a proper accounting officer of the Company and accompanied by a certificate of said officer stating whether any event has occurred which constitutes a Default or an Event of Default; and (iv) from time to time, such other information as TDS may reasonably request; (2) permit, and cause each of its Subsidiaries to permit, TDS to have one or more of its officers, employees or agents, upon at least three days' notice, and at TDS's -9- expense, visit and inspect any of the properties of the Company or any Subsidiary and examine the minute books, books of account and other records of the Company or any Subsidiary and make copies thereof or extracts therefrom, and discuss its affairs, finances and accounts with its officers and employees and, at the request of TDS, with the Company's independent accountants, during normal business hours and at such other reasonable times and as often as TDS may reasonably desire; (3) maintain, and cause each of its Subsidiaries to maintain, insurance to such extent and against such hazards and liabilities as is commonly maintained by companies similarly situated; (4) pay, and cause each of its Subsidiaries to pay, when due all taxes, assessments, and other liabilities, except where the failure so to pay could not have a material adverse effect on the business, credit, financial condition or operations of the Company and its Subsidiaries taken as a whole or except and so long as contested in good faith; (5) preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence and all of its material (considering the Company and its Subsidiaries taken as a whole) rights, privileges and Fran- -10- chises (including Franchises and any licenses granted by the Federal Communications Commission) necessary in the normal conduct of its business; PROVIDED that nothing herein contained shall prevent (i) the termination during any consecutive 12-month period of the business or corporate existence of any one or more Subsidiaries which comprise less than 5% of the consolidated assets of the Company and its Subsidiaries, or (ii) the Company or any Subsidiary from merging with another Person if the Company or such Subsidiary is the surviving corporation or the other Person is controlled by the Company or any Subsidiary, or any Subsidiary from merging into, consolidating with or transferring assets to the Company or another Subsidiary or any Person controlled by the Company or any Subsidiary, PROVIDED that the effect of such merger will not constitute a Default or Event of Default; (6) comply, and cause each Subsidiary to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, a breach of which would materially and adversely affect the business or credit of the Company and its Subsidiaries taken as a whole, except where contested in good faith and by proper proceedings; (7) promptly notify TDS upon the discovery by any officer of the Company of the occurrence of any Default or -11- Event of Default, in each case describing the nature thereof and the action the Company proposes to take with respect thereto; and (8) cause each Subsidiary of the Company to comply with all sections of this Revolving Credit Agreement applicable to Subsidiaries to the same extent as if such Subsidiary were the Company. (b) Until the expiration or termination of the Credit and thereafter until the Note and other liabilities of the Company hereunder are paid in full: (1) the Company shall not purchase or redeem any shares of its stock (other than in connection with stock option or other employee benefit programs or where the redemption price is payable in shares of TDS furnished by TDS to the Company to enable it to effect the redemption), declare or pay any dividends thereon or make any other distribution to any of its shareholders other than normal dividends payable with respect to preferred stock, except to the extent that the cumulative sum of all such payments (excluding any payments to redeem shares of the Company's stock with shares of TDS furnished by TDS to the Company to enable it to effect the redemption) shall not exceed one-half of the cumulative consolidated net -12- income of the Company for the period from and after January 1, 1994 to and including the date of making any such payment; (2) the Company shall not permit its consolidated equity (excluding customer deposits and unearned revenues) to be less than 30% of its consolidated liabilities (including, without limitation, the Note, accounts payable and other liabilities); (3) the Company shall not incur or permit to exist any indebtedness for Borrowed Money, except (i) borrowings under this Revolving Credit Agreement, or (ii) indebtedness of the Company or which is guaranteed by the Company if, as to the Company's obligations thereunder, such indebtedness is subordinate to or on a parity with borrowings under this Revolving Credit Agreement; (4) the Company shall not create or permit to exist or allow any of its Subsidiaries to create or permit to exist any mortgage, pledge, title retention lien, or other encumbrance or security interest with respect to any assets now owned or hereafter acquired by the Company's Subsidiaries, except (i) liens in connection with the acquisition of property and attaching only to the property acquired and any licenses related thereto; (ii) liens for current taxes not delinquent or as security for taxes being contested in good faith, or in -13- connection with workmen and materialmen for sums not due or sums being contested in good faith; (iii) liens created in the normal course of business to procure surety bonds; (iv) liens on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Company or another Subsidiary; (v) liens existing on real property owned or leased that are incidental to the conduct of business of the Company or the ownership of its property and assets and that were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of the assets of the Company and its Subsidiaries taken as a whole or materially impair the use thereof in the operation of the business of the Company and its Subsidiaries taken as a whole; (vi) liens existing on the date hereof as shown on Exhibit B; (vii) liens on assets of any corporation existing at the time such corporation is merged into or consolidated with a Subsidiary or becomes a Subsidiary and not created in contemplation of such event; (viii) liens existing on any asset prior to the acquisition thereof by a Subsidiary and not created in contemplation of such acquisition; (ix) liens arising out of the refinancing, extension, renewal or refunding of any debt secured by any lien permitted by any of the foregoing clauses of this Section, PROVIDED that such debt is not increased and is not secured by any additional assets; -14- and (x) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance; and (5) the Company shall not enter into or be a party to, or allow any of its Subsidiaries to enter into or be a party to, any contract for the purchase of materials, supplies, other property or services if such contract requires that payment be made by the Company or its Subsidiaries regardless of whether delivery is ever made of such materials, supplies, other property or services. Section 8. CONDITIONS OF LENDING. TDS shall not be required to make the first loan contemplated hereunder to be made after January 1, 1994, unless the Company shall have delivered to TDS: (a) a certified copy of the Company's Board of Directors' resolutions authorizing the execution and delivery of the Note and this Revolving Credit Agreement; (b) a certificate executed by the President or a Vice President of the Company and dated the date of the loan certifying (i) that the warranties and representations made in Section 6 by the Company are true and correct on such date, (ii) that no Event -15- of Default has occurred or would result from the Company obtaining the requested loan, and (iii) that no Default has occurred and is continuing; (c) the Note appropriately completed and duly executed; (d) such other documents as TDS shall reasonably request; and (e) an opinion from counsel to the Company that the Company is a corporation duly existing under the laws of the State of Delaware; that the Company has full power to execute and deliver this Revolving Credit Agreement, to borrow money hereunder, to execute and deliver the Note, and to perform its obligations under this Revolving Credit Agreement and the Note; that such actions have been duly authorized by all necessary corporate action and are not in conflict with any provision of law or of the charter or bylaws of the Company, nor in conflict with any agreement binding upon the Company of which such counsel has knowledge; and that this Revolving Credit Agreement is, and the Note when executed and delivered by the Company for value received will be, the legal and binding obligations of the Company. Section 9. EVENTS OF DEFAULT. The occurrence of any one or more of the following events, unless waived in writing by TDS -16- either before or after the occurrence, shall constitute an "Event of Default" hereunder: (a) the Company fails to pay the principal of or interest on the Note when and as the same shall become due and payable, whether at the due date thereof, by acceleration or otherwise, and in the case of interest such failure shall continue for more than five Business Days thereafter; (b) the Company, or during any consecutive 12-month period any one or more Subsidiaries which comprise more than 5% of the consolidated assets of the Company and its Subsidiaries, becomes insolvent or admits in writing its inability to pay its debts as they mature or applies for, consents to, or acquiesces in the appointment of a trustee or receiver for the Company or any such Subsidiary or any property thereof; in the absence of such application, consent, or acquiescence, a trustee or receiver is appointed for the Company or any such Subsidiary or for a substantial part of the property of any thereof and is not discharged within 30 days; or any bankruptcy, reorganization, debt arrangement, or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is instituted by or against the Company or any such Subsidiary, and if instituted against the Company or any such Subsidiary is consented to or -17- acquiesced in by the Company or any such Subsidiary or remains for 30 days undismissed; (c) any representation or warranty made by the Company herein is untrue in any material respect and such representation or warranty is not made true within 30 days after an officer of the Company becomes aware of such material untruth, or if such representation or warranty is not made true within 90 days after an officer of the Company becomes aware of such material untruth PROVIDED the Company is trying in good faith to make such representation or warranty true at all times after an officer of the Company becomes aware of such material untruth and the Company is taking whatever action is necessary to make such representation or warranty true; (d) any schedule, statement, report, notice, or writing furnished by the Company is untrue in any material respect on the date as of which the facts set forth are stated or certified if such document is not revised to be true and furnished by the Company to TDS within ten days after an officer of the Company becomes aware of such material untruth; (e) the Company breaches any of the terms, covenants or agreements herein set forth and such breach continues (i) for 30 days after notice to the Company, (ii) for 60 days after an officer -18- of the Company becomes aware of such breach, or (iii) for 90 days after an officer of the Company becomes aware of such breach in the case of a breach of any of the terms, covenants or agreements of Sections 7(a)(5), 7(a)(6), 7(b)(2), and 7(b)(4), PROVIDED that the Company is making a good faith effort to cure the breach at all times after an officer of the Company becomes aware of it; (f) any event shall occur or fail to occur if the effect of such occurrence or failure is to accelerate the maturity of any indebtedness for Borrowed Money (other than the indebtedness under this Revolving Credit Agreement) of the Company or any of its Subsidiaries, which indebtedness for Borrowed Money in the aggregate exceeds 10% of the Company's consolidated equity as reflected on the most recent consolidated balance sheet of the Company and its Subsidiaries, or to permit the holder thereof to cause such indebtedness to become due prior to the stated maturity thereof and such occurrence or failure shall not have been remedied or waived within any applicable period of grace; (g) the Company or any of its Subsidiaries defaults in the payment of any indebtedness for Borrowed Money other than the indebtedness under this Revolving Credit Agreement if the aggregate of such indebtedness for Borrowed Money, including the defaulted payment, exceeds 10% of the Company's consolidated equity as -19- reflected on the most recent consolidated balance sheet of the Company and its Subsidiaries; and (h) one of more judgments against the Company or any of its Subsidiaries or attachments against its property, which in the aggregate exceed $2,000,000, or the operation or result of which would be to interfere materially and adversely with the conduct of the business of the Company and its Subsidiaries taken as a whole, remain, unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a period of 30 days. The Company shall immediately advise TDS of any Event of Default or of any Default. If any Event of Default shall occur, whether the Event of Default shall then be continuing, TDS may declare the Credit to be terminated at any time thereafter and the Note to be due and payable, whereupon the Credit shall immediately terminate and the Note shall become immediately due and payable, both as to principal and interest, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note to the contrary notwithstanding (PROVIDED that TDS's commitment hereunder shall forthwith terminate, and the unpaid principal of and accrued interest on the loans and all other amounts owing hereunder shall automatically become and be forthwith due and payable upon the occurrence of any event specified in clause (b) above without any -20- such notice or other action, all of which are hereby expressly waived by the Company). TDS shall promptly advise the Company of any such declaration, but failure to do so shall not impair the effect of such declaration. Section 10. DEFINITIONS. (a) Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles. (b) The following terms shall have the meanings ascribed to them below: "BORROWED MONEY" shall mean, as to any Person, any obligation of such Person to repay money, any indebtedness of such Person evidenced by notes, bonds, debentures or similar obligations, any obligation of such Person under a conditional sale or other title retention agreement, any obligation of others secured by any asset of such Person, whether or not such obligation is assumed by such Person, any obligation of others Guaranteed by such Person, all Capital Lease Obligations, and any reimbursement -21- obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers acceptances and similar instruments, PROVIDED, HOWEVER, that Borrowed Money indebtedness shall not include performance bonds, franchise bonds, obligations to reimburse drawings under letters of credit issued in lieu of performance or franchise bonds and other obligations of like nature, trade payables, and accrued liabilities and subscriber advance payments and deposits, arising in the ordinary course of such Person's business. "BUSINESS DAY" shall mean any day on which commercial banks are not generally authorized or required to close in Chicago, Illinois. "CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement containing the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on the balance sheet of such Person under generally accepted accounting principles and, for the purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles. -22- "CODE" shall mean the Internal Revenue Code of 1986, as amended. "CONTROL" (including, with its correlative meanings, "controlled by" and under "common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person. "CREDIT" shall mean TDS's commitment to loan funds to the Company pursuant to the terms and conditions of this Revolving Credit Agreement. "DEFAULT" shall mean any event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default. "DOLLARS" (including "$") shall mean lawful money of the United States of America. "FRANCHISE" shall mean a franchise, license, authorization or right to construct, own, promote, extend and/or otherwise exploit any System operated or to be operated by the Company or any of its Subsidiaries granted by the Federal Communications Commission, by any foreign government, or by any state, county, city, town, village or other government authority -23- but shall not include any such franchise, license, authorization or right which is incidentally required for the purpose of installing, constructing or extending any System. "GUARANTEE" by any Person shall mean any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any indebtedness for Borrowed Money or other obligation of any other Person, or in any manner providing for the payment of any indebtedness for Borrowed Money or other obligation of any other Person, or otherwise protecting the holder of such indebtedness against loss (whether by virtue of partnership arrangements, agreements to purchase assets, goods, securities or services, or to take-or-pay or otherwise), PROVIDED that the term "guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "guarantee" used as a verb shall have a correlative meaning. "NOTE" shall mean the promissory note of the Company to TDS substantially in the form of Exhibit A hereto, evidencing borrowings made under this Revolving Credit Agreement. "PERSON" shall mean an individual, a corporation, a partnership, a joint venture, a trust or unincorporated organization, a joint stock company or similar organization, a -24- government or any political subdivision thereof, or any other legal entity. "PRIME LENDING RATE" shall mean the rate of interest announced by LaSalle National Bank of Chicago ("LaSalle") from time to time as its prime rate. If no such rate of interest is announced by LaSalle at any time, the Prime Lending Rate shall be the rate of interest announced by THE WALL STREET JOURNAL from time to time during such time as the prime rate. "SUBSIDIARY" shall mean any Person other than the Company whose accounts are included in the consolidated financial statements of the Company and its Subsidiaries prepared in accordance with generally accepted accounting principles in effect at the time. "SYSTEM" shall mean the assets constituting a radio paging system serving subscribers within a geographical area covered by one or more Franchises. Section 11. MISCELLANEOUS. (a) No delay on the part of TDS or the holder of the Note in the exercise of any power or right shall operate as a waiver thereof, nor shall any single or partial exercise of any -25- power or right preclude other or further exercise thereof, or the exercise of any other power or right. No waiver by TDS shall be valid unless it is in writing and signed by the chief executive officer or the chief financial officer of TDS and then only to the extent specifically set forth in such writing. (b) All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, by telegram or sent by registered mail, postage prepaid to: TDS at: 30 North LaSalle Street Suite 4000 Chicago, Illinois 60602-2507 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary API at: 1300 Godward Street, N.E. Suite 3100 Minneapolis, MN 55413-1767 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary or to such other address as any party may, from time to time, designate in a written notice given in a like manner. Any notice given under this Agreement shall be deemed delivered when received at the appropriate address. -26- (c) The Company agrees to reimburse TDS upon demand for all reasonable out-of-pocket expenses (including reasonable attorney's fees and legal expenses) incurred by TDS in enforcing the obligations of the Company hereunder or under the Note and to pay, and save TDS harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Revolving Credit Agreement or the issuance of the Note, which obligations of the Company shall survive any termination of this Revolving Credit Agreement. (d) This Revolving Credit Agreement and the Note shall be a contract made under and governed by the laws of the State of Illinois. (e) This Revolving Credit Agreement shall be binding upon the Company and TDS and their respective successors and assigns, and shall inure to the benefit of the Company and TDS and the successors and assigns of TDS. (f) TDS may at any time sell, assign, transfer, grant participations in, or otherwise dispose of all or any portion of its loans or the Note or of its Credit or of its right, title interest therein or thereto or in or to this Revolving Credit Agreement (collectively, "Participations") to any other Person ("Participant"). The Company agrees that any Participant may -27- exercise any and all rights of banker's lien, set-off and counterclaim with respect to its Participation as fully as if such Participant were the maker of a loan in the amount of its Participation. TDS shall be released from its obligations in connection with any assignment of its rights hereunder if such obligations are expressly assumed by the assignee of such rights. TDS shall promptly furnish the Company with notice of any assignment or Participation hereunder, specifying in each case the identity of the assignee or Participant and the amounts and terms of the assignment or Participation. Any provision of this Revolving Credit Agreement may be amended, modified or waived only by an instrument or instruments in writing and signed by the chief executive officer or chief financial officer of TDS and the chief executive officer or chief financial officer of the Company. (g) This Revolving Credit Agreement may be executed in any number of counterparts and by different parties in separate counterparts. Each counterpart shall be deemed an original and all counterparts taken together shall constitute one instrument. (h) All representations, warranties and covenants of the parties shall survive the delivery of the Note and the furnishing of the Credit and shall expire upon the termination of this Revolving Credit Agreement. -28- (i) If any provision of this Revolving Credit Agreement is held prohibited, invalid or unenforceable under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Revolving Credit Agreement or the Note. (j) Subject to the provisions hereof, TDS and the Company shall each make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Revolving Credit Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, TDS and the Company shall each, in connection with entering into this Revolving Credit Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority and promptly provide the other with all such information as the other may reasonably request in order to be able to comply with the provisions of this sentence. (k) Nothing in this Revolving Credit Agreement expressed or implied is intended or shall be construed to confer any right or -29- benefit upon any Person other than TDS and the Company and their respective permitted successors and assigns. (l) Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential and shall cause its employees and agents to keep strictly confidential, any information which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provision of this Revolving Credit Agreement; PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not apply to information which (i) at the time of disclosure was in the public domain not as a result of acts by the receiving party, or (ii) was in the possession of the receiving party at the time of disclosure. (m) This Revolving Credit Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby. (n) Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Revolving Credit Agreement. -30- IN WITNESS WHEREOF, the parties have executed this Revolving Credit Agreement in Chicago, Illinois, as of the day and year first above written. TELEPHONE DATA AND SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. --------------------------------- Name: LeRoy T. Carlson, Jr. --------------------------------- Title: President ------------------------------- AMERICAN PAGING, INC. By: /s/ John R. Schaaf --------------------------------- Name: John R. Schaaf --------------------------------- Title: President ------------------------------- Signature Page of Revolving Credit Agreement dated as of January 1, 1994 -31- EXHIBIT A REVOLVING CREDIT NOTE $ 60,000,000.00 __________, 1994 For value received, the undersigned, American Paging, Inc., a Delaware corporation (herein called the "Company"), hereby promises to pay to the order of Telephone and Data Systems, Inc., an Iowa corporation (herein called "TDS"), on or before the earlier to occur of (a) December 31, 1998 or (b) the date six months after the Early Termination Date (as defined in the Revolving Credit Agreement referred to herein), the sum of all amounts borrowed under the Revolving Credit Agreement and evidenced hereby, the total of which borrowings at any one time outstanding is not to exceed Sixty Million Dollars pursuant to the terms of the Revolving Credit Agreement. The Company also promises to pay interest on the unpaid principal amount of this Note outstanding at a rate per annum equal to 1 1/2% above the Prime Lending Rate (as defined in the Revolving Credit Agreement) and as in effect from time to time, payable on the first days of January, April, July and October of each year until the principal amount becomes due (whether at maturity, by acceleration or otherwise); and to pay on demand interest on any overdue principal and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate per annum equal to 3 1/2% above the Prime Lending Rate as in effect from time to time. All payments of principal and interest under this Note shall be made in lawful money of the United States at the main office of TDS in Chicago, Illinois, or at such other place or places as TDS may designate in writing to the Company, for the account of TDS, as provided in the Revolving Credit Agreement. The Company expressly waives any presentment, demand, protest or notice in connection with this Note, now or hereafter required by applicable law. This Note is the Note referred to in, and is subject to, the terms and provisions of, the Revolving Credit Agreement dated as of January 1, 1994 (as the same may be amended, modified or supplemented from time to time, herein called the "Revolving Credit Agreement"), executed by the Company and accepted by TDS, to which reference is hereby made for a statement of the terms and conditions under which this Note may be prepaid. All payments on account of the principal amount of this Note shall, prior to transfer hereof, be recorded by TDS on Schedule I attached hereto. AMERICAN PAGING, INC. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ SCHEDULE I
Principal Earlier Principal Date Amount Maturity Date Amount of of Specified by Prepaid Borrowing Borrowing the Company or Paid - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- --------- - -------- --------- ---------- ---------
EXHIBIT B MORTGAGES, LIENS, PLEDGES, CHARGES AND ENCUMBRANCES OF THE COMPANY AND ITS SUBSIDIARIES NONE. EX-99.(C)(8) 9 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] March 5, 1997 American Paging, Inc. Suite 3100 1300 Godward Street, N.E. Minneapolis, Minnesota 55413 Re: Revolving Credit Agreement dated January 1, 1994, as amended (the "Revolving Credit Agreement"), between American Paging, Inc. (the "Company") and Telephone and Data Systems, Inc. ("TDS") Ladies and Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement, effective January 1, 1997, by changing all references to "$150,000,000" in the Revolving Credit Agreement to "$180,000,000." All other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. TDS also hereby waives all defaults or events of default by the Company under the Revolving Credit Agreement resulting from the violation of the covenant in Section 7(b)(2) of the Revolving Credit Agreement or the insolvency of the Company from the respective dates from any such default or event of default through January 1, 1999. Please acknowledge your agreement to this amendment by executing a copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson ------------------------------ Murray L. Swanson Executive Vice President - Finance American Paging, Inc. March 5, 1997 Page 2 Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Dennis M. Beste ------------------------------ Dennis M. Beste Vice President - Finance, Chief Financial Officer and Treasurer EX-99.(C)(9) 10 AMENDMENT TO REVOLVING CREDIT AGREEMENT CORPORATE OFFICE 30 North LaSalle Street Suite 4000 Chicago, Illinois 60602-2507 Office: 312-630-1900 FAX: 312-630-1908 312-630-9299 TELEPHONE AND [LOGO] DATA SYSTEMS, INC. _____________________________________________________________________ January 13, 1998 American Paging, Inc. 1300 Godward Street NE #3100 Minneapolis, MN 55413 RE: Revolving Credit Agreement dated January 1, 1994, as amended (the "Revolving Credit Agreement"), between American Paging, Inc. ("API") and Telephone and Data Systems, Inc. ("TDS") Ladies and Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all of the references to "$180,000,000" in the Revolving Credit Agreement to "$185,000,000." All of the other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. The amendment is subject to completion of American Paging's business plan and budget for 1998 and approval of an extension of credit from TDS to American Paging by the TDS Board of Directors. Please acknowledge your agreement to this amendment by executing the copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LEROY T. CARLSON, JR. By: /s/ MURRAY L. SWANSON ------------------------- -------------------------- LeRoy T. Carlson, Jr. Murray L. Swanson President Executive Vice President, Finance Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ TERRENCE T. SULLIVAN ------------------------------------ Terrence T. Sullivan President and Chief Executive Officer EX-99.(C)(10) 11 INTERCOMPANY AGREEMENT INTERCOMPANY AGREEMENT This Intercompany Agreement, dated as of January 1, 1994, is entered into between Telephone and Data Systems, Inc., an Iowa corporation ("herein called TDS"), and American Paging, Inc., a Delaware corporation (herein called "API"). WHEREAS, TDS owns all of the issued and outstanding shares of the capital stock of API; WHEREAS, in connection with the execution and delivery of this Agreement, API is selling in an underwritten public offering (the "Offering") a number of its Common Shares, par value $1.00 per share, as a result of which API will have a class of publicly held securities and API will be subject to the reporting and other requirements of the Securities Exchange Act of 1934 (the "Exchange Act"); and WHEREAS, the parties desire to provide for certain transactions and relationships between the parties hereto after the date hereof; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the terms set out below shall have the indicated meanings (such meanings applying equally to the singular and plural forms thereof): "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on January 1, 1994. "API GROUP" shall mean API and all Subsidiaries of API. "GROUP" shall mean the API Group or the TDS Group. A "PERSON" shall mean an individual, a corporation, a partnership, a joint venture, a trust or unincorporated organization, a joint stock company or similar organization, a governmental or any political subdivision thereof, or any other legal entity. "SUBSIDIARY", with respect to a specified person, shall mean any person whose accounts are included in the consolidated financial statements of the specified person and its Subsidiaries prepared in accordance with generally accepted accounting principles in effect at the time. "TDS GROUP" shall mean TDS and all Subsidiaries of TDS except the members of the API Group. ARTICLE II SERVICES AND OTHER MATTERS Section 2.01. SERVICES TO BE MADE AVAILABLE. Subject to the other provisions of this Article II, TDS, either directly or through other members of the TDS Group, shall make available to members of the API Group, and API, either directly or through other members of the API Group, shall make available to members of the TDS Group, from time to time, services (the "Services") relating to the following: (a) operations, including engineering, governmental relations, systems and procedures, information systems, data processing and other computer services, emergency assistance, education and training, technology assessment, research and development, construction, purchasing, safety, maintenance and consulting; (b) marketing, including strategy development, market analysis, competitive analysis, market planning, product policy, sales, advertising, pricing and customer relations; -3- (c) human resources, including selection, hiring, labor relations, savings, retirement and other employee benefits, compensation, and incentive plans; (d) accounting, including internal auditing, accounting compliance, record keeping, consolidations, taxes, budgeting, and internal and external reporting; (e) customer services, including billing, credit and collections; (f) finance, including financial planning and analysis, capital allocation, treasury, investment management, investor relations, acquisitions and other corporate development; (g) general administration, including corporate planning, security and risk management, insurance, real estate, printing, computer services, legal, public relations and other services; and (h) other matters. Section 2.02. FURNISHING OF SERVICES. Unless TDS shall otherwise determine, or unless Services are provided pursuant to a separate written agreement between a member of the TDS Group and a -4- member of the API Group relating to the specific services to be provided, Services provided hereunder to members of the API Group by members of the TDS Group shall be provided in conformity with the customary practices of the TDS Group for furnishing services to TDS and its Subsidiaries at the time the Services are provided. Services provided hereunder to the TDS Group by members of the API Group shall be provided on request of any officer of TDS desiring Services to be provided to the members of the TDS Group. Section 2.03. LIMITATION ON OBLIGATION TO PROVIDE SERVICES. Notwithstanding the provisions of Section 2.01, neither TDS nor API need make available any Services to the extent that doing so would unreasonably interfere with the performance by any employee of such employee's duties for such employee's employer or otherwise cause unreasonable burden to such employee's employer. Section 2.04. PAYMENT FOR SERVICES. Unless otherwise provided in a separate written agreement between a member of the TDS Group and a member of the API Group relating to specific services, Services provided to members of the API Group by members of the TDS Group shall be charged and paid for in conformity with the customary practices of the TDS Group for charging TDS's non-telephone company Subsidiaries (other than the members of the API Group) for Services at the time the Services are provided. For providing Services requested pursuant to Section 2.02, API shall be -5- entitled to receive from TDS, upon presentation of reasonably detailed invoices therefor, payment for the salaries of its employees and agents assigned to render such Services (plus 40% of the cost of such salaries in respect of overhead) for the time spent rendering such Services (excluding unproductive travel time), determined on a per hour basis, and all travel and out-of-pocket expenses incurred by such employees in rendering such Services, but shall not be entitled to receive any other payment for such Services. Section 2.05. EQUIPMENT AND MATERIALS. API shall, and shall cause the other members of the API Group to, purchase materials and equipment from members of the TDS Group on the same basis as materials and equipment are purchased by members of the TDS Group from other members of the TDS Group. Section 2.06. INDEPENDENT ACCOUNTANTS. API shall, and shall cause the other members of the API Group to, engage the firms of independent public accountants either selected for them by TDS, or selected by the API audit committee and acceptable to TDS, for purposes of auditing the financial statements of the members of the API Group and providing tax, data processing and all other accounting services and advice. The foregoing shall not apply, however, in the case of a member of the API Group that is a partnership if the member of the API Group that is the partner of -6- the partnership does not have the contractual right or power to select the firm of independent public accountants to be engaged by the partnership for the foregoing purposes. Section 2.07. TRANSFEREE OF API ASSETS. Without the prior written consent of TDS, API shall not, nor shall API permit any member of the API Group to, sell, merge or transfer assets or property representing more than 15% of the consolidated assets of the API Group as reflected on the most recent consolidated balance sheet of the API Group, unless the other party to the sale, merger or transfer agrees to be subject to the provisions of this Article II and enters into an appropriate agreement to that effect with TDS. ARTICLE III ACCESS TO INFORMATION AND WITNESSES Section 3.01. INFORMATION AND WITNESSES TO BE MADE AVAILABLE. For purposes of this Article III, the term "Information" means any books, records, contracts, instruments, data, facts and other information in the possession or under the control of either the members of the TDS Group or of the API Group necessary or desirable for use in legal, administrative or other proceedings and, in the case of Information to be provided by the API Group to TDS, for auditing, accounting and tax purposes. TDS shall provide to API and API shall provide to TDS, upon the other's -7- written request, at reasonable times, full and complete access to, and duplication rights with respect to, any and all such Information as the other may reasonably request and require, and TDS shall use its best efforts to make available to API, and API shall use its best efforts to make available to TDS, upon the other's written request, the officers, directors, employees and agents of the members of the TDS Group and of the API Group, respectively, as witnesses to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which members of the API Group or members of the TDS Group, as the case may be, may from time to time be a party. Section 3.02. LIMITATIONS ON OBLIGATIONS TO PROVIDE ACCESS TO INFORMATION AND WITNESSES. Notwithstanding the provisions of Section 3.01, neither TDS nor API need provide any Information or make available witnesses to the other (a) to the extent that doing so would (i) unreasonably interfere with the performance by any person of such persons's duties to the party to which a request under Section 3.01 is made or otherwise cause unreasonable burden to such party, (ii) result in a waiver of any attorney-client or work product privilege of such party or its legal counsel, (iii) require either TDS or API to provide any Information which relates to the subject matter of any legal, administrative or other proceeding in which any member of the TDS -8- Group and any member of the API Group are adverse parties, or (iv) result in any breach of any agreement with a third party; and (b) with respect to any legal, administrative or other proceeding which has been finally determined by any court or other body having jurisdiction and which shall not be subject to judicial review (by appeal or otherwise). Each party shall use reasonable efforts, if requested by the other, to obtain waivers of any provision of any agreement which restricts the provision of any Information, and shall use reasonable efforts to provide in any future agreements that Information may be provided to Affiliates of such party. Section 3.03. PAYMENT FOR INFORMATION AND WITNESSES. (a) Subject to the provisions of paragraph (b) of this Section, the party providing Information or making available witnesses pursuant to Section 3.01 shall be entitled to receive from the other party payment on the same basis as the party is entitled to receive payment for Services rendered pursuant to Article II hereof. (b) API shall provide Information and make available witnesses pursuant to Section 3.01 hereof free of charge in connection with (i) any legal, administrative or other proceeding in respect of, or any audit or investigation by any applicable taxing authority of, the consolidated tax returns of TDS which -9- shall include within its scope any audit or investigation with respect to any member of the API Group; and (ii) any legal, administrative or other proceeding relating to or arising out of Information provided by any member of the API Group to TDS and included in or relied on in preparing TDS's consolidated financial statements, whether before, at or after the date hereof (audited or unaudited). ARTICLE IV MAIL AND OTHER COMMUNICATIONS TDS and API each authorize the members of the other's Group to receive and open all mail, telegrams, packages and other communications received by any member of its Group and not unambiguously intended for members of the other's Group or any of the officers, directors, employees and agents of any member of the other's Group specifically in their capacities as such, and to retain the same to the extent that they relate to the business of the receiving party. To the extent that any such mail, telegrams, packages and other communications so received does not relate to the business of the receiving party but does relate to the business of the other party's Group, or to the extent that they relate to both, the receiving party shall, unless a prior method for the delivery of such communications shall have been agreed upon between the parties, promptly contact the other party by telephone for the -10- delivery instructions and such mail, telegrams, packages or other communications (or, in case the same is related to both businesses, copies thereof) shall promptly be forwarded to the other party in accordance with its delivery instructions. ARTICLE V LITIGATION Section 5.01. API LIABILITIES. With respect to any litigation, proceeding or investigation by or before any court or governmental agency or body which may be commenced or threatened against members of the TDS Group after the date hereof which arises out of or is based upon the past, present or future business or operations of members of the API Group but not the TDS Group, at TDS's option API and TDS will use their best efforts to have a member of the API Group substituted in the place of and for members of the TDS Group and to have members of the TDS Group removed as parties as promptly as is reasonably practicable. Pending such substitution, and in cases where such substitution cannot be effected, API shall promptly assume and direct the defense, prosecution and/or settlement of the claims involved, employing for this purpose counsel satisfactory to TDS, and shall pay all expenses related thereto. To the extent that any such expenses are paid by members of the TDS Group, API shall promptly reimburse each member therefor. -11- Section 5.02. TDS LIABILITIES. With respect to any litigation, proceeding or investigation by or before any court or governmental agency or body which may be commenced or threatened against members of the API Group after the date hereof which arises out of or is based upon the past, present or future business or operations of members of the TDS Group but not the API Group, at API's option API and TDS will use their best efforts to have a member of the TDS Group substituted in the place of and for members of the API Group and to have members of the API Group removed as parties as promptly as is reasonably practicable. Pending such substitution, and in cases where such substitution cannot be effected, TDS shall promptly assume and direct the defense, prosecution and/or settlement of the claims involved, employing for this purpose counsel selected by TDS, and shall pay all expenses related thereto. To the extent that any such expenses are paid by members of the API Group, TDS shall promptly reimburse API therefor. Section 5.03. INDEMNIFICATION AND PARTICIPATION. The provisions of Sections 5.01 and 5.02 shall not limit or affect the indemnification provided by Article VI, including the right of any indemnified party to participate in the defense of any action and the limitations on settlement rights. -12- Section 5.04. FUTURE LITIGATION. Subject to Article VII, with respect to any litigation, proceeding and investigation which may arise subsequent to the date hereof and which may result in joint liability on the part of both TDS and API, TDS shall have the right to make all decisions regarding the defense thereof, the sharing of expenses in connection therewith and other matters relating to such litigation, proceeding and investigation, and API agrees to cooperate fully to implement any decision made by TDS in connection therewith and to pay its share of any liability, expense or loss arising out of or relating to such litigation, proceeding and investigation as the same shall be incurred. Section 5.05. AFFILIATES OF TDS AND API. As used in Section 5.04, TDS shall include any Affiliates of TDS (other than any member of the API Group) and API shall include any Affiliate of API (other than any member of the TDS Group). ARTICLE VI ALLOCATION OF LIABILITIES AND INDEMNIFICATION Section 6.01. TDS SECONDARY OBLIGATIONS. (a) With respect to all the guarantees and other obligations and liabilities of TDS (collectively, the "TDS Secondary Obligations") in connection with any indebtedness, lease, -13- contract or other obligation in respect to which any member of the API Group is the party primarily liable and with respect to which TDS has obligations which are monetary in nature, including but not limited to those listed on Schedule I hereto, but excluding any such indebtedness, lease, contract or other obligation incurred after January 1, 1994 at the specific request of TDS, API will use its best efforts to have TDS removed as such guarantor or obligor as promptly as practicable. (b) In addition to and not in substitution for the indemnity from API to TDS under Section 6.03(a) hereof, if TDS has not been removed as guarantor or obligor with respect to all the TDS Secondary Obligations by December 31, 1994, API shall pay TDS on December 31, 1994, and on each December 31 thereafter, an amount equal to one percent of the then present value of the maximum amounts TDS could be required to pay on account of all TDS Secondary Obligations. Such present value shall be determined by discounting such maximum amounts at a rate per annum equal to the Prime Lending Rate (as defined in that certain Revolving Credit Agreement dated as of January 1, 1994 (the "Revolving Credit Agreement") between API and TDS) in effect on the December 15 preceding the applicable December 31, compounded annually. (c) TDS agrees that it will not exercise any right that it has, acting either alone or together with another person, to -14- become substituted, either alone or together with another person, as the lessee under any lease listed on Schedule I hereto, so long as API is not in breach of its obligations under paragraphs (a) and (b) of this Section 6.01, no event of default has occurred and is continuing under the lease, and no event of default has occurred and is continuing under the Revolving Credit Agreement. Section 6.02. OBLIGATIONS REGARDING CERTAIN AGREEMENTS. API will not, nor will it permit or cause any member of the API Group to, take or refrain from taking any action that would cause TDS or any of its Subsidiaries or Affiliates to breach, violate or be in default under any of the terms of any agreement or other instrument or obligation to which TDS or any of its Subsidiaries or Affiliates is a party or by which it or any of them or any of its or their properties or assets may be bound and of which API is given notice at any time. Schedule II lists those agreements of which API has been given notice as of the date of this Agreement. Section 6.03. INDEMNIFICATION. (a) API shall indemnify and hold harmless each member of the TDS Group and any person who is or was a director, officer, employee or agent of any such member, or is or was serving at the request of any such member as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or -15- other enterprise, from and against any and all losses, claims, damages and liabilities, and shall promptly reimburse them, as and when incurred, for any legal or other costs and expenses (including, without limitation, reasonable attorneys' fees, any amount paid in settlement of any litigation commenced or threatened, if such settlement is effected with the written consent of API, and any and all expenses reasonably incurred in investigating, preparing or defending any litigation, commenced or threatened, or any claim whatsoever or in enforcing API's obligations under this indemnity) arising out of or related in any manner to (i) the conduct by members of the API Group of their respective businesses prior to, on or after the date hereof (other than any such loss, claim, damage or liability resulting from TDS's gross negligence or willful misconduct); (ii) any breach by API of its representations, warranties and agreements made herein; or (iii) any TDS Secondary Obligations. (b) TDS shall indemnify and hold harmless each member of the API Group and any person who is or was a director, officer or employee of any such member, from and against any and all losses, claims, damages and liabilities, and shall promptly reimburse them, as and when incurred, for any legal or other costs and expenses (including, without limitation, reasonable attorneys' fees, any amount paid in settlement of any litigation commenced or threatened, if such settlement is effected with the written consent -16- of TDS, and any and all expenses reasonably incurred in investigating, preparing or defending any litigation, commenced or threatened, or any claim whatsoever) arising out of or relating in any manner to (i) the conduct by members of the TDS Group of their respective businesses prior to the date hereof (other than any such loss, claim, damage or liability resulting from API's gross negligence or willful misconduct); and (ii) any breach by TDS of its representations and warranties made herein. Section 6.04. PROCEDURE FOR INDEMNIFICATION. Each party indemnified under paragraph (a) or (b) of Section 6.03 shall, promptly after receipt of notice of the commencement of any action against such indemnified party in respect of which indemnity may be sought, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party so to notify an indemnifying party of any such action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity agreement contained in paragraphs (a) or (b) of Section 6.03, unless the indemnifying party was prejudiced by such omission, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate -17- therein and, to the extent that it may wish, to assume the defense thereof, with counsel satisfactory in any case to TDS. If the indemnifying party so assumes the defense thereof, it may not agree to any settlement of such action as the result of which any remedy or relief, other than monetary damages for which the indemnifying party shall be responsible hereunder, shall be applied to or against the indemnified party, without the prior written consent of the indemnified party. If the indemnifying party does not assume the defense thereof, it shall be bound by any settlement to which the indemnified party agrees, irrespective of whether the indemnifying party consents thereto. If any settlement of any claim is effected by the indemnified party prior to commencement of any action relating thereto, the indemnifying party shall be bound thereby only if it has consented in writing thereto. In any action hereunder, the indemnified party shall continue to be entitled to participate in the defense thereof, with counsel satisfactory to TDS, even if the indemnifying party has assumed the defense thereof, and the indemnifying party shall not be relieved of the obligation hereunder to reimburse the indemnified party for the costs thereof. Section 6.05. SURVIVAL OF INDEMNIFICATION; PRIOR KNOWLEDGE. The indemnification provisions of this Article VI shall survive the Offering and any investigation made at any time by either of the parties hereto. Actual prior knowledge by any -18- indemnified party with respect to any matter as to which indemnification may be sought shall not constitute a defense to any indemnified party's rights to indemnification pursuant to the provisions hereof. ARTICLE VII LEGAL COUNSEL In any case where legal counsel is to be employed to represent the parties for any purpose under this Agreement, TDS shall have the right to select such counsel. The parties recognize that API shall have the right to request to discuss such selection with TDS. If in the judgment of TDS it would be appropriate to do so, TDS may select the same counsel to represent both parties in connection with any matter, and API hereby consents in advance to any such joint representation; PROVIDED, HOWEVER, that if any counsel selected for such joint representation is of the opinion at any time that, in light of the circumstances then existing, it would not be able to discharge its professional responsibilities properly in undertaking or in continuing such joint representation, then TDS shall select separate counsel to represent API in the matter. Except as otherwise specifically provided in Section 6.03(b), API shall be solely responsible for the fees and expenses of any separate counsel so selected, and TDS shall have no responsibility or liability whatsoever with respect thereto. If -19- the parties use the same counsel, each of the parties shall be responsible for the portion of the fees and expenses of such counsel determined by such counsel to be allocable to each of the parties. ARTICLE VIII REPRESENTATIONS AND WARRANTIES As an inducement to enter into this Agreement, each party represents to and agrees with the other that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power to own, lease and operate its properties, to carry on its business as presently conducted and to carry out the transactions contemplated by this Agreement; (b) it has duly and validly taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; (c) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation -20- enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally from time to time in effect, and subject to equitable limitations on the availability of the remedy of specific performance); and (d) none of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or the compliance with any of the provisions of this Agreement will (i) conflict with or result in a breach of any provision of its corporate charter or bylaws, (ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it or affecting any of its properties or assets. ARTICLE IX MISCELLANEOUS Section 9.01. MATTERS RELATING TO THE OFFERING. API shall pay all costs and expenses relating to the Offering. Each of -21- the parties shall indemnify the other with respect to the Offering in the same manner as set forth in the Registration Rights Agreement between the parties dated as of the date hereof. Section 9.02. DISPOSAL OF API SECURITIES. TDS shall not dispose of any securities of API held by it if the disposition would directly cause any member of the API Group to lose any authorizations or licenses the loss of which would have a material adverse effect on the API Group taken as a whole. Section 9.03. TERMINATION. If, at any time after TDS becomes the owner of Series A Common Shares, par value $1.00 per share, of API, less than 500,000 Series A Common Shares are outstanding, either party may terminate the provisions of Article II hereof upon 60 days' written notice to the other party. All other provisions of this Agreement shall remain in effect indefinitely or until such time as the obligations of both parties hereunder shall have been fully discharged. Section 9.04. INJUNCTIONS. Irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms -22- and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity. Section 9.05. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. In the event that any such term, provision, covenant, or restriction is so held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. Section 9.06. ASSIGNMENT. Except, with respect to TDS, by operation of law or in connection with the sale or transfer of all or substantially all of the assets of a party hereto or of all or substantially all of the capital stock of API beneficially owned by TDS, this Agreement shall not be assignable, in whole or in -23- part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; PROVIDED, HOWEVER, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns. Section 9.07. FURTHER ASSURANCES. Subject to the provisions hereof, the parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the parties shall, in connection with entering into this Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority and promptly provide the other with all such information as the other may reasonably request in order to be able to comply with the provisions of this sentence. -24- Section 9.08. PARTIES IN INTEREST. Except for the rights of the parties indemnified pursuant to Sections 6.03(a) and (b) hereof, nothing in this Agreement expressed or implied is intended or shall be construed to confer any right or benefit upon any person, firm or corporation other than the parties and their respective Subsidiaries and permitted successors and assigns. Section 9.09. WAIVERS, ETC. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No amendment, modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing and signed by the chief executive officer or the chief financial officer of each party in the case of amendments or modifications, or by the chief executive officer or the chief financial officer of the waiving or consenting party, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. -25- Section 9.10. SETOFF. All payments to be made by either party under this Agreement shall be made without setoff, counterclaim or withholding, all of which are expressly waived. Section 9.11. CHANGES OF LAW. If, due to any change in applicable law or regulations or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated by this Agreement shall become impracticable or impossible, then the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. Section 9.12. CONFIDENTIALITY. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential and shall cause its employees and agents to keep strictly confidential, any information which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provision of this Agreement; PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not apply to information which (a) at the time of disclosure was in the public domain not as a result of acts by the receiving -26- party or (b) was in the possession of the receiving party at the time of disclosure. Section 9.13. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby. With respect to Services, the parties acknowledge that certain agreements relating to specific services to be provided and the terms of payment therefor have been, and may in the future be, entered into between members of the API Group and members of the TDS Group. Those agreements are not superseded by this Agreement; PROVIDED, HOWEVER, that if any of the provisions of those agreements shall conflict with any of the provisions of this Agreement (other than as specifically permitted by this Agreement), the provisions of this Agreement shall control. Section 9.14. HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Section 9.15. COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be, and shall be deemed to be, an original instrument. Section 9.16. NOTICES. All notices, consents, requests, instructions, approvals and other communications provided for -27- herein shall be validly given, made or served, if in writing and delivered personally, by telegram or sent by registered mail, postage prepaid to: TDS at: 30 North LaSalle Street Suite 4000 Chicago, IL 60602-2507 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary API at: 1300 Godward Street, N.E. Suite 3100 Minneapolis, MN 55413-1767 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary or to such other address as any party may, from time to time, designate in a written notice given in a like manner. Any notice given under this Agreement shall be deemed delivered when received at the appropriate address. Section 9.17. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois applicable to contracts made and to be performed therein. -28- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the day and year first above written. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. -------------------------------- Name: LeRoy T. Carlson, Jr. ------------------------------ Title: President ----------------------------- AMERICAN PAGING, INC. By: /s/ John R. Schaaf -------------------------------- Name: John R. Schaaf ------------------------------ Title: President ----------------------------- Signature Page of Intercompany Agreement dated as of January 1, 1994 -29- SCHEDULE I AGREEMENTS REFERRED TO IN SECTION 6.01 1. Obligations of TDS in connection with a letter of credit issued by LaSalle National Bank to support the lease of office space in Florida by API or its subsidiaries or affiliates. SCHEDULE II AGREEMENTS REFERRED TO IN SECTION 6.02 1. The indenture dated as of February 1, 1991 (the "Indenture") between TDS and Harris Trust and Savings Bank, as trustee, and the debt securities and instruments issued and to be issued under the Indenture. EX-99.(C)(11) 12 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement, dated as of January 1, 1994, is entered into between Telephone and Data Systems, Inc., an Iowa corporation (herein called "TDS"), and American Paging, Inc., a Delaware corporation (herein called "API"). WHEREAS, TDS owns all of the issued and outstanding shares of the capital stock of API, which have been or will be converted into Series A Common Shares, par value $1.00 per share, and/or Common Shares, par value $1.00 per share; and WHEREAS, at any time and from time to time hereafter, API may authorize, issue and sell, and TDS may acquire, other classes of debt or equity securities (such other classes of debt or equity securities of API, the Series A Common Shares and the Common Shares being herein collectively called the "Securities", which term shall also have the meaning assigned thereto in Section 8(c) hereof); NOW, THEREFORE, in consideration of the foregoing and in order to specify certain provisions relating to the sale by means of domestic or foreign public offerings of Securities owned by TDS, the parties hereto agree as follows: Section 1. REGISTRATION AND LISTING RIGHTS. (a) REGISTRATION. If TDS shall, at any time and from time to time, request API in writing to register under the Securities Act of 1933 (the "Act") any Securities held by it (whether for purposes of a public offering, an exchange offer or otherwise), API shall use its best efforts to cause the prompt registration of all Securities specified in such request, and in connection therewith shall prepare and file on such appropriate form as API, in its reasonable discretion, shall determine, a registration statement under the Act to effect such registration. If TDS shall so request, API will register such Securities for offering on a delayed or continuous basis pursuant to Rule 415 (or any successor rule or rules to similar effect) under the Act. Notwithstanding the foregoing, API shall be entitled to postpone for a reasonable period of time, but not in excess of 90 calendar days, the filing of any registration statement otherwise required to be prepared and filed by it if (i) API is at such time conducting or about to conduct an underwritten public offering of Securities for sale for its account and determines that such offering would be materially adversely affected by the registration so required and (ii) API so notifies TDS within five days after TDS so requests. -2- (b) OTHER OFFER AND SALE. If TDS shall, at any time and from time to time, request API in writing to take such actions as shall be necessary or appropriate to permit any Securities held by TDS to be publicly or privately offered and sold in compliance with the securities laws or other relevant laws or regulations of any foreign jurisdiction in which a principal securities market outside the United States is located, API shall use its best efforts to take such actions in any such foreign jurisdiction (including listing such Securities on any foreign securities exchange on which such listing is requested by TDS) and shall otherwise cooperate in a timely manner in such offering. Any request under this paragraph (b) may be made separately or in conjunction with any request under paragraph (a). Notwithstanding the foregoing, API shall be entitled to postpone for a reasonable period of time, but not in excess of 90 calendar days, the taking of any actions otherwise required under this paragraph (b) if (i) API is at such time conducting or about to conduct an underwritten public offering of Securities for sale for its account and determines that such offering would be materially adversely affected by the registration so required and (ii) API so notifies TDS within 5 days after TDS so requests. (c) WRITTEN NOTICE. Any request by TDS pursuant to paragraph (a) or (b) of this Section 1, shall (i) specify the number and class of shares or the principal amount, as the case may -3- be, of Securities which TDS intends to offer and sell, (ii) express the intention of TDS to offer or cause the offering of such Securities, (iii) describe the nature or method of the proposed offer and sale thereof and state whether such offer is intended to be made domestically or abroad, or both, and, if abroad, the country or countries in which such offer is intended to be made, (iv) specify any securities exchange (including any foreign securities exchange in any principal securities market outside the United States) or quotation system on which TDS requests that such Securities be listed, (v) contain the undertaking of TDS to provide all such information regarding its holdings and the proposed manner of distribution thereof as may be required in order to permit API to comply with all applicable laws and regulations, foreign or domestic, and all requirements of the Securities and Exchange Commission (the "SEC"), any other applicable United States or foreign regulatory or self-regulatory body and any other body having jurisdiction and any securities exchange (including any foreign securities exchange in any principal securities market outside the United States) on which the Securities are to be listed and to obtain acceleration of the effective date of any registration statement filed in connection therewith, and (vi) in the case of an underwritten public offering made domestically or abroad, or both, specify the managing underwriter or underwriters of such Securities, which shall be selected by TDS; PROVIDED, HOWEVER, that TDS may at any time prior to the effectiveness of any -4- such registration statement or commencement of any such offering not pursuant to a registration statement, in its sole discretion and without the consent of API, abandon the proposed offering. (d) CONDITION TO EXERCISE OF RIGHTS. The obligations of API under paragraphs (a) and (b) of this Section 1 shall be subject to the limitation that API shall not be obligated to register, take other specified actions with respect to, or cooperate in the offering of, Securities upon the request of TDS, unless, in the case of a class of equity Securities, the number of shares specified in such request pursuant to Section 1(c)(i) shall be greater than the lesser of (A) one million shares or (B) one percent of the total number of shares of such class at the time issued and outstanding, or, in the case of a class of debt Securities, the principal amount specified in such request pursuant to Section 1(c)(i) shall be at least $5,000,000. Notwithstanding the foregoing, the failure of TDS to own the minimum number or percent or principal amount of Securities referred to in the preceding sentence at any time shall not affect the ability of TDS to exercise its rights under this Agreement at any subsequent time when TDS again owns such minimum number or percent or principal amount. (e) INCIDENTAL REGISTRATION. If API shall, at any time and from time to time, propose an underwritten offering for cash of -5- any Securities, whether pursuant to a registration statement under the Act or otherwise, API shall give written notice as promptly as practicable of such proposed registration or offering to TDS and shall use its best efforts to include in such offering and, if such offering is pursuant to a registration statement under the Act, in such registration, any of the same class of such Securities held by TDS as TDS shall request within 20 calendar days after the giving of such notice, upon the same terms (including the method of distribution) as such offering; PROVIDED, HOWEVER, that (i) API shall not be required to give such notice or include any such Securities in any offering pursuant to a registration statement filed on Form S-8 or Form S-4 (or such other form or forms as shall be prescribed under the Act for the same purposes), and (ii) API may at any time prior to the effectiveness of any such registration statement or commencement of any such offering not pursuant to a registration statement, in its sole discretion and without the consent of TDS, abandon the proposed offering in which TDS had requested to participate. Notwithstanding the foregoing, API shall not be obligated to include such Securities in such offering if API is advised in writing by its managing underwriter or underwriters (with a copy to TDS within five days after TDS delivers its request pursuant to this paragraph (e)) that such offering would in its or their opinion be materially adversely affected by such inclusion; PROVIDED, HOWEVER, that API shall in any case be obligated to include up to, at TDS's discretion, such number or amount of -6- Securities in such offering as such managing underwriter or underwriters shall determine will not materially adversely affect such offering. (f) CONVERSION OF OTHER SECURITIES. Should TDS offer any rights, warrants or other securities issued by it or any other person that are convertible into or exercisable or exchangeable for any Securities, API's obligations under this Section 1 shall be applicable to such Securities to be purchased upon such conversion, exercise or exchange. Section 2. COVENANTS OF API. In connection with any offering of Securities pursuant to this Agreement, API shall: (a) furnish to TDS such number of copies of any prospectus (including any preliminary prospectus), registration statement, offering memorandum or other offering document (including any exhibits thereto or documents referred to therein) as TDS may reasonably request and a copy of any and all transmittal letters or other correspondence with the SEC or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Securities; -7- (b) take such reasonable action as may be necessary to qualify such Securities for offer and sale under such securities, "blue sky" or similar laws of such jurisdictions (including any foreign country or political subdivision thereof) as TDS or any underwriter shall request; (c) enter into an underwriting agreement (or equivalent document in any foreign jurisdiction) containing representations, warranties, indemnities, contribution provisions and agreements then customarily included by an issuer in underwriting agreements (or such equivalent documents) in the form customarily used by the managing underwriter and reasonably acceptable to API and TDS with respect to secondary distributions; (d) at the closing, furnish unlegended certificates representing ownership of the Securities being sold in such denominations as shall be requested by TDS or the managing underwriter; (e) in the case of any offering of equity securities, instruct the transfer agent and registrar to release any stop transfer orders with respect to the equity securities being sold; -8- (f) promptly inform TDS (i) in the case of any domestic offering of Securities in respect of which a registration statement is filed under the Act, of the date on which such registration statement or any post-effective amendment thereto becomes effective (and, in the case of any offering abroad of Securities, of the date when any required filing under the securities and other laws of such foreign jurisdiction shall have been made and when the offering may be commenced in accordance with such laws) and (ii) of any request by the SEC, any securities exchange, government agency, self-regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or preliminary prospectus or prospectus included therein or any offering memorandum or other offering document relating to such offering; (g) upon any registration statement becoming effective pursuant to any registration under the Act pursuant to this Agreement, file any necessary amendments or supplements to such registration statement and otherwise use its best efforts to keep such registration statement effective for such period as TDS shall request; (h) take such reasonable actions as may be necessary to have such Securities listed on any securities exchange or -9- quotation system on which TDS shall request such listing pursuant to the notice delivered by TDS under Section 1(c) hereof; (i) promptly notify TDS of the happening of any event as a result of which any registration statement or any preliminary prospectus or prospectus included therein or any offering memorandum or other offering document includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and prepare and furnish to TDS as many copies of a supplement to or amendment of such offering document which shall correct such untrue statement or eliminate such omission, as TDS shall request; (j) appoint a trustee or fiscal agent (in the case of debt securities) and any transfer agent, registrar, depository, authentication agent or other agent as may be necessary or desirable or as may be requested by TDS; and (k) take such actions and execute and deliver such other documents as may be necessary to give full effect to the rights of TDS under this Agreement. -10- Section 3. EXPENSES. (a) All expenses incurred in complying with Section 1(a) or (b) hereof, including, without limitation, all registration and filing fees (including all expenses incident to any filing with the National Association of Securities Dealers, Inc., or listing on any domestic or foreign securities exchange), fees and expenses of complying with securities and blue sky laws (including those of counsel satisfactory to TDS retained to effect such compliance) and printing expenses (collectively "Registration Expenses") and any stamp, duty or transfer tax shall be paid by TDS. Notwithstanding the foregoing, (i) TDS shall pay all underwriting discounts and commissions, (ii) API shall pay (x) the fees and disbursements of its independent public accountants (including any such fees and expenses incurred in performing any special audits required in connection with any such offering and incurred in connection with the preparation of pro forma financial statements and comfort letters for any such offering), (y) transfer agents', trustees', fiscal agents', depositaries', and registrars' fees and the fees of any other agent appointed in connection with such offering, and (z) all security engraving and printing expenses and (iii) each party shall pay the fees and expenses of its counsel. (b) All expenses incurred in complying with Section 1(e) hereof, including, without limitation, any Registration Expenses, -11- shall be paid by API, except that (i) TDS shall pay all underwriting discounts, commissions and expenses specifically attributable to the inclusion in the offering under said Section 1(e) of the Securities being sold by TDS and (ii) each party shall pay the fees and expenses of its counsel. Section 4. INDEMNIFICATION. (a) API INDEMNITY. In the case of each offering contemplated by this Agreement, API shall indemnify and hold harmless TDS, its officers and directors, each underwriter of Securities so offered and each person, if any, who controls TDS or any such underwriter within the meaning of Section 15 of the Act, and each person affiliated with or retained by TDS and who may be subject to liability under any applicable securities laws, against any and all losses, claims, damages or liabilities to which they or any of them may become subject under the Act or any other statute or common law of the United States of America or any other country, or otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse them, as and when incurred, for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any untrue statement or alleged untrue statement of a material fact -12- contained in the registration statement (or in any preliminary or final prospectus included therein) or in any offering memorandum or other offering document relating to the offering and sale of such Securities, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation or alleged violation by API of the Act, any blue sky laws, securities laws or other applicable laws of any state or country in which Securities are offered and relating to action or inaction required of API in connection with such offering; PROVIDED, HOWEVER, that the indemnification agreement contained in this Section 4(a) shall not apply to such losses, claims, damages, liabilities or actions if such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, made in reliance upon and in conformity with information concerning TDS supplied or approved by TDS for use in connection with the preparation of the registration statement or any preliminary prospectus or final prospectus contained in the registration statement, any offering memorandum or other offering document, or any amendment thereof or supplement thereto. (b) TDS INDEMNITY. In the case of each offering made pursuant to this Agreement, TDS shall, in the same manner and to the same extent as set forth in paragraph (a) of this Section 4, -13- indemnify and hold harmless API and each person, if any, who controls API within the meaning of Section 15 of the Act, and each person affiliated with or retained by API and who may be subject to liability under any applicable securities laws, its directors and those officers of API who shall have signed any registration statement, offering memorandum or other offering document with respect to any statement in or omission from such registration statement, any preliminary prospectus or final prospectus contained in such registration statement, any offering memorandum or other offering document, or any amendment thereof or supplement thereto, if such statement or omission shall have been made in reliance upon and in conformity with information concerning TDS supplied or approved by TDS for use in connection with the preparation of such registration statement, any preliminary prospectus or final prospectus contained in such registration statement, any offering memorandum or other offering document, or any amendment thereof or supplement thereto. (c) PROCEDURE FOR INDEMNIFICATION. Each party indemnified under paragraph (a) or (b) of this Section 4, or under Section 8(f) hereof, shall, promptly after receipt of notice of the commencement of any action against such indemnified party in respect of which indemnity may be sought, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party so to notify an indemnifying party of any such -14- action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity agreement contained in paragraph (a) or (b) of this Section 4, or under Section 8(f) hereof, unless the indemnifying party was materially prejudiced by such omission, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any such action shall be brought against any indemnified party and such indemnified party shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory in any case to TDS. If the indemnifying party so assumes the defense thereof, it may not agree to any settlement of any such action as the result of which any remedy or relief shall be applied to or against the indemnified party, without the prior written consent of the indemnified party. If the indemnifying party does not assume the defense thereof, it shall be bound by any settlement to which the indemnified party agrees, irrespective of whether the indemnifying party consents thereto. If any settlement of any claim is effected by the indemnified party prior to commencement of any action relating thereto, the indemnifying party shall be bound thereby only if it has consented in writing thereto. In any action hereunder, the indemnified party shall continue to be entitled to participate in -15- the defense thereof, with counsel satisfactory to TDS, even if the indemnifying party has assumed the defense thereof, and the indemnifying party shall not be relieved of the obligation hereunder to reimburse the indemnified party for the costs thereof. Section 5. TRANSFER OF RIGHTS. (a) Subject to paragraph (b) below, the rights of TDS under this Agreement with respect to any Security may be transferred to any one or more transferees of such Security. Any transfer of registration rights pursuant to this Section 5 shall be effective only upon receipt by API of written notice from TDS stating the name and address of any transferee and identifying the Securities with respect to which the rights under this Agreement are being transferred. (b) The rights of a transferee under paragraph (a) above shall be the same rights granted to TDS under this Agreement, except such transferee shall (i) only have the right to make one request under paragraph (a) or (b) of Section 1, which may be a simultaneous request under paragraphs (a) and (b), and two requests under paragraph (e) of Section 1 and (ii) in the case of a request under paragraph (a) or (b) of Section 1, be required to pay all expenses that, under Section 3, would be required to be paid by TDS and in the case of a request under paragraph (e) of Section 1, be -16- required to pay all expenses that, under Section 3(b), would be required to be paid by TDS. Section 6. TERMINATION OF OBLIGATIONS. Section 1 of this Agreement shall terminate and cease to be of any force and effect in respect of TDS at such time as TDS, and in respect of any assignee of TDS under Section 9(c) at such time as such assignee, shall cease beneficially to own any Securities; PROVIDED, HOWEVER, that such termination shall not affect the rights of any transferee under Section 5. Section 7. REPRESENTATION AND WARRANTIES. As an inducement to enter into this Agreement, each party represents to and agrees with the other that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power to own, lease and operate its properties, to carry on its business as presently conducted and to carry out the transactions contemplated by this Agreement; (b) it has duly and validly taken all corporate action necessary to authorize the execution, delivery and performance -17- of this Agreement and the consummation of the transactions contemplated hereby; (c) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally from time to time in effect, and subject to equitable limitations on the availability of the remedy of specific performance); and (d) none of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or the compliance with any of the provisions of this Agreement will (i) conflict with or result in a breach of any provision of its corporate charter or bylaws, (ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it or affecting any of its properties or assets. -18- Section 8. CERTAIN AGREEMENTS AND DEFINITIONS. (a) CALCULATION OF AMOUNTS. For purposes of this Agreement, the amount of any Securities outstanding at any time (and the amount of any Securities then beneficially owned by TDS or any other person) shall be calculated on the basis of the information contained in API's most recent report filed with the SEC. For purposes of calculating the amount of Securities outstanding at any time (and the amount of Securities then beneficially owned by TDS or any other person) all outstanding securities convertible into or exchangeable for such Securities, including outstanding securities that in the future will become so convertible or exchangeable, shall be deemed to have been fully converted at such time. (b) "PERSON"; "AFFILIATE". As used in this Agreement, the term "person" shall mean any individual, partnership, corporation, trust or other entity. As used in this Agreement, the term "affiliate" shall mean, with respect to any specified person, any other person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. (c) "SECURITIES". As used in this Agreement, the term "Securities" shall include any security of API now owned or -19- hereafter acquired by TDS, whether acquired in any transaction with API or another person, in any recapitalization of API, as a dividend or other distribution, as a result of any "split" or "reverse split", upon conversion or exercise of another security of API or any other person, or otherwise. (d) NO LEGEND. No Security held or to be transferred by TDS shall bear any legend, nor shall API cause or permit any transfer agent or registrar appointed by API with respect to such Security to refuse or fail to effect a transfer or registration with respect to such Security, provided that TDS provides to API a certificate of an officer to TDS in connection with such transfer or registration to the effect that such transfer or registration is not in violation of any applicable securities or other law. (e) STOCK BOOKS. Except as otherwise provided by law for all holders of securities, API will not close its stock books or other registries against the transfer of any Security held by TDS. (f) SECURITIES EXCHANGE ACT OF 1934. API shall at all times (whether or not it is required to do so) timely file such information, documents and reports as the SEC may require or prescribe under the Securities Exchange Act of 1934 (the "Exchange Act") and shall provide TDS with two copies of each thereof or any -20- other communication with or from the SEC. API shall, whenever requested by TDS, notify TDS in writing whether API has, as of the date specified by TDS, complied with the Exchange Act reporting requirements to which it is subject for such period to such date as shall be specified by TDS. API acknowledges and agrees that one of the purposes of the requirements contained in this Section 8(f) is to enable TDS to comply with the current public information requirements contained in Paragraph (c) of Rule 144 under the Act (or any corresponding rule hereafter in effect) should TDS ever wish to dispose of any Securities without registration under the Act in reliance upon Rule 144. In addition, API shall take such other measures and file such other information, documents and reports as shall hereafter be required by the SEC as a condition to the availability of Rule 144. API covenants, represents and warrants that all such information, documents and reports filed with the SEC shall not contain any untrue statement of a material fact or fail to state therein a material fact required to be stated therein or necessary to make the statements contained therein not misleading, and API shall indemnify and hold TDS, its officers and directors and each broker, dealer, underwriter or other person acting for TDS (and any controlling person of any of the foregoing) harmless from and against any and all claims, liabilities, losses, damages, expenses and judgments and shall promptly reimburse them, as and when incurred, for any legal or other expenses incurred by them in connection with investigating any claims and defending any -21- actions insofar as such claims, liabilities, losses, damages expenses and judgments arise out of or based upon any breach of the foregoing covenants, representations or warranties. The procedure for indemnification set forth in Section 4(c) hereof shall apply to the indemnification provided under this Section 8(f). (g) LISTING. Once initially listed, API shall maintain in effect any listing of Securities on any securities exchange (domestic or foreign) or quotation system, shall make all filings and take all other actions required under the rules of such exchange or quotation system and any applicable listing agreement, shall provide TDS with two copies of each such filing or any other communication with such exchange or quotation system at the time at which such filing is made, and shall notify TDS of any proceeding or other action taken by such exchange, quotation system or any other person which might have the effect of terminating or otherwise changing the status of such listing, forthwith upon the occurrence thereof. (h) LIMITATION ON OTHER SECURITIES TO BE REGISTERED. In case of any registration, offering or sale contemplated by paragraph (a) or (b) of Section 1, API shall not include in such registration, offering or sale any Securities other than those beneficially owned by TDS, and in case of any registration, offering or sale contemplated by paragraph (e) of Section 1, API -22- shall not include in such registration, offering or sale any Securities other than those being offered by API and TDS. (i) FILINGS; PRESS RELEASES. As far in advance as is practicable of (but in any event no later than two business days before) (i) the publication of any press release containing information material to API's stockholders or (ii) the filing of any document or report with the SEC or with any securities exchange or quotation system, API shall send a reasonably final draft of such press release, document or report to TDS at the address set forth in Section 9(m) hereof. TDS shall have the right to request amendments, modifications or supplements to any such release, document or report and API shall not unreasonably withhold its consent thereto. The obligations of API under this Section 8(i) shall terminate and cease to be of any force and effect at such time as TDS shall cease to beneficially own any Securities, or if at any time less than 500,000 Series A Common Shares, par value $1.00 per share, of API are outstanding. (j) COUNSEL. In any case where legal counsel is to be employed to represent the parties for any purpose under this Agreement, TDS shall have the right to select such counsel. If in the judgment of TDS it would be appropriate to do so, TDS may select the same counsel to represent both parties in connection with any matter, and API hereby consents in advance to any such -23- joint representation; PROVIDED, HOWEVER, that if any counsel selected for such joint representation is of the opinion at any time that, in light of the circumstances then existing, it would not be able to discharge its professional responsibilities properly in undertaking or in continuing such joint representation, then TDS shall select separate counsel to represent API in the matter. Except as otherwise specifically provided in Section 4(b) hereof, API shall be solely responsible for the fees and expenses of any separate counsel so selected, and TDS shall have no responsibility or liability whatsoever with respect thereto. If the parties use the same counsel, each of the parties shall be responsible for the portion of the fees and expenses of such counsel determined by such counsel to be allocable to each of the parties. Section 9. MISCELLANEOUS. (a) INJUNCTIONS. Irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity. -24- (b) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or enforceable. In the event that any such term, provision, covenant or restriction is so held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. (c) ASSIGNMENT. Except in the case of a transaction as a result of which API ceases to be an affiliate of TDS or except as provided otherwise in Section 5 hereof, and except by operation of law or in connection with the sale of all or substantially all the assets of a party hereto, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; PROVIDED, HOWEVER, that the -25- provisions of the Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto (including, solely for purposes of Section 4 hereof, their officers and directors) and their respective successors and permitted assigns. In the case of a transaction as a result of which API ceases to be an affiliate of TDS, this Agreement and all of TDS's rights and obligations hereunder shall be deemed to be automatically assigned to any person who acquires Securities in connection with the transaction and who API and TDS are affiliates of both before and after the transaction. (d) FURTHER ASSURANCES. Subject to the provisions hereof, the parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the parties shall, in connection with entering into this Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority and promptly provide the other with all such information -26- as the other may reasonably request in order to be able to comply with the provisions of this sentence. (e) PARTIES IN INTEREST. Nothing in this Agreement expressed or implied is intended or shall be construed to confer any right or benefit upon any person, firm or corporation other than the parties and their respective permitted successors and assigns. (f) WAIVERS, ETC. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No amendment, modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing and signed by the chief executive officer or the chief financial officer of each party in the case of amendments or modifications, or by the chief executive officer or the chief financial officer of the waiving or consenting party, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. -27- (g) SETOFF. All payments to be made by either party under this Agreement shall be made without setoff, counterclaim or withholding, all of which are expressly waived. (h) CHANGES OF LAW. If, due to any change in applicable law or regulations or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. (i) CONFIDENTIALITY. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential and shall cause its employees and agents to keep strictly confidential, any information which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provision of this Agreement; PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not apply to information which (x) at the time of disclosure was in the public domain not as a result of acts by the receiving -28- party or (y) was in the possession of the receiving party at the time of disclosure. (j) ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby. (k) HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. (l) COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be, and shall be deemed to be, an original instrument. (m) NOTICES. All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, by telegram or sent by registered mail, postage prepaid to: -29- TDS at: 30 North LaSalle Street Suite 4000 Chicago, IL 60602-2507 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary API at: 1300 Godward Street, N.E. Suite 3100 Minneapolis, MN 55413-1767 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary or to such other address as any party may, from time to time, designate in a written notice given in a like manner. Any notice given under this Agreement shall be deemed delivered when received at the appropriate address. (n) GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois applicable to contracts made and to be performed therein. -30- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the date and year first above written. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. -------------------------------- Name: LeRoy T. Carlson, Jr. ------------------------------ Title: President ----------------------------- AMERICAN PAGING, INC. By: /s/ John R. Schaaf -------------------------------- Name: John R. Schaaf ------------------------------ Title: President ----------------------------- Signature Page of Registration Rights Agreement dated as of January 1, 1994. -31- EX-99.(C)(12) 13 EMPLOYEE BENEFIT PLANS AGREEMENT EMPLOYEE BENEFIT PLANS AGREEMENT This Employee Benefit Plans Agreement, dated as of January 1, 1994, is entered into between Telephone and Data Systems, Inc., an Iowa corporation (herein called "TDS"), and American Paging, Inc., a Delaware corporation (herein called "API"). WHEREAS, TDS owns all of the issued and outstanding shares of the capital stock of API; WHEREAS, in connection with the execution and delivery of this Agreement, API is selling in an underwritten public offering (the "Offering") a number of its Common Shares, par value $1.00 per share; WHEREAS, in connection with the foregoing, certain employees of API will continue to participate in TDS's 1993 Employees' Stock Purchase Plan; WHEREAS, in connection with the foregoing, certain senior managers of API will continue to participate in the American Paging, Inc. Long-Term Incentive Program; and WHEREAS, for purposes of this Agreement, unless the context otherwise requires, "TDS" shall mean TDS and any of its subsidiaries, including those which become subsidiaries after the date hereof (other than API and API's subsidiaries), and API shall mean API and any of its subsidiaries, including those which become subsidiaries after the date hereof; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the terms set out below shall have the indicated meanings (such meanings applying equally to the singular and plural forms thereof); "API LTIP" means the American Paging, Inc. Long-Term Incentive Program. "API LTIP PARTICIPANT" means each individual who is or was a participant in the API LTIP. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. "TDS ESPP" means the TDS 1993 Employees' Stock Purchase Plan. "TDS ESPP - API PARTICIPANT" means each individual who is or was a participant in the TDS ESPP and an employee and/or officer of API. Any capitalized term not otherwise defined in this Agreement shall have the meaning set forth for such term in the employee benefit plan to which such term relates. ARTICLE II TDS ESPP In connection with the purchase of TDS Common Shares under the TDS ESPP by a TDS ESPP - API Participant, API shall pay in cash to TDS an amount equal to the excess of the fair market value of the TDS Common Shares on the date of purchase over the amount paid therefor by the TDS ESPP - API Participant and any other amounts paid or to be paid by TDS to any government or governmental agency for taxes, if any, with respect thereto, less any amounts paid to TDS by a API ESPP Participant for withholding taxes. Any payments by API to TDS pursuant to this Article shall be made within 10 days after the date of purchase under the TDS ESPP. For purposes of this Article, the fair market value of a TDS Common Share is the closing price of a TDS Common Share on the American Stock Exchange on the date of reference or, if the reference date is not a trading date, the closing price of a TDS -3- Common Share on the American Stock Exchange on the next preceding trading date. ARTICLE III API LTIP API currently maintains the API LTIP which provides for the granting of Stock Appreciation Rights ("SAR's") utilizing shares of phantom API stock to selected senior managers of API. Upon the exercise of vested SAR's, an API LTIP Participant may elect to receive cash or TDS Common Shares having a value (as determined under the API LTIP) equal to the difference between the most recently computed value of the shares of phantom API stock for which the SAR's are being exercised and the initial price of the related shares of phantom API stock at the date the SAR's were granted. Although API LTIP Participants can elect to receive payment of a vested SAR in cash or TDS Common Shares, the President of TDS or the Board of Directors of TDS has the final determination as to whether payment will be made in TDS Common Shares or cash. It is understood by TDS and API that any payment under the API LTIP has been and continues to be the sole obligation of API. If as a result of an exercise of an SAR, the President of TDS or the Board of Directors of TDS agrees to have TDS pay a portion or all of the value of an exercised SAR in TDS Common Shares, API shall pay in -4- cash to TDS an amount equal to the fair market value on the date of the exercise of the SAR of the TDS Common Shares distributed to the participants by TDS on behalf of API. In addition, API shall pay to TDS any other amounts paid or to be paid by TDS to any government or governmental agency for taxes, if any, relating to the exercise of an SAR under the API LTIP less any amounts paid to TDS by an API LTIP Participant for withholding taxes. Any payments by API to TDS pursuant to this Article shall be made within 10 days after the date of exercise under the API LTIP. For purposes of this Article, the fair market value of a TDS Common Share on the date of the exercise of an SAR is the closing price of a TDS Common Share on the American Stock Exchange on such date or, if the date of the exercise is not a trading date, the closing price of a TDS Common Share on the American Stock Exchange on the next preceding trading day. ARTICLE IV INDEMNIFICATION Section 4.01. INDEMNIFICATION. (a) API shall indemnify and hold harmless TDS, and each person, if any, who controls TDS, from and against any and all losses, claims, damages or liabilities and any costs and expenses (including without limitation reasonable attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any -5- litigation, commenced or threatened, or any claim whatsoever) (1) arising out of or related in any manner to API's failure to comply with any of its obligations under this Agreement, (2) arising out of the negligence or misconduct of API in connection with the participation of (A) the TDS ESPP - API Participants or any present or former employees of API, in the TDS ESPP or (B) the API LTIP Participants or any present or former employees of API, in the API LTIP, or (3) subject to TDS's compliance with its obligations under this Agreement, arising out of the transactions contemplated by this Agreement and incurred by any TDS ESPP - API Participant or API LTIP Participant. (b) TDS shall indemnify and hold harmless API from and against any and all losses, claims, damages or liabilities and any costs and expenses (including without limitation reasonable attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) (1) arising out of or related in any manner to TDS's failure to comply with any of the terms of this Agreement, or (2) arising out of the negligence or misconduct of TDS in connection with the participation of (A) the TDS ESPP - API Participants or any present or former employees of API, in the TDS ESPP or (B) the API LTIP Participants or any present or former employees of API, in the API LTIP. -6- Section 4.02. PROCEDURE FOR INDEMNIFICATION. Each party indemnified under paragraph (a) or (b) of Section 4.01 shall, promptly after receipt of notice of the commencement of any action against such indemnified party in respect of which indemnity may be sought, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party so to notify an indemnifying party of any such action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity agreement contained in paragraph (a) or (b) of Section 4.01, unless the indemnifying party was prejudiced by such omission, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel satisfactory in any case to TDS. If the indemnifying party so assumes the defense thereof, it may not agree to any settlement of such action as the result of which any remedy or relief, other than monetary damages for which the indemnifying party shall be responsible hereunder, shall be applied to or against the indemnified party, without the prior written consent of the indemnified party. If the indemnifying party does not assume the defense thereof, it shall be bound by any settlement to which -7- the indemnified party agrees, irrespective of whether the indemnifying party consents thereto. If any settlement of any claim is effected by the indemnified party prior to commencement of any action relating thereto, the indemnifying party shall be bound thereby only if it has consented in writing thereto. In any action hereunder, the indemnified party shall continue to be entitled to participate in the defense thereof, with counsel satisfactory to TDS, even if the indemnifying party has assumed the defense thereof, and the indemnifying party shall not be relieved of the obligation hereunder to reimburse the indemnified party for the costs thereof. Section 4.03. OFFICERS, DIRECTORS, ETC. For purposes of this Article IV, losses, claims, damages, liabilities, costs and expenses of past, present or future officers, directors, employees, agents (in each case, acting in their capacities as such) or subsidiaries (or past, present or future officers, directors, employees and agents of subsidiaries) of TDS or API, as the case may be, shall be deemed to have been suffered by TDS or API, as the case may be. Section 4.04. SURVIVAL OF INDEMNIFICATION; PRIOR KNOWLEDGE. The indemnification provisions of this Article IV shall survive the Offering and any investigation made at any time by either of the parties hereto. Actual prior knowledge by any -8- indemnified party with respect to any matter as to which indemnification may be sought shall not constitute a defense to any indemnified party's rights to indemnification pursuant to the provisions hereof. ARTICLE V LEGAL COUNSEL In any case where legal counsel is to be employed to represent the parties for any purpose under this Agreement, TDS shall have the right to select such counsel. If in the judgment of TDS it would be appropriate to do so, TDS may select the same counsel to represent both parties in connection with any matter, and API hereby consents in advance to any such joint representation; PROVIDED, HOWEVER, that if any counsel selected for such joint representation is of the opinion at any time that, in light of the circumstances then existing, it would not be able to discharge its professional responsibilities properly in undertaking or in continuing such joint representation, then TDS shall select separate counsel to represent API in the matter. Except as otherwise specifically provided in Section 4.01(b), API shall be solely responsible for the fees and expenses of any separate counsel so selected, and TDS shall have no responsibility or liability whatsoever with respect thereto. If the parties use the same counsel, each of the parties shall be responsible for the -9- portion of the reasonable fees and expenses of such counsel determined by such counsel to be allocable to each of the parties. ARTICLE VI REPRESENTATIONS AND WARRANTIES As an inducement to enter into this Agreement, each party represents to and agrees with the other that: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power to own, lease and operate its properties, to carry on its business as presently conducted and to carry out the transactions contemplated by this Agreement; (b) it has duly and validly taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; (c) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms (subject, as to the enforcement of remedies, to -10- applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally from time to time in effect, and subject to equitable limitations on the availability of the remedy of specific performance); and (d) none of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or the compliance with any of the provisions of this Agreement will (i) conflict with or result in a breach of any provision of its corporate charter or by-laws, (ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it or affecting any of its properties or assets. -11- ARTICLE VII MISCELLANEOUS Section 7.01. DISPOSAL OF API SHARES. API acknowledges that TDS may at any time and from time to time dispose of any Series A Common Shares or Common Shares of API held by it in any manner which it deems fit without regard to the effect of any such disposition on any provision or term of any employee benefit plan as that term is defined in Section 3(3) of ERISA, or other arrangements with employees of API or TDS. API hereby expressly waives any claim which it might otherwise at any time have or have had against TDS with respect to any such disposition of API Series A Common Shares or Common Shares. Section 7.02. INJUNCTIONS. Irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity. -12- Section 7.03. ASSIGNMENT. Except, with respect to TDS, by operation of law or in connection with the sale or transfer of all or substantially all of the assets of a party hereto or of all or substantially all of the capital stock of API beneficially owned by TDS, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; PROVIDED, HOWEVER, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns. Section 7.04. FURTHER ASSURANCES. Subject to the provisions hereof, the parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the parties shall, in connection with entering into this Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or -13- similar authority and promptly provide the other with all such information as the other may reasonably request in order to be able to comply with the provisions of this sentence. Section 7.05. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. In the event that any such term, provision, covenant or restriction is so held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. Section 7.06. WAIVERS, ETC. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any -14- other or further exercise thereof or the exercise of any other right or power. No amendment, modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing and signed by the chief executive officer or the chief financial officer of each party in the case of amendments or modifications, or by the chief executive officer or the chief financial officer of the waiving or consenting party, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Section 7.07. CHANGES OF LAW. If, due to any change in applicable law or regulations or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated by this Agreement shall become impracticable or impossible, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. Section 7.08. PARTIES IN INTEREST. Except for the rights of the parties indemnified pursuant to Section 4.01(a) and (b) hereof, nothing in this Agreement expressed or implied is intended or shall be construed to confer any right or benefit upon -15- any person, firm or corporation other than the parties and their respective permitted successors and assigns. Section 7.09. CONFIDENTIALITY. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential and shall cause its employees and agents to keep strictly confidential, any information which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provision of this Agreement; PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not apply to information which (a) at the time of disclosure was in the public domain not as a result of acts by the receiving party or (b) was in the possession of the receiving party at the time of disclosure. Section 7.10. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby. Section 7.11. HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. -16- Section 7.12. COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be, and shall be deemed to be, an original instrument. Section 7.13. NOTICES. All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally, by telegram or sent by registered mail, postage prepaid to: TDS at: 30 North LaSalle Street Suite 4000 Chicago, Illinois 60602-2507 Attention: President with separate copies at such address to the attention of the Chief Financial Officer and the Corporate Secretary API at: 1300 Godward Street N.E. Suite 3100 Minneapolis, MN 55413-1767 Attention: President with separate copies at such address to the attention of the Chief Financial officer and the Corporate Secretary or to such other address as any party may, from to time to time, designate in a written notice given in a like manner. Any notice given under this Agreement shall be deemed delivered when received at the appropriate address. -17- Section 7.14. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois applicable to contracts made and to be performed therein. -18- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the day and year first above written. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. -------------------------------------- Name: LeRoy T. Carlson, Jr. ------------------------------------- Title: President ------------------------------------ AMERICAN PAGING, INC. By: /s/ John R. Schaaf -------------------------------------- Name: John R. Schaaf ------------------------------------- Title: President ------------------------------------ Signature Page of Employee Benefit Plans Agreement dated as of January 1, 1994. -19- EX-99.(C)(13) 14 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] February 27, 1995 American Paging, Inc. 1300 Godward Street NE Minneapolis, MN 55413 RE: Revolving Credit Agreement dated January 1, 1994, (the "Revolving Credit Agreement"), between American Paging, Inc. ("API") and Telephone and Data Systems, Inc. ("TDS") Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all of the references to "$60,00,000" in the Revolving Credit Agreement to "$90,000,000." All of the other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. Please acknowledge your agreement to this amendment by executing the copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson -------------------------------------- Murray L. Swanson Executive Vice President - Finance Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Terry M. Busse -------------------------------------- Terry M. Busse Vice President, Finance EX-99.(C)(14) 15 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] August 10, 1995 American Paging, Inc. 1300 Godward Street NE Suite 3100 Minneapolis, MN 55413 RE: Revolving Credit Agreement dated January 1, 1994, as amended February 27, 1995, (the "Revolving Credit Agreement"), between American Paging, Inc. ("API") and Telephone and Data Systems, Inc. ("TDS") Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all of the references to "$90,00,000" in the Revolving Credit Agreement to "$100,000,000." All of the other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. Please acknowledge your agreement to this amendment by executing the copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson -------------------------------------- Murray L. Swanson Executive Vice President, Finance Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Terry M. Busse -------------------------------------- Terry M. Busse Vice President, Finance EX-99.(C)(15) 16 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] December 31, 1995 American Paging, Inc. 1300 Godward Street NE Suite 3100 Minneapolis, MN 55413 RE: Revolving Credit Agreement dated January 1, 1994, as amended August 10, 1995, (the "Revolving Credit Agreement"), between American Paging, Inc. ("API") and Telephone and Data Systems, Inc. ("TDS") Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all of the references to $100,000,000" in the Revolving Credit Agreement to "$125,000,000." All of the other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. Please acknowledge your agreement to this amendment by executing the copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson -------------------------------------- Murray L. Swanson Executive Vice President, Finance Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Terrence T. Sullivan -------------------------------------- Terrence T. Sullivan Vice President - Finance EX-99.(C)(16) 17 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] April 15, 1996 American Paging, Inc. Suite 3100 1300 Godward Street, N.E. Minneapolis, Minnesota 55413 Re: Revolving Credit Agreement dated January 1, 1994, as last amended December 31, 1995 (the "Revolving Credit Agreement"), between American Paging, Inc. (the "Company") and Telephone and Data Systems, Inc. ("TDS") ---------------------------------------------------------------------- Gentlemen: This letter will constitute TDS's agreement to correct the Revolving Credit Agreement by amending and restating Section 7(b)(2) thereof in its entirety to read as follows: "(2) the Company shall not permit its consolidated equity to be less than 30% of its consolidated liabilities (including, without limitation, the Note, accounts payable and other liabilities, but excluding customer deposits and unearned revenues);" All other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. Please acknowledge your agreement to this amendment by executing a copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Ronald D. Webster -------------------------------------- Ronald D. Webster Vice President and Treasurer American Paging, Inc. April 15, 1996 Page 2 Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Terrence T. Sullivan -------------------------------------- Terrence T. Sullivan Vice President - Finance (Chief Financial Officer) and Treasurer EX-99.(C)(17) 18 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] August 2, 1996 American Paging, Inc. 1300 Godward Street NE #3100 Minneapolis, MN 55413 RE: Revolving Credit Agreement dated January 1, 1994, (the "Revolving Credit Agreement"), as amended December 31, 1995, between American Paging, Inc. ("API") and Telephone and Data Systems, Inc. ("TDS") Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all of the references to "$125,000,000" in the Revolving Credit Agreement to "$140,000,000." All of the other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. Please acknowledge your agreement to this amendment by executing the copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson -------------------------------------- Murray L. Swanson Executive Vice President - Finance Accepted and agreed to as of the date set forth above. AMERICAN PAGING, INC. By: /s/ Terrence T. Sullivan -------------------------------------- Terrence T. Sullivan Vice President - Finance EX-99.(C)(18) 19 AMENDMENT TO REVOLVING CREDIT AGREEMENT [Letterhead of TDS] November 13, 1996 American Paging, Inc. Suite 3100 1300 Godward Street, N.E. Minneapolis, Minnesota 55413 Re: Revolving Credit Agreement dated January 1, 1994, as amended (the "Revolving Credit Agreement"), between American Paging, Inc. (the "Company") and Telephone and Data Systems, Inc. ("TDS") ----------------------------------------------------------------- Ladies and Gentlemen: This letter will constitute TDS's agreement to amend the Revolving Credit Agreement by changing all references to "$140,000,000" in the Revolving Credit Agreement to "$150,000,000." All other terms and conditions of the Revolving Credit Agreement shall remain in full force and effect. TDS also hereby waives all defaults or events of default by the Company under the Revolving Credit Agreement resulting from the violation of the covenant in Section 7(b)(2) of the Revolving Credit Agreement or the insolvency of the Company from the respective dates from any such default or event of default through January 2, 1998. Please acknowledge your agreement to this amendment by executing a copy of this letter and return it to the undersigned. Very truly yours, TELEPHONE AND DATA SYSTEMS, INC. By: /s/ Murray L. Swanson -------------------------------------- Murray L. Swanson Executive Vice President- Finance American Paging, Inc. November 13, 1996 Page 2 Accepted and agreed to as of the date set forth above by Terrence T. Sullivan, President of the Company, as acknowledged by Michelle M. Haupt, Controller of the Company. AMERICAN PAGING, INC. By: /s/ Michelle M. Haupt -------------------------------------- Michelle M. Haupt Controller EX-99.(C)(19) 20 AMENDMENT TO VOTING TRUST AGREEMENT AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 A Voting Trust Agreement ("Agreement") was entered into as of June 30, 1989, between certain holders of the Series A Common Shares, par value $1.00 per share, of Telephone and Data Systems, Inc., an Iowa corporation ("Certificate Holders"), and WALTER C.D. CARLSON, LETITIA G.C. CARLSON, LEROY T. CARLSON, JR., MELANIE J. HEALD AND DONALD C. NEBERGALL, as Trustees. Paragraph 8.5 of the Agreement provides that the Agreement may be amended upon the consent in writing of an eight-vote majority of the Trustees and no less than ninety percent (90%) in interest of the Certificate Holders of record. Pursuant to paragraph 8.5 of the Agreement, the Agreement is hereby amended as follows: LEROY T. CARLSON shall be permitted to withdraw up to 1,500 Series A Common Shares from the voting trust, by written instrument delivered to the Trustees prior to June 30, 1993, and upon his surrender of the corresponding number of Voting Trust Certificates, without the conversion of such shares into Common Shares and without notice of such withdrawal to the Trustees (other than such written instrument) or to any other Certificate Holder. Furthermore, paragraph 3.2 of the Agreement (relating to the granting of options) shall not apply to any withdrawal pursuant to the preceding sentence. IN WITNESS WHEREOF, the following Trustees signify their approval of the foregoing amendment as of the date set opposite the name of each such Trustee. Dated: NOVEMBER 20,1992 /s/ Walter C.D. Carlson ___________________________________________ Walter C.D. Carlson, Trustee (2 votes) Dated: NOVEMBER 24, 1992 /s/ Letitia G.C. Carlson ___________________________________________ Letitia G.C. Carlson, Trustee (2 votes) Dated: NOV. 24, 1992 /s/ LeRoy T. Carlson, Jr. ___________________________________________ LeRoy T. Carlson, Jr., Trustee (2 votes) Dated: 11-24-92 /s/ Melanie J. Heald __________________________________________ Melanie J. Heald, Trustee (1 vote) Dated: 11/20/92 /s/ Donald C. Nebergall, trustee ____________________________________________ Donald C. Nebergall, Trustee (2 votes) SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -2- IN WITNESS WHEREOF, the following Certificate Holders signify their approval of the foregoing amendment as of the date set opposite the name of each such Certificate Holder. Dated: 12/3/92 /s/ Arthur Anderson __________ ___________________________________________ Arthur Anderson, custodian for Jacob Anderson, Certificate Holder Dated: 12/3/92 /s/ Arthur Andeerson __________ ____________________________________________ Arthur Anderson, custodian for Samuel Keith, Certificate Holder Dated: __________ ____________________________________________ Eric Anderson, Certificate Holder /s/ Kendrick Anderson, custodian for Dated: 11/29/92 Eve Anderson ____________________________________________ Kendrick Anderson, custodian for Eve Anderson, Certificate Holder /s/ Kendrick Anderson, custodian for Dated: 11/29/92 Jill Anderson ____________________________________________ Kendrick Anderson, custodian for Jill Anderson, Certificate Holder Dated: /s/ K.C. August ___________ ____________________________________________ K.C. August, Certificate Holder Dated: /s/ LeRoy T. Carlson ____________ ____________________________________________ LeRoy T. Carlson, Certificate Holder Dated: /s/ Margaret D. Carlson ____________ ____________________________________________ Margaret D. Carlson, Certificate Holder Dated:Nov. 24, 1992 /s/ LeRoy T. Carlson, Jr. ____________________________________________ LeRoy T. Carlson, Jr., Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -3- /s/ LeRoy T. Carlson, Jr., custodian Dated: NOV. 24, 1992 for Anthony Carlson _______________ ____________________________________________ LeRoy T. Carlson, Jr., custodian for Anthony J.M. Carlson, Certificate Holder /s/ Catherine Mouly, custodian for Dated: 11/25/92 Anthony J.M. Carlson, Certificate Holder _________ ____________________________________________ Catherine Mouly, custodian for Anthony J.M. Carlson, Certificate Holder Dated: 11/23/92 /s/ Byron Wertz, Trustee _________ ____________________________________________ Byron Wertz, trustee for Anthony J.M. Carlson, Certificate Holder /s/ LeRoy T. Carlson, Jr., custodian for Dated: NOV. 24, 1992 Leo Carlson ______________ ____________________________________________ LeRoy T. Carlson, Jr., custodian for Leo P.M. Carlson, Certificate Holder Dated: 11/23/92 /s/ Byron Wertz, Trustee ___________ ____________________________________________ Byron Wertz, trustee for Leo P.M. Carlson, Certificate Holder Dated: 11/25/92 /s/ Catherine Mouly __________ ____________________________________________ Catherine Mouly, Certificate Holder Dated: 11/24/92 /s/ Letitia G. C. Carlson _________ ____________________________________________ Letitia G. C. Carlson, Certificate Holder Dated: 11/28/92 /s/ Edwin Himwich __________ ____________________________________________ Edwin Himwich, Certificate Holder Dated: /s/ Prudence E. Carlson ___________ ____________________________________________ Prudence E. Carlson, Certificate Holder Dated: /s/ Richard Beckett ___________ ___________________________________________ Richard Beckett, Certificate Holder Dated: 11/23/92 /s/ Walter C.D. Carlson __________ ____________________________________________ Walter C.D. Carlson, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -4- Dated: 11/23/92 /s/ Walter C.D. Carlson, Custodian _________ ____________________________________________ Walter C.D. Carlson, custodian for Amanda Liv de Hoyos Carlson, Certificate Holder Dated: 11/23/92 /s/ Byron Wertz, Trustee __________ ____________________________________________ Byron Wertz, trustee for Amanda L. de Hoyos, Certificate Holder Dated: 11/23/92 /s/ Walter C.D. Carlson, Custodian __________ ____________________________________________ Walter C.D. Carlson, custodian for Greta M. de Hoyos Carlson, Certificate Holder Dated: 11/23/92 /s/ Byron Wertz, Trustee __________ ____________________________________________ Byron Wertz, trustee for Greta M. de Hoyos Carlson, Certificate Holder Dated: 11/23/92 /s/ Walter C.D. Carlson, Custodian __________ ____________________________________________ Walter C.D. Carlson, custodian for Linnea Faith de Hoyos Carlson, Certificate Holder Dated:___________ ____________________________________________ Debora M. de Hoyos, Certificate Holder Dated: ___________ ____________________________________________ Yvonne M. Carlson, Certificate Holder Dated: 11-24-92 /s/ Melanie J. Heald __________ ____________________________________________ Melanie J. Heald, Certificate Holder Dated: 12/16/92 /s/ Dorothea Hopkins __________ ____________________________________________ Dorothea Hopkins, Certificate Holder Dated: 12/1/92 /s/ Lester O. Johnson __________ ____________________________________________ Lester O. Johnson Trust, Certificate Holder Dated: 12/1/92 /s/ Frances M. Johnson __________ ____________________________________________ Frances Johnson Trust, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -5- Dated: /s/ Graham Johnson & Sharon Johnson __________ ____________________________________________ Graham Johnson & Sharon Johnson, Certificate Holder Dated: 12/1/92 /s/ Kent Johnson __________ ____________________________________________ Kent Johnson, Certificate Holder Dated: /s/ Laurel Ann Johnson __________ ____________________________________________ Laurel Ann Johnson, Certificate Holder Dated: __________ ____________________________________________ Dana Dougherty, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Dana Dougherty, Certificate Holder Dated: /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Dana Dougherty, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Adam Maldonado, Certificate Holder Dated: /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Adam Maldonado, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Nicole Maldonado, Certificate Holder Dated: /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Nicole Maldonado, Certificate Holder Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -6- Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A dated 1/1/56 for Walter C.D. Carlson, Certificate Holder Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A dated 10/24/60 for Letitia G.C. Carlson, Certificate Holder Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A 12/28/72, Certificate Holder Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A date 12/31/76, Certificate Holder Dated: 11/20/92 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee Lead Annuity Trust for Wellesley College, Certificate Holder Dated: __________ ____________________________________________ Byron Wertz, custodian for Allison M. Wertz, Certificate Holder Dated: __________ ____________________________________________ Byron Wertz, custodian for Joseph E. Wertz, Certificate Holder Dated: /s/ Florence Wertz John E. Wertz __________ ____________________________________________ Florence Wertz & John E. Wertz '81 Trust, Certificate Holder Dated: 11/27/92 /s/ John Alan Wertz __________ ____________________________________________ John Alan Wertz, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -7- Dated: 11-23-92 /s/ Kristin Wertz __________ ____________________________________________ Kristin Wertz, Certificate Holder /s/ Paul G. Wertz cust for Elizabeth Dated: / /92 D. Wertz __________ ____________________________________________ Paul G. Wertz, custodian for Elizabeth D. Wertz, Certificate Holder /s/ Paul G. Wertz cust for Jessica Dated: / /92 A. Wertz __________ ____________________________________________ Paul G. Wertz, custodian for Jessica A. Wertz, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF NOVEMBER 20, 1992, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989. -8- EX-99.(C)(20) 21 AMENDMENT TO VOTING TRUST AGREEMENT AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 A Voting Trust Agreement ("Agreement") was entered into as of June 30, 1989, between certain holders of the Series A Common Shares, par value $1.00 per share, of Telephone and Data Systems, Inc., an Iowa corporation ("Certificate Holders"), and WALTER C.D. CARLSON, LETITIA G.C. CARLSON, LEROY T. CARLSON, JR., MELANIE J. HEALD AND DONALD C. NEBERGALL, as Trustees. Paragraph 8.5 of the Agreement provides that the Agreement may be amended upon the consent in writing of an eight-vote majority of the Trustees and no less than ninety percent (90%) in interest of the Certificate Holders of record. Pursuant to paragraph 8.5 of the Agreement, the Agreement is hereby amended as follows: LEROY T. CARLSON shall be permitted to withdraw up to 650 Series A Common Shares from the voting trust, by written instrument delivered to the Trustees prior to December 31, 1991, and upon his surrender of the corresponding number of Voting Trust Certificates, without the conversion of such shares into Common Shares and without notice of such withdrawal to the Trustees (other than such written notice) or to any other Certificate Holder. Furthermore, paragraph 3.2 of the Agreement (relating to the granting of options) shall not apply to any withdrawal pursuant to the preceding sentence. IN WITNESS WHEREOF, the following Trustees signify their approval of the foregoing amendment as of the date set opposite the name of each such Trustee. Dated: 6/13/91 /s/ Walter C.D. Carlson __________ ____________________________________________ Walter C.D. Carlson, Trustee (2 votes) Dated: 6/19/91 /s/ Letitia G.C. Carlson __________ ____________________________________________ Letitia G.C. Carlson, Trustee (2 votes) Dated: 6/17/91 /s/ LeRoy T. Carlson, Jr. __________ ____________________________________________ LeRoy T. Carlson, Jr., Trustee (2 votes) Dated: 6/24/91 /s/ Melanie J. Heald __________ ____________________________________________ Melanie J. Heald, Trustee (1 vote) Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee (2 votes) SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -2- IN WITNESS WHEREOF, the following Certificate Holders signify their approval of the foregoing amendment as of the date set opposite the name of each such Certificate Holder. Dated: 7/22/91 /s/ Arthur Anderson __________ ____________________________________________ Arthur Anderson, custodian for Jacob Anderson, Certificate Holder Dated: 7/22/91 /s/ Arthur Anderson __________ ____________________________________________ Arthur Anderson, custodian for Samuel Keith, Certificate Holder Dated: __________ ____________________________________________ Eric Anderson, Certificate Holder Dated: 7/13/91 /s/ Kendrick Anderson, Custodian __________ ____________________________________________ Kendrick Anderson, custodian for Eve Anderson, Certificate Holder Dated: 7/13/91 /s/ Kendrick Anderson, Custodian __________ ____________________________________________ Kendrick Anderson, custodian for Jill Anderson, Certificate Holder Dated: 7/10/91 /s/ K.C. August __________ ____________________________________________ K.C. August, Certificate Holder Dated: 6/17/91 /s/ LeRoy T. Carlson __________ ____________________________________________ LeRoy T. Carlson, Certificate Holder Dated: 6/30/91 /s/ Margaret D. Carlson __________ ____________________________________________ Margaret D. Carlson, Certificate Holder Dated: 6/17/91 /s/ LeRoy T. Carlson, Jr. __________ ____________________________________________ LeRoy T. Carlson, Jr., Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -3- /s/ LeRoy T. Carlson, Jr., custodian Dated: 6/17/91 for Anthony J.M. Carlson __________ ____________________________________________ LeRoy T. Carlson, Jr., custodian for Anthony J.M. Carlson, Certificate Holder /s/ Catherine Mouly, custodian for Dated: 7/7/91 Anthony J.M. Carlson __________ ____________________________________________ Catherine Mouly, custodian for Anthony J.M. Carlson, Certificate Holder /s/ Byron Wertz, trustee for Anthony Dated: J.M. Carlson __________ ____________________________________________ Byron Wertz, trustee for Anthony J.M. Carlson, Certificate Holder /s/ LeRoy T. Carlson, Jr., custodian for Dated: 7/17/91 Leo P.M. Carlson __________ ____________________________________________ LeRoy T. Carlson, Jr., custodian for Leo P.M. Carlson, Certificate Holder /s/ Byron Wertz, trustee for Leo P.M. Dated: Carlson __________ ____________________________________________ Byron Wertz, trustee for Leo P.M. Carlson, Certificate Holder Dated: 7/7/91 /s/ Catherine Mouly __________ ____________________________________________ Catherine Mouly, Certificate Holder Dated: 6/19/91 /s/ Letitia G. C. Carlson __________ ____________________________________________ Letitia G. C. Carlson, Certificate Holder Dated: 6/19/91 /s/ Edwin Himwich __________ ____________________________________________ Edwin Himwich, Certificate Holder Dated: 6/27/91 /s/ Prudence E. Carlson __________ ____________________________________________ Prudence E. Carlson, Certificate Holder Dated: 6/27/91 /s/ Richard Beckett __________ ____________________________________________ Richard Beckett, Certificate Holder Dated: 6/13/91 /s/ Walter C.D. Carlson __________ ____________________________________________ Walter C.D. Carlson, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -4- Dated: 6/13/91 /s/ Walter C.D. Carlson, Custodian __________ ____________________________________________ Walter C.D. Carlson, custodian for Amanda Liv de Hoyos Carlson, Certificate Holder /s/ Byron Wertz, trustee for Amanda L. Dated: de Hoyos __________ ____________________________________________ Byron Wertz, trustee for Amanda L. de Hoyos, Certificate Holder Dated: 6/13/91 /s/ Walter C.D. Carlson, Custodian __________ ____________________________________________ Walter C.D. Carlson, custodian for Greta M. de Hoyos Carlson, Certificate Holder /s/ Byron Wertz, trustee for Greta M. Dated: de Hoyos Carlson __________ ____________________________________________ Byron Wertz, trustee for Greta M. de Hoyos Carlson, Certificate Holder Dated: 6/13/91 /s/ Walter C.D. Carlson, Custodian __________ ____________________________________________ Walter C.D. Carlson, custodian for Linnea Faith de Hoyos Carlson, Certificate Holder Dated: 7/15/91 /s/ Debora M. de Hoyos __________ ____________________________________________ Debora M. de Hoyos, Certificate Holder Dated: 7/18/91 /s/ Yvonne M. Carlson __________ ____________________________________________ Yvonne M. Carlson, Certificate Holder Dated: 6/24/91 /s/ Melanie J. Heald __________ ____________________________________________ Melanie J. Heald, Certificate Holder Dated: 7/6/91 /s/ Dorothea Hopkins __________ ____________________________________________ Dorothea Hopkins, Certificate Holder Dated: 6/25/91 /s/ Lester O. Johnson __________ ____________________________________________ Lester O. Johnson Trust, Certificate Holder Dated: 7/7/91 /s/ Frances Johnson __________ ____________________________________________ Frances Johnson Trust, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -5- Dated: 9/05/91 /s/ Graham Johnson Sharon Johnson __________ ____________________________________________ Graham Johnson & Sharon Johnson, Certificate Holder Dated: 7/7/91 /s/ Kent Johnson __________ ____________________________________________ Kent Johnson, Certificate Holder Dated: 7/7/91 /s/ Laurel Ann Johnson __________ ____________________________________________ Laurel Ann Johnson, Certificate Holder Dated: 7/18/91 /s/ Dana Dougherty __________ ____________________________________________ Dana Dougherty, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Dana Dougherty, Certificate Holder Dated: 7/18/91 /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Dana Dougherty, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Adam Maldonado, Certificate Holder Dated: 7/18/91 /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Adam Maldonado, Certificate Holder Dated: __________ ____________________________________________ Dagmar Maldonado, custodian for Nicole Maldonado, Certificate Holder Dated: 7/18/91 /s/ Ross Carlson __________ ____________________________________________ Ross Carlson, custodian for Nicole Maldonado, Certificate Holder Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -6- Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A dated 1/1/56 for Walter C.D. Carlson, Certificate Holder Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A dated 10/24/60 for Letitia G.C. Carlson, Certificate Holder Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A 12/28/72, Certificate Holder Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee U/A date 12/31/76, Certificate Holder Dated: 6/17/91 /s/ Donald C. Nebergall __________ ____________________________________________ Donald C. Nebergall, Trustee Lead Annuity Trust for Wellesley College, Certificate Holder /s/ Byron Wertz, Custodian for Allison Dated: M. Wertz __________ ____________________________________________ Byron Wertz, custodian for Allison M. Wertz, Certificate Holder /s/ Byron Wertz, Custodian for Joseph Dated: E. Wertz __________ ____________________________________________ Byron Wertz, custodian for Joseph E. Wertz, Certificate Holder Dated: Sept. 4, 1991 /s/ Florence Wertz John E. Wertz __________ ____________________________________________ Florence Wertz & John E. Wertz '81 Trust, Certificate Holder Dated: 7/15/91 /s/ John Alan Wertz __________ ____________________________________________ John Alan Wertz, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -7- Dated: 9-9-91 /s/ Kristin Wertz __________ ____________________________________________ Kristin Wertz, Certificate Holder Dated: 7/21/91 /s/ Paul G. Wertz cust for Elizabeth __________ ____________________________________________ Paul G. Wertz, custodian for Elizabeth D. Wertz, Certificate Holder Dated: 7/21/91 /s/ Paul G. Wertz cust for Jessica __________ ____________________________________________ Paul G. Wertz, custodian for Jessica A. Wertz, Certificate Holder SIGNATURE PAGE TO THE AMENDMENT DATED AS OF MAY 9, 1991, TO THE VOTING TRUST AGREEMENT DATED AS OF JUNE 30, 1989 -8- EX-99.(D)(1) 22 FORM OF OFFER TO PURCHASE Offer to Purchase for Cash All Outstanding Common Shares of American Paging, Inc. at $2.50 Net Per Common Share by API Merger Corp. a direct wholly owned subsidiary of Telephone and Data Systems, Inc. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) AT LEAST THE NUMBER OF COMMON SHARES THAT WHEN ADDED TO THE COMMON SHARES OWNED BY TELEPHONE AND DATA SYSTEMS, INC. ("TDS") AND API MERGER CORP. ("PURCHASER") SHALL CONSTITUTE 90% OF THE COMMON SHARES THEN OUTSTANDING (THE "MINIMUM CONDITION") AND (II) THAT THE ASSET CONTRIBUTION AGREEMENT, DATED AS OF DECEMBER 22, 1997, AMONG TDS, TSR PAGING, INC. AND TSR WIRELESS LLC BE IN FULL FORCE AND EFFECT AND NOT TERMINATED IN ACCORDANCE WITH THE TERMS THEREOF AND ALL OF THE CONDITIONS SET FORTH IN ARTICLES XI AND XII THEREOF SHALL HAVE BEEN SATISFIED OR WAIVED (THE "ASSET CONTRIBUTION AGREEMENT CONDITION"). PURCHASER HAS AGREED TO WAIVE THE MINIMUM CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN. THE BOARD OF DIRECTORS OF AMERICAN PAGING, INC. (THE "COMPANY"), BY UNANIMOUS VOTE OF ALL DIRECTORS, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS CONSISTING OF THE INDEPENDENT DIRECTORS OF THE COMPANY WHO ARE NOT DIRECTORS, OFFICERS OR EMPLOYEES OF TDS OR PURCHASER OR OTHERWISE AFFILIATED WITH TDS OR PURCHASER NOR OFFICERS OR EMPLOYEES OF THE COMPANY (THE "SPECIAL COMMITTEE"), HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO THE SHAREHOLDERS OF THE COMPANY (OTHER THAN TDS AND PURCHASER), AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON SHARES PURSUANT TO THE OFFER. IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc. should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Common Shares, and any other required documents, to the depositary or tender such Common Shares pursuant to the procedure for book-entry transfer set forth in "The Tender Offer-- 3. Procedures for Accepting the Offer and Tendering Common Shares" or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Common Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Common Shares. Any shareholder who desires to tender Common Shares and whose certificates evidencing such Common Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Common Shares by following the procedure for guaranteed delivery set forth in "THE TENDER OFFER-- 3. Procedures for Accepting the Offer and Tendering Common Shares". Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or the Dealer Manager. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. The Dealer Manager for the Offer is: [LOGO] February 18, 1998 TABLE OF CONTENTS INTRODUCTION.......................................................................... 1 SPECIAL FACTORS....................................................................... 4 Background of the Offer and the Merger.............................................. 4 Recommendation of the Special Committee and the Company's Board; Fairness of the Offer and the Merger.............................................................. 7 Fairness of the Offer and the Merger................................................ 7 Opinion of Financial Advisor to the Special Committee............................... 9 Position of TDS and Purchaser Regarding Fairness of the Offer and the Merger........ 12 Presentation of Financial Advisor to TDS............................................ 13 Financial Projections............................................................... 15 Purpose and Structure of the Offer and the Merger; Reasons of TDS and Purchaser for the Offer and the Merger.......................................................... 16 Plans for the Company after the Offer and the Merger; Certain Effects of the Offer............................................................................. 17 Rights of Shareholders in the Merger................................................ 18 The Merger Agreement................................................................ 18 Interests of Certain Persons in the Offer and the Merger............................ 23 Beneficial Ownership of Securities of the Company................................... 26 Related Party Transactions.......................................................... 34 Fees and Expenses................................................................... 39 THE TENDER OFFER...................................................................... 41 1. Terms of the Offer; Expiration Date............................................. 41 2. Acceptance for Payment and Payment for Common Shares............................ 42 3. Procedures for Accepting the Offer and Tendering Common Shares.................. 43 4. Withdrawal Rights............................................................... 45 5. Certain Federal Income Tax Consequences......................................... 46 6. Price Range of Common Shares; Dividends......................................... 47 7. Certain Information Concerning the Company...................................... 48 8. Certain Information Concerning Purchaser, TDS and The Voting Trust.............. 51 9. Financing of the Offer and the Merger........................................... 52 10. Dividends and Distributions..................................................... 52 11. Effect of the Offer on the Market for the Common Shares; American Stock Exchange, Inc. and Exchange Act Registration.................................... 53 12. Certain Conditions of the Offer................................................. 53 13. Certain Legal Matters and Regulatory Approvals.................................. 55 14. Fees and Expenses............................................................... 57 15. Miscellaneous................................................................... 58
SCHEDULE I. Directors and Executive Officers of TDS and Purchaser and the Trustees of The Voting Trust....................................... I-1 SCHEDULE II. Directors and Executive Officers of the Company.................... II-1 SCHEDULE III. Opinion of PaineWebber Incorporated................................ III-1 SCHEDULE IV. Summary of Stockholder Appraisal Rights and Text of Section 262 of the General Corporation Law of the State of Delaware............... IV-1 SCHEDULE V. Audited Financial Statements (and Related Notes) for the Company for the Years Ended December 31, 1997 and December 31, 1996........ V-1
ii To the Holders of Common Shares of American Paging, Inc.: INTRODUCTION API Merger Corp., a Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., a corporation organized under the laws of Iowa ("TDS"), hereby offers to purchase all outstanding Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company"), at a price of $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Tendering shareholders who have Common Shares registered in their name and who tender directly will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Common Shares by Purchaser pursuant to the Offer. Shareholders who hold their Common Shares through their bank or broker should consult with them as to whether they charge any service fees. Purchaser will pay all charges and expenses of Credit Suisse First Boston Corporation, which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), Harris Trust and Savings Bank (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See "SPECIAL FACTORS--Fees and Expenses" and "THE TENDER OFFER--14. Fees and Expenses". THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), BY UNANIMOUS VOTE OF ALL DIRECTORS, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS CONSISTING OF THE INDEPENDENT DIRECTORS WHO ARE NOT DIRECTORS, OFFICERS OR EMPLOYEES OF TDS OR PURCHASER OR OTHERWISE AFFILIATED WITH TDS OR PURCHASER NOR OFFICERS OR EMPLOYEES OF THE COMPANY (THE "SPECIAL COMMITTEE"), HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO THE SHAREHOLDERS OF THE COMPANY (OTHER THAN PURCHASER AND TDS), AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON SHARES PURSUANT TO THE OFFER. The Company has advised TDS that PaineWebber Incorporated ("PaineWebber") has delivered to the Special Committee its written opinion that the $2.50 per Common Share cash consideration to be offered to the shareholders of the Company in each of the Offer and the Merger (as defined below) is fair to such shareholders (other than the Purchaser and TDS) from a financial point of view. See "SPECIAL FACTORS--Opinion of Financial Advisor to the Special Committee" for further information concerning the opinion of PaineWebber. The Company has filed with the Securities and Exchange Commission (the "Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to shareholders herewith. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) AT LEAST THE NUMBER OF COMMON SHARES THAT WHEN ADDED TO THE COMMON SHARES OWNED BY TDS AND PURCHASER SHALL CONSTITUTE 90% OF THE COMMON SHARES THEN OUTSTANDING AND (II) THE ASSET CONTRIBUTION AGREEMENT, DATED AS OF DECEMBER 22, 1997 (THE "ASSET CONTRIBUTION AGREEMENT") AMONG TDS, TSR PAGING, INC., A DELAWARE CORPORATION ("TSR PAGING"), AND TSR WIRELESS LLC, A DELAWARE LIMITED LIABILITY COMPANY ("TSR WIRELESS"), BE IN FULL FORCE AND EFFECT AND NOT TERMINATED IN ACCORDANCE WITH THE TERMS THEREOF AND ALL OF THE CONDITIONS SET FORTH IN 1 ARTICLES XI AND XII THEREOF SHALL HAVE BEEN SATISFIED OR WAIVED (THE "ASSET CONTRIBUTION AGREEMENT CONDITION"). PURCHASER HAS AGREED TO WAIVE THE MINIMUM CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN. PURCHASER CURRENTLY OWNS 12,500,000 SERIES A COMMON SHARES, PAR VALUE $1.00 PER SHARE (THE "SERIES A COMMON SHARES"), WHICH HAVE FIFTEEN VOTES PER SHARE ON ALL MATTERS AND ARE CONVERTIBLE ON A SHARE-FOR-SHARE BASIS INTO COMMON SHARES, AND 4,000,000 COMMON SHARES, CONSTITUTING 100% OF THE CURRENTLY OUTSTANDING SERIES A COMMON SHARES AND APPROXIMATELY 52.3% OF THE OUTSTANDING COMMON SHARES FOR A COMBINED TOTAL OF APPROXIMATELY 81.9% OF THE COMPANY'S OUTSTANDING CLASSES OF CAPITAL STOCK AND APPROXIMATELY 98.1% OF THEIR COMBINED VOTING POWER. AFTER CONSUMMATION OF THE OFFER, IF REQUIRED TO ACHIEVE OWNERSHIP OF 90% OF THE COMMON SHARES THEN OUTSTANDING, PURCHASER CURRENTLY INTENDS TO CONVERT ITS EXISTING 12,500,000 SERIES A COMMON SHARES INTO AN EQUIVALENT NUMBER OF COMMON SHARES IN ACCORDANCE WITH THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION. SEE "THE TENDER OFFER--12. CERTAIN CONDITIONS OF THE OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. The Company has advised Purchaser that as of February 10, 1998, (i) 12,500,000 Series A Common Shares were issued and outstanding, (ii) no Series B Common Shares, par value $1.00 per share, were issued and outstanding, (iii) no shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock") were issued and outstanding, (iv) 7,645,446 Common Shares were issued and outstanding, (v) no Common Shares were held in the treasury of the Company, (vi) 150,000 Common Shares were reserved for future issuance pursuant to the TDS Tax-Deferred Savings Plan, (vii) 100,000 Common Shares were reserved for future issuance for sale to employees of the Company and its subsidiaries under the 1997 Employee Stock Purchase Plan, (viii) 700,000 shares were reserved for future issuance under the 1994 Long Term Incentive Plan (with respect to which options to acquire 287,072 Common Shares were issued and outstanding) and (ix) 12,500,000 Common Shares were reserved for issuance upon conversion of the Series A Common Shares. The Company has further advised Purchaser that prior to the announcement of the Offer, there were approximately 111 holders of record of the issued and outstanding Common Shares. Purchaser owns 4,000,000 Common Shares and 12,500,000 Series A Common Shares (see "SPECIAL FACTORS--Background of the Offer and the Merger"), which it acquired in consideration for the issuance by it of 100 shares of common stock, par value $1.00 per share, to TDS. Purchaser does not currently intend to convert any of the Series A Common Shares while the Offer is open. As a result, assuming Purchaser does not convert any of the Series A Common Shares during the Offer, but all exercisable options with an exercise price less than $2.50 are exercised, the Minimum Condition would be satisfied if 2,893,052 Common Shares were validly tendered in the Offer and not withdrawn. If after the consummation of the Offer Purchaser is not the owner of at least 90% of the outstanding Common Shares and can become the owner of at least 90% of the outstanding Common Shares by converting its Series A Common Shares into Common Shares, Purchaser currently intends to then convert its Series A Common Shares into Common Shares to become the owner of at least 90% of the outstanding Common Shares. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of February 11, 1998 (the "Merger Agreement"), among TDS, Purchaser and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Common Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware ("Delaware Law"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become a direct wholly owned subsidiary of TDS. At the effective time of the merger (the "Effective Time"), each Common Share issued and outstanding immediately prior to the Effective Time (other than Common Shares held in the treasury of the Company or owned by Purchaser, TDS or any direct or indirect wholly owned subsidiary of TDS or the Company, and other than Common Shares held by shareholders 2 who shall have properly demanded and perfected appraisal rights under Section 262 of Delaware Law) will be canceled and converted automatically into the right to receive $2.50 in cash, or any higher or lower price that may be paid per Common Share pursuant to the Offer, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in "SPECIAL FACTORS--The Merger Agreement". Upon consummation of such merger, TDS and TSR Paging, in accordance with the terms and conditions of the Asset Contribution Agreement, would combine their respective paging businesses, and TDS would cause the Company to contribute substantially all of the assets and certain, limited, liabilities of the Company, and TSR Paging would contribute all of its assets and liabilities into TSR Wireless. TSR Wireless would not assume debt owed by the Company to TDS pursuant to the Revolving Credit Agreement (approximately $185 million at January 31, 1998). The Company, which would then be a wholly owned subsidiary of TDS, would have a 30% interest and TSR Paging would have a 70% interest in TSR Wireless, subject to adjustment pursuant to the terms of the Asset Contribution Agreement. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including the approval and adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. See "SPECIAL FACTORS--The Merger Agreement". Under the Company's Restated Certificate of Incorporation and Delaware Law, the approval of the Board and the affirmative vote of the holders of Common Shares and Series A Common Shares entitled to cast at least a majority of the total number of votes entitled to be cast by the holders of Common Shares and Series A Common Shares is required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. Consequently, Purchaser currently has sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other shareholder. Pursuant to the Asset Contribution Agreement, TDS is obligated to use its best efforts to cause Purchaser to complete the Merger, subject to the approval of the Merger by the Special Committee and TDS is not required to complete a Merger which does not have the recommendation of the Special Committee. Under Delaware Law, if Purchaser owns, following consummation of the Offer, conversion of its Series A Common Shares or otherwise, at least 90% of the then outstanding Common Shares and Series A Common Shares, Purchaser will be able to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, without a vote of the Company's shareholders. In such event, TDS, Purchaser and the Company have agreed to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the Company's shareholders. If, after the consummation of the Offer, Purchaser is not the owner of at least 90% of the outstanding Common Shares and can become the owner of at least 90% of the outstanding Common Shares by converting its Series A Common Shares into Common Shares, Purchaser currently intends to convert its Series A Common Shares into Common Shares to become the owner of at least 90% of the outstanding Common Shares. Purchaser's obligation to consummate the Offer is conditioned on there being validly tendered and not withdrawn at least the number of Common Shares that, when added to the 4,000,000 Common Shares owned by Purchaser, shall constitute 90% of the Common Shares then outstanding, so as to enable Purchaser to consummate the Merger without a vote of the Company's shareholders. If, however, fewer than such number of Common Shares are validly tendered and not withdrawn, and all other conditions set forth in Annex II of the Merger Agreement are satisfied, Purchaser may extend the Offer for a period or periods not to exceed 20 business days after the later of (i) the initial Expiration Date and (ii) the date on which all other conditions set forth in the Merger Agreement shall have been satisfied, after which time (or earlier if TDS did not extend the Offer) Purchaser shall waive the Minimum Condition. In such case, if the conversion of all of Purchaser's Series A Common Shares would not result in Purchaser owning at least 90% of the Common Shares outstanding, a vote of the Company's shareholders will be required under Delaware Law, and a significantly longer period of time will be required to effect the Merger. See "SPECIAL FACTORS--Purpose and Structure of the Offer and the Merger; Reasons of TDS and Purchaser for the Offer and the Merger". The term "Expiration Date" means 12:00 Midnight, New York City time, on March 17, 1998, unless and until Purchaser shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 3 SPECIAL FACTORS BACKGROUND OF THE OFFER AND THE MERGER TDS INVESTMENT IN THE COMPANY. The Company was formed in 1980 under Delaware Law as a wholly owned subsidiary of TDS. In 1994, the Company sold 3.5 million Common Shares in an underwritten public offering at an initial public offering price of $14.00 per share. The Company realized $45.6 million in connection with the sale, after the payment of the underwriters' discount. The proceeds of the sale were used to repay indebtedness to TDS. Prior to the public offering, TDS exchanged all of the outstanding common stock of the Company for 1.5 million Common Shares and 15.0 million Series A Common Shares. During 1994, TDS converted 2.5 million Series A Common Shares into Common Shares. The holders of Common Shares are entitled to one vote per share. The holders of Series A Common Shares are entitled to fifteen votes per share. Series A Common Shares are convertible on a share-for-share basis into Common Shares. On February 9, 1998, TDS contributed all of the Series A Common Shares and Common Shares held by it in consideration for 100 shares of common stock, par value $1.00 per share, of Purchaser. The Company has experienced cumulative net losses since 1993 of $117,441,000, including net losses in 1996 of $45,527,000 and in 1997 of $51,636,000. Cash flows from Operating Activities were ($10,774,000) in 1996 and ($18,752,000) in 1997, with additional negative cash flows from investing activities of ($38,535,000) in 1996 and ($19,050,000) in 1997, which were financed with loans from TDS of $45,437,000 in 1996 and $40,030,000 in 1997. Pursuant to a Revolving Credit Agreement dated as of January 1, 1994 between TDS and the Company, as amended and supplemented to date (the "Revolving Credit Agreement"), TDS has made advances to the Company totaling $28,113,000 as of December 31, 1994, $94,523,000 as of December 31, 1995, $139,960,000 as of December 31, 1996, and $179,990,000 as of December 31, 1997. Pursuant to a waiver granted March 5, 1997, TDS agreed to waive all defaults by the Company under the Revolving Credit Agreement resulting from violation of a covenant requiring the Company to maintain a certain ratio of equity to liabilities or the insolvency of the Company until January 1, 1999. In January 1998, TDS agreed to extend the line of credit to $185 million, of which $185 million has been advanced through January 31, 1998. TDS has undertaken in its agreement with TSR Paging described below to advance sufficient funds to the Company through the closing of the transaction with TSR Paging described below, but has not determined whether or under what conditions it will continue to advance funds should the TSR closing not occur. See "SPECIAL FACTORS--Background of the Offer and the Merger--TSR Negotiations". TDS's investment has been partially offset by $37.1 million of federal tax benefits and $3.9 million of state tax benefits used in TDS's consolidated federal and state income tax returns in accordance with the provisions of the Tax Allocation Agreement between TDS and the Company. See "RELATED PARTY TRANSACTIONS--Tax Allocation Agreement." BACKGROUND OF SEARCH FOR A STRATEGIC PARTNER. In September 1996, TDS retained Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or "CSFB") to assist TDS in evaluating alternatives for maximizing TDS's investment in the Company, including seeking third party indications of interest in a possible strategic transaction involving the Company. After an extensive search conducted on behalf of TDS during early 1997, only two written indications of interest, including a proposal from TSR Paging, were received which were not withdrawn. A third written indication of interest was received in late 1997. In the judgment of TDS, the most favorable indication of interest received came from TSR Paging. None of the indications involved consideration to TDS which, as evaluated by TDS and CSFB, exceeded the amount of the Company's outstanding debt to TDS. See "SPECIAL FACTORS--Background of the Offer and the Merger--TSR Negotiations", "--Presentation of Financial Advisor to TDS" and "SPECIAL FACTORS--Fairness of the Offer and the Merger--Other Proposals." From time to time representatives of TDS briefed the Board of Directors of the Company on the progress of these efforts. 4 During late 1996 and 1997, the Company attempted to improve its operations and develop an alternative strategy. Discussions with a potential purchaser of certain license assets as a means to redeploy capital in early 1997 were unsuccessful. Management of the Company prepared and revised a tentative plan for independent operation which recognized that significant operating losses would continue to be incurred in 1998, funded in part by significant asset sales and supported by conversion of the Company's indebtedness to TDS into equity. Absent such recapitalization and asset sales, the last version of this plan called for $45 million of additional investment by TDS in 1997 and 1998 beyond its commitment under the Revolving Credit Agreement. Management later withdrew this plan as not capable of achievement. TSR NEGOTIATIONS. In the fall of 1997, TSR Paging presented a revised indication of interest. After negotiations between TDS and TSR Paging, on December 22, 1997, TDS, TSR Paging and TSR Wireless entered into the Asset Contribution Agreement. In accordance with the terms and conditions of the Asset Contribution Agreement, TDS agreed to propose to negotiate and enter into a merger agreement with the Company pursuant to which a wholly owned subsidiary of TDS would acquire all of the issued and outstanding stock of the Company not owned by TDS and its affiliates. TDS is not, however, required to complete a merger which does not have the recommendation of a special committee of the independent directors of the Company. Upon consummation of such merger, TDS and TSR Wireless, in accordance with the terms and conditions of the Asset Contribution Agreement, would combine their respective paging businesses, and TDS would cause the Company to contribute substantially all of the assets and certain, limited, liabilities of the Company, and TSR Paging would contribute all of its assets and liabilities into TSR Wireless (the "TSR Transaction"). TSR Wireless would not assume debt owed by the Company to TDS pursuant to the Revolving Credit Agreement (approximately $185 million at January 31, 1998). The Company, which would then be a wholly owned subsidiary of TDS, would have a 30% interest and TSR Paging would have a 70% interest in TSR Wireless, subject to adjustment pursuant to the terms of the Asset Contribution Agreement. A copy of the Asset Contribution Agreement is filed as an Exhibit to the Schedule 14D-1 filed by TDS and Purchaser with the Commission in connection with the Offer. Upon closing of the TSR Transaction, the Company will be entitled to elect two of the nine member Management Committee of TSR Wireless. In addition, although the Company's membership interest in TSR Wireless will not be transferable without consent of TSR Paging, the Company will be granted registration rights in the event either TSR Wireless or TSR Paging, both of which currently are privately held, conducts an initial or subsequent public offering of its securities. After such an initial public offering and in any event by December 31, 2002, the Company will have certain rights to demand registration of its interests. The Company will also be entitled to require, and is subject to TSR Paging's (and the controlling Shareholders of TSR Paging) right to require, that its interests be sold on the same terms as certain dispositions of the interests of TSR Paging in TSR Wireless and certain dispositions by the controlling shareholders of their interests in TSR Paging, subject to various exceptions. Concurrently with the execution and delivery of the Asset Contribution Agreement, TDS and TSR Wireless executed and delivered an option agreement (the "Option Agreement"), pursuant to which TDS granted TSR Wireless an option to acquire the Company's debt to TDS pursuant to the Revolving Credit Agreement (the "Option"). Such Option would become exercisable upon certain conditions, including failure of the special committee of independent directors of the Company to approve the acquisition of the Common Shares of the Company not owned by TDS and its affiliates pursuant to the Merger described herein or the withdrawal by such special committee of its approval of such acquisition. Although the Option is not currently exercisable, if the special committee were to withdraw its recommendation of the Merger, or the Purchaser agreed to sell its capital stock in the Company, or the Board of the Company resolved to liquidate the Company or the Company entered into an agreement for the merger, consolidation, other combination or sale of substantially all its assets, then, TSR Wireless would be in a position to acquire TDS's interest in the Company's indebtedness to TDS and, after January 1, 1999, to take whatever action the holder of that debt is entitled to take with regard to any defaults then existing under such indebtedness. A copy of the Option is filed as an Exhibit to the Schedule 14D-1 filed by TDS and Purchaser. 5 On December 23, 1997, TDS delivered to the Board of Directors of the Company (the "Board") a letter dated December 23, 1997 (the "TDS Proposal Letter"), in which TDS offered to enter into a merger agreement with the Company pursuant to which all of the issued and outstanding Common Shares not owned by TDS would be acquired for cash in an amount equal to $2.25 per share. On December 26, 1997, the Board met and appointed Jean Burhardt Keffeler and Edwin L. Russell as the members of a special committee (the "Special Committee") to, among other things, consider how the Company should respond to the TDS Proposal Letter. In January 1998, the Special Committee retained PaineWebber as financial advisor to the Special Committee and Vedder, Price, Kaufman & Kammholz ("Vedder, Price") as legal advisor to the Special Committee. The Special Committee held meetings by conference telephone with its financial and legal advisors present to consider and conduct due diligence with respect to the TDS Proposal Letter on January 9, 15 and 23 and February 6, 1998, and met in person with its financial and legal advisors present on February 2 and 10, 1998. In January and February 1998 PaineWebber and Vedder Price conducted due diligence with respect to the TDS Proposal Letter, including a review of the Asset Contribution Agreement and ancillary agreements including the Option Agreement as well as information about the Company and the efforts of TDS to find a suitable strategic partner. Counsel for TDS also prepared on behalf of TDS and discussed with Vedder, Price a draft Merger Agreement which provided for an offer to purchase for cash the Common Shares not owned by TDS and its affiliates. On February 6, 1998, the Special Committee discussed with Mr. LeRoy T. Carlson, Jr., President of TDS, the TDS Proposal Letter and stated that it was not able to recommend that the Common Shares not held by TDS and its affiliates be acquired at a price of $2.25. The Special Committee proposed that the price should be increased from $2.25 to $2.55, or a premium of 20 percent above $2.125, the closing price on the date prior to announcement of the TDS Proposal Letter. The Special Committee also requested that TDS seek further confirmation from TSR Paging that it was unwilling to modify the terms of the Asset Contribution Agreement in order to allow the shareholders of the Company other than TDS and Purchaser (the "Public Shareholders") to remain as shareholders of the Company and thereby indirectly participate in TSR Wireless. On February 10, 1998, counsel to TSR Paging confirmed by letter to TDS's legal advisors that since the beginning of the discussions with respect to the transaction contemplated by the Asset Contribution Agreement, TSR had been unwilling to proceed with such transaction if there continued to be any public minority shareholders. Such letter also stated that "TSR Paging is not interested in having a continuing reporting obligation nor having public stockholders" and that "TSR Paging's negotiations . . . were based on this premise." On February 7, 1998, the Company's and TDS's financial advisors further discussed the appropriate premium, if any, for TDS's acquisition of such Common Shares and the extent to which other recent minority acquisition transactions provided a relevant basis for comparison. On February 9, 1998, Mr. Leroy T. Carlson, Jr. and Mr. Scott H. Williamson, Vice President-- Acquisitions of TDS, held further discussions with the Special Committee. Mr. Carlson, while indicating that he believed the TDS Proposal Letter was fair, offered to increase the price per share to $2.32. The Special Committee stated that it was not prepared to reconsider its original recommendation. On February 10, 1998, the Special Committee and its financial and legal advisors met in person with Mr. Carlson and Mr. Williamson and TDS's legal advisors. Both sides made presentations with respect to their positions. The Special Committee, based in part upon additional information provided by its financial advisors about other minority purchase transactions which it considered to be relevant, indicated that it could recommend as fair a consideration of $2.50 per share. After an adjournment, the TDS representatives agreed to increase the consideration offered to that amount. Subsequently on February 10, 1998, the Special Committee unanimously determined to recommend the proposed transaction to the Board of Directors of the Company after PaineWebber expressed the opinion (subsequently confirmed in its written opinion) that, on the basis of, and subject to the matters 6 stated in its opinion, the consideration to be received by the Public Shareholders pursuant to the Offer and the Merger is fair to the Public Shareholders from a financial point of view. Later that day, the Board, with all directors personally in attendance, met to consider the Offer and the Merger. The Special Committee, with representatives of PaineWebber and Vedder, Price in attendance, reported to the Board on its review of the TDS Proposal Letter, the TSR Transaction and its recommendation of the proposed transaction as fair to the Public Shareholders. After receiving the recommendation of the Special Committee, asking questions of the Special Committee as well as its financial and legal advisors and receiving a further explanation of the TSR Transaction and the provisions of the Offer and Merger Agreement from representatives of TDS and its legal advisors, the Board unanimously approved the Merger Agreement and Offer. Subsequently that evening, the Board of Directors of TDS, at a special meeting held to consider the matter, unanimously approved the Offer and the Merger Agreement. Representatives of TDS and the Company completed execution of the Merger Agreement, and the proposed Offer and the Merger were announced, the next day. RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY'S BOARD; FAIRNESS OF THE OFFER AND THE MERGER On February 10, 1998, the Special Committee unanimously approved and recommended to the Company's Board as fair to the Public Shareholders of the Company, and the Board, by a unanimous vote of all directors, based in part on the recommendation and approval of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby and determined that each of the Offer and the Merger is fair to the Public Shareholders. The Board, by a unanimous vote of all directors, has recommended that all holders of Common Shares accept the Offer and tender their Common Shares pursuant to the Offer. FAIRNESS OF THE OFFER AND THE MERGER In reaching its determinations referred to immediately above, the Special Committee considered the following factors, each of which, in the view of the Special Committee, supported such determinations: (i) the poor historical performance of the Company, its current high turnover rate of employees and changes in management, its inability to restructure its operations in a manner which significantly improved its financial prospects, and its inability to develop a viable plan for independent operations indicate that the Company is unlikely to achieve success on a stand alone basis; (ii) the current financial condition of the Company, its need for significant continuing investment to fund operating and capital requirements, and questions about its ability to obtain such financing from TDS or third parties indicate that its prospects are in jeopardy; (iii) a review of possible transactions considered by the Company or TDS in 1996 and 1997 as previously reported to the Board of Directors and the diligent search for strategic partners conducted on behalf of TDS, confirmed by a review of such activities by the Special Committee's own financial advisor, indicate that a thorough effort had been made by TDS to find the most favorable transaction for API; (iv) representatives of TDS have advised that the TSR Proposal provided higher value than the only other proposals received; (v) the refusal of TSR to consider a transaction which would allow the Public Shareholders to continue to participate in the paging business by retaining an interest in the new venture, which refusal was confirmed in writing by its counsel, indicate that there is limited practical opportunity for the Public Shareholders to continue their investment; (vi) the Special Committee received an opinion dated February 10, 1998, of its financial advisor, PaineWebber, which concluded, based upon its review and assumptions and subject to the limitations 7 stated therein, that the consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger (the "Offer Price") is fair, from a financial point of view, to the Public Shareholders. (vii) the Offer Price was the product of arms length negotiations between the Special Committee and representatives of TDS which resulted in an increase in the Offer Price; and (viii) the likelihood that the Offer and Merger will be consummated based in part on the financial condition of TDS and the advice of its representatives with respect to the likelihood that the other conditions contained in the Asset Contribution Agreement will be met, based upon information currently available to such representatives. In light of the nature of the recent trading value of the Common Shares, the Special Committee did not consider net book values or liquidation value to be relevant indicators of the value of the consideration to be received by the Public Shareholders. In reaching its determinations referred to above, the Board considered the recommendation of the Special Committee and the factors set forth immediately above, each of which, in view of the Board, supported such determinations. The members of the Board, including the Special Committee, evaluated the various factors listed above in light of their knowledge of the business, financial condition and prospects of the Company, and based upon the advice of financial and legal advisors. In light of the number and variety of factors that the Board and the Special Committee considered in connection with their evaluation of the Offer and the Merger, neither the Board nor the Special Committee found it practicable to assign relative weights to the foregoing factors, and, accordingly, neither the Board nor the Special Committee did so. In addition to the factors listed above, the Board and the Special Committee had each considered the fact that consummation of the Offer and the Merger would eliminate the opportunity of the Public Shareholders to participate in any potential future growth in the value of the Company, but determined that (i) this loss of opportunity was reflected in part by the price of $2.50 per Common Share to be paid in the Offer and the Merger, and (ii) as noted above, there was significant uncertainty as to the Company's long-term economic viability. The Board, including the Special Committee, believes that the Offer and the Merger are procedurally fair because, among other things: (i) the Special Committee consisted of independent directors appointed to represent the interests of the Public Shareholders; (ii) the Special Committee retained and was advised by independent legal counsel; (iii) the Special Committee retained PaineWebber as its independent financial advisor to assist them in evaluating the Offer and the Merger; (iv) the deliberations pursuant to which the Special Committee evaluated the Offer and the Merger and alternatives thereto; and (v) the fact that the $2.50 per Common Share price and the other terms and conditions of the Merger Agreement resulted from active arm's length bargaining between the Special Committee, on the one hand, and TDS, on the other. The Board and the Special Committee recognized that the Merger is not structured to require the approval of a majority of the shareholders of the Company other than Purchaser, and that Purchaser has sufficient voting power to approve the Merger without the affirmative vote of any other shareholder of the Company. The Board and the Special Committee recognized that TDS is required pursuant to the Asset Contribution Agreement to vote its shares in favor of the Merger so long as the Special Committee recommends and approves the Merger. 8 OTHER PROPOSALS. Although TDS advised the Special Committee and the Board that no other firm offers had been received by TDS with respect to its investment in the Company, the Board and Special Committee did consider two other indications of interest which representatives of TDS advised had been received and not withdrawn. As so described, one non-binding indication of interest was originally submitted in January 1997 by another paging company and subsequently revised. As last revised, that proposal contemplated an offer for the assets and business of the Company (without assumption of the Company's indebtedness under the Revolving Credit Agreement) for a consideration consisting of preferred stock and convertible preferred stock, estimated to have a present value by TDS's financial advisor of approximately $105 million to $110 million. The potential buyer in that transaction did not conduct on site due diligence with the Company or review its performance and plans with management. In addition, the proposal contemplated that closing of the transaction would be delayed for as much as one year. In early December 1997, another proposal was received from a financial buyer, subject to due diligence and financing, of $95 million in cash and a contingent note of $25 million. In view of the low value of the offer relative to TDS's assessment of the value of the TSR Transaction, the lateness of the offer, the advanced state of the negotiations with TSR Paging and documentation of the TSR Transaction, and the uncertain status of the financial buyer and its financing, TDS declined to proceed with the proposal. OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE The Special Committee retained PaineWebber as its financial advisor in connection with the Offer and Merger as described under "SPECIAL FACTORS--Background of the Offer and the Merger." In connection with such engagement, the Special Committee requested PaineWebber to render an opinion as to whether or not the price of $2.50 per share to be paid to the Public Shareholders (the "Consideration") is fair, from a financial point of view, to the holders of Common Shares (other than TDS and its affiliates). The full text of the opinion of PaineWebber, dated February 10, 1998, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Schedule III to this Offer to Purchase. The holders of the Common Shares are urged to read such opinion carefully and in its entirety. The summary of the PaineWebber opinion set forth in this Offer to Purchase is qualified in its entirety by reference to the full text of such opinion. PaineWebber delivered its opinion on February 10, 1998 (the "PaineWebber Opinion"), to the effect that, as of the date of the PaineWebber Opinion, and based on its review and assumptions and subject to the limitations summarized below, the Consideration is fair, from a financial point of view, to the holders of Common Shares (other than TDS and its affiliates). The PaineWebber Opinion was prepared at the request and for the information of the Special Committee and does not constitute a recommendation as to whether or not any Public Shareholder should tender its Common Shares in the Offer. The PaineWebber Opinion does not address the relative merits of the Offer and the Merger and other transactions or business strategies discussed by the Special Committee as alternatives to the Offer and the Merger or the decision of the Special Committee to proceed with the Offer and the Merger. The Consideration was determined by the Special Committee and TDS after arm's length negotiations. PaineWebber was not requested to, and did not, solicit third party indications of interest with respect to a business combination with the Company. The Special Committee did not place any limitations upon PaineWebber with respect to the procedures followed or factors considered in rendering the PaineWebber Opinion. It should be understood that, although subsequent developments may affect the conclusions reached in the PaineWebber Opinion, PaineWebber does not have any obligation to update, revise or reaffirm its opinion. In arriving at its opinion, PaineWebber, among other things: (i) reviewed, among other public information, the Company's Annual Reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 1996 and the Company's Form 10-Q and the related unaudited financial 9 information for the nine months ended September 30, 1997; (ii) reviewed the Company's unaudited financial information for the fiscal year ended December 31, 1997; (iii) reviewed certain information including a preliminary 1998 financial budget, relating to the business, earnings, cash flow, assets and prospects of the Company, prepared on the basis that the TSR Transaction would be completed in April 1998, furnished to PaineWebber by the Company; (iv) conducted discussions with members of senior management of the Company concerning its businesses and prospects; (v) reviewed the historical market prices and trading activity for the Common Shares and compared them with that of certain publicly traded companies which it deemed to be relevant; (vi) compared the results of operations of the Company with that of certain companies which it deemed to be relevant; (vii) compared the proposed financial terms of the transactions contemplated by the Merger Agreement with the financial terms of certain other mergers and acquisitions which it deemed to be relevant; (viii) reviewed the draft of the Merger Agreement dated February 10, 1998; and (ix) reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as it deemed necessary including its assessment of regulatory, economic, market and monetary conditions. In preparing the PaineWebber Opinion, PaineWebber relied on the accuracy and completeness of all information that was publicly available, supplied or otherwise communicated to PaineWebber by or on behalf of the Company and PaineWebber has not assumed any responsibility to independently verify such information. PaineWebber assumed, with the consent of the Special Committee, that the preliminary 1998 financial budget examined by PaineWebber was reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company as to the future performance of the Company. PaineWebber also relied upon assurances of the management of the Company that they are unaware of any facts that would make the information, or the preliminary 1998 financial budget provided to PaineWebber prepared on the basis that the TSR Transaction would be completed in April 1998, suspended, incomplete or misleading. PaineWebber also assumed, with the consent of the Special Committee, that any material liabilities (contingent or otherwise, known or unknown) are as set forth in the financial statements of the Company. PaineWebber was not engaged to make and did not make an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company nor was PaineWebber furnished with any such evaluations or appraisals. The PaineWebber Opinion was based upon regulatory, economic, monetary, and market conditions existing on the date thereof. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant quantitative methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. Accordingly, PaineWebber believes that its analysis must be considered as a whole and that considering any portion of such analysis and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the PaineWebber Opinion. In its analyses, PaineWebber made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. In addition, analyses relating to the value of the business do not purport to be appraisals or to reflect the prices at which the business may actually be sold. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty and neither the Company nor PaineWebber assumes responsibility for the accuracy of such analyses and estimates. The following paragraphs summarize the significant analyses performed by PaineWebber in arriving at the PaineWebber Opinion. SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available information, PaineWebber compared selected historical and projected financial, operating and stock market performance data of the Company to the corresponding data of the following companies: Arch Communications Group, Inc.; 10 Metrocall Inc.; Mobile Telecommunications Technologies Corp.; PageMart Wireless, Inc.; and Paging Network, Inc.; comprising the Paging Company Index (collectively, the "Paging Comparable Companies"). With respect to the Company and the Paging Comparable Companies, PaineWebber compared multiples of total enterprise value ("TEV")(market value of equity, based on stock market prices as of February 6, 1998, plus total debt less cash and cash equivalents as set forth in their most recent Form 10-Q) to latest twelve months ("LTM") net revenue. LTM earnings before interest, taxes, depreciation and amortization ("EBITDA"), 1998 estimated EBITDA and units in service ("UIS"). The relevant Paging Comparable Companies' TEV multiples of LTM net revenue, LTM EBITDA, 1998 EBITDA and UIS were 2.25x to 3.36x, 8.4x to 11.2x, 7.0x to 9.6x, and $229 to $281, respectively. PaineWebber applied the relevant Paging Comparable Companies' multiples to the Company's LTM net revenue. LTM EBITDA, 1998 EBITDA and UIS and derived an implied range of fully diluted equity values for the Company of $0.00 to $2.50 per Common Share. SELECTED COMPARABLE TRANSACTION ANALYSIS. PaineWebber reviewed publicly available financial information for selected transactions involving acquisitions of paging companies. The selected transactions PaineWebber analyzed included (acquiror/target): Metrocall/ProNet; Metrocall/Page America Group; Metrocall/A+ Network; and Arch Communications Group/USA Mobile Communications (collectively, the "Comparable Transactions"). PaineWebber noted that there are no directly comparable transactions to the Offer and the Merger. PaineWebber reviewed the consideration paid in the Comparable Transactions and compared multiples of TEV to the target's net revenue and EBITDA, each for the LTM prior to the announcement of the transaction, and to the UIS, as set forth in the latest publicly reported financial statements prior to the announcement of the transaction. With respect to stock-for-stock transactions, stock prices for acquirors on the day prior to the announcement of the transaction were used to calculate consideration paid. PaineWebber calculated the relevant Comparable Transactions' multiples of net revenue, EBITDA and UIS to be 2.08x, 8.4x and $167, respectively. PaineWebber applied the relevant Comparable Transactions multiples to the Company's LTM net revenue, LTM EBITDA, and latest quarter UIS and derived an implied range of fully diluted equity values for the Company of $0.00 to $0.10 per Common Share. NONCONTROL POSITION BUYOUT ANALYSIS. PaineWebber analyzed premiums paid to noncontrol shareholders in publicly-disclosed business combinations in all industries announced and completed from January 1, 1994 through February 6, 1998. This analysis indicated mean premiums to the target's closing stock price one day, one week and four weeks prior to the announcement of the transaction of 20.3%, 25.6% and 29.1%, respectively. This analysis also indicated median premiums to the target's closing stock price one day, one week and four weeks prior to the announcement of the transaction of 18.4%, 19.4% and 24.5%, respectively. Based on the closing stock prices of the Common Shares one day, one week and four weeks prior to the December 23, 1997 announcement by TDS to acquire the Common Shares for $2.25 per share, applying the relevant premiums to the applicable closing stock prices yielded fully diluted equity values of $2.24 to $2.56 per Common Share. The Special Committee selected PaineWebber to be its financial advisor in connection with the Offer and the Merger because PaineWebber is a prominent investment banking and financial advisory firm with experience in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and valuations for corporate purposes. Pursuant to an engagement letter between the Company and PaineWebber dated January 8, 1998, PaineWebber has earned a fee of $450,000 for the rendering of the PaineWebber Opinion. In addition, PaineWebber will be reimbursed for certain of its related expenses. The Special Committee also agreed, under separate agreement, to indemnify PaineWebber, its affiliates and each of its directors, officers, agents and employees and each person, if any, controlling PaineWebber or any of its affiliates against certain liabilities, including liabilities under federal securities laws. 11 In the past, PaineWebber and its affiliates have provided investment banking services to TDS unrelated to the TSR Transaction or the Offer and the Merger and have received fees for the rendering of these services. During 1997 and in 1998, PaineWebber acted as a co-manager of Trust Originated Preferred Securities offerings by TDS for which it received customary underwriter's compensation. PaineWebber has not provided investment banking services to the Company at any time in the past. PaineWebber may provide financial advisory services to, and may act as underwriter or placement agent for, TDS or the Company in the future. In the ordinary course of business, PaineWebber and its affiliates may trade the securities or TDS or the Company for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in such securities. POSITION OF TDS AND PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER TDS and Purchaser believe that the consideration to be received by the Company's Public Shareholders pursuant to the Offer and the Merger is fair to the Company's Public Shareholders. TDS and Purchaser base their belief on the following facts and conclusions: (i) the Company's Board and the Special Committee concluded that the Offer and the Merger are fair to and in the best interests of the Company's Public Shareholders; (ii) notwithstanding the fact that PaineWebber's opinion was addressed to the Special Committee, and that neither TDS or Purchaser is entitled to rely on such opinion, the Special Committee received an opinion from PaineWebber that, as of the date of such opinion and based on and subject to certain matters stated in such opinion, the consideration to be received in the Offer and the Merger is fair to the Company's Public Shareholders from a financial point of view; (iii) the poor historical performance of the Company, its current high turnover rate of employees and changes in management, its inability to restructure its operations in a manner which significantly improved its financial prospects, and its inability to develop a viable plan for independent operations indicate that the Company is unlikely to achieve success on a stand alone basis; (iv) the Company's inability to continue as an independent entity is further indicated by (a) the current rate at which the Company is utilizing funds, (b) the uncertainty regarding whether TDS will provide advances beyond its current commitment under the Revolving Credit Agreement and its obligations under the Asset Contribution Agreement, and (c) the uncertainty that the Company could successfully raise additional sources of capital to repay existing indebtedness or provide necessary additional capital without TDS guarantees of future borrowings and the lack of an achievable strategic plan; (v) the sale of assets by the Company on a piece-meal or liquidation basis would not, in the judgment of the Board of Directors of TDS (the "TDS Board"), upon advice of its management and its financial advisor, recover values as great as that available from combination with a strategic partner; (vi) after diligent efforts of TDS with the assistance of TDS's financial advisor to solicit indications of interest in a strategic transaction involving the Company, the TSR Paging proposal was in the judgment of TDS management, after consultation with TDS's financial and legal advisors, superior to the only two other indications of interest received and not withdrawn; (vii) upon the basis of the foregoing, the TDS Board believes that the value of the Company does not exceed its outstanding debt to TDS under the Revolving Credit Agreement and the value to be obtained by TDS from its continuing participation in the paging industry through the 30% interest in TSR Wireless does not exceed the outstanding debt to TDS under the Revolving Credit Agreement; 12 (viii) the consideration stated in the Offer and Merger for purchase of the Common Shares not already owned by TDS and its affiliates represents a premium of 17.6% over the closing price of the Common Shares on December 22, 1997, the day prior to announcement of the TDS Proposal, and a premium of approximately 29% over the closing price four weeks prior to the announcement of the TDS Proposal; (ix) although the current prices for the Common Shares reflect a decline in value of the Company over historical market prices during 1995 and 1996, such decline is attributable to the continuing deterioration in the Company's financial results and business prospects as well as concerns about the long term future of the paging industry in general; and (x) the other factors enumerated by the Special Committee as supporting their recommendation of the Offer and the Merger. Neither TDS nor Purchaser found it practicable to assign, nor did either of them assign, relative weights to the individual factors considered in reaching its conclusion as to fairness. In light of the nature of the Company's business and the TSR Transaction TDS and Purchaser did not consider net book value or liquidation value to be relevant indicators of the value of the consideration to be received by the Public Shareholders. PRESENTATION OF FINANCIAL ADVISOR TO TDS Credit Suisse First Boston is acting as Dealer Manager in connection with the Offer and as financial advisor to TDS in connection with the Merger and the TSR Transaction. CSFB was selected by TDS based on CSFB's experience, expertise and familiarity with TDS and its business. CSFB is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In connection with CSFB's engagement, TDS requested that CSFB assist TDS in evaluating alternatives in maximizing TDS's investment in the Company, including soliciting third party indications of interest in a possible strategic transaction involving the Company and evaluating the financial terms of any proposals received by TDS in connection with any such transaction. On February 10, 1998, CSFB reviewed with the Board of Directors of TDS the solicitation process undertaken on behalf of TDS in respect of the Company and the proposals received by TDS, including the TSR Transaction. CSFB was not requested to, and did not, render an opinion regarding the fairness of the consideration to be paid by TDS in the Offer and the Merger or to be received by TDS in the TSR Transaction. In preparing its presentation, CSFB reviewed certain publicly available business and financial information relating to the Company and certain available business and financial information relating to TSR Wireless. CSFB also reviewed certain other information provided by TDS, the Company and TSR Paging, including financial forecasts relating to TSR Wireless provided by TSR Paging, and met with the managements of TDS, the Company and TSR Paging to discuss the operations and prospects of the Company and TSR Wireless. CSFB also considered certain financial and stock market data and such other information, financial studies, analyses and investigations and financial, economic and market criteria which CSFB deemed relevant. In connection with its review, CSFB did not assume any responsibility for independent verification of any of the information provided to or otherwise reviewed by CSFB and relied on such information being complete and accurate in all material respects. With respect to its review of the TSR Transaction, CSFB assumed that the financial forecasts relating to TSR Wireless provided by TSR Paging were reasonably prepared on bases reflecting the best available estimates and judgments of the management of TSR Paging as to the future financial performance of TSR Wireless. CSFB was not requested to make, and did not 13 make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or TSR Wireless, nor was CSFB furnished with any such evaluations or appraisals. CSFB's presentation was necessarily based upon information available to CSFB, and financial, economic, market and other conditions as they existed and could be evaluated, on the date of its presentation. No other limitations were imposed by TDS on CSFB with respect to the investigations made or procedures followed by CSFB in connection with its presentation. In preparing its presentation to the Board of Directors of TDS, CSFB provided the TDS Board of Directors with a written presentation, a copy of which has been filed as an exhibit to the Schedule 13E-3 and may be inspected, copied and obtained in the manner specified in "THE TENDER OFFER-- Section 7--Certain Information Concerning the Company". The summary of CSFB's presentation set forth below does not purport to be a complete description of CSFB's presentation. In preparing its presentation, CSFB made qualitative judgments as to the significance and relevance of the various factors considered by it and made numerous assumptions with respect to TDS, the Company, TSR Wireless, industry performance, regulatory, general business, economic, market and financial conditions and other matters, many of which are beyond the control of TDS, the Company and TSR Paging. The estimates contained or utilized in the presentation set forth below are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such presentation. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. CSFB's presentation is only one of many factors considered by the TDS Board of Directors with respect to TDS's investment in the Company and should not be viewed as determinative of the views of the TDS Board of Directors or management of TDS with respect to the TSR Transaction, the Offer or the Merger or the consideration payable in such transactions. The following is a summary of the material aspects of CSFB's presentation to the TDS Board of Directors dated February 10, 1998: COMPANY STAND-ALONE VALUE. CSFB discussed with the TDS Board of Directors the potential stand-alone value of the Company. Based upon, among other things, difficult conditions in the paging industry generally and the Company's weak financial performance, failed restructuring efforts, decline in the growth of its subscribers, cash flow requirements and lack of a business plan, CSFB believed that the Company's stand-alone value would likely be defined by the value of its assets on a liquidation basis. CSFB further believed that such value would likely be below the value that a potential acquiror, which would be acquiring the Company not only for its assets but also for its future potential under such acquiror's management team, philosophy and business capabilities, would place on the Company. SOLICITATION PROCESS. CSFB reviewed with the TDS Board of Directors the efforts undertaken on behalf of TDS to solicit indications of interest in a possible strategic transaction involving the Company. Initially, 50 parties were contacted regarding a possible transaction. Ten potential parties subsequently requested and were furnished with a confidential memorandum regarding the Company. In the spring of 1997, two bidders, TSR Paging and one other strategic bidder, submitted written indications of interest. Based on a discounted cash flow analysis of TSR Wireless performed by CSFB utilizing financial forecasts provided by TSR Paging, discount rates of 14% to 15% and terminal value EBITDA multiples of 5.0x to 6.0x, TSR's final proposal was estimated to yield, on a present value basis, approximately $143 million to $180 million for TDS's 30% equity interest in TSR Wireless. The second bidder's final proposal had an estimated present value of approximately $105 million to $110 million. In early December 1997, a financial buyer also submitted a proposal, subject to due diligence and financing, which consisted of $95 million in cash and a contingent note of $25 million. None of the proposals described above, including the TSR Transaction, contemplated assumption of the indebtedness of the Company to TDS and its affiliates of approximately $185 million at January 31, 1998. 14 MISCELLANEOUS. In the ordinary course of business, CSFB and its affiliates may actively trade the debt and equity securities of TDS, its affiliates and the Company for their own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. See "THE TENDER OFFER--Fees and Expenses" for a description of TDS's fee arrangements with CSFB in connection with the Offer, the Merger and the TSR Transaction. FINANCIAL PROJECTIONS Management of the Company prepared but withdrew as unachievable certain projections for independent operation for years beginning in 1997. Accordingly, such projections were not considered by the Board of Directors of the Company or of TDS or by the Special Committee in reaching their views about the fairness of the Offer and Merger to the Public Shareholders. In addition, the financial advisor to the Special Committee, PaineWebber, requested and received a preliminary version of a 1998 budget for the Company prepared in late January 1998 at the request of TDS in connection with the Company's request to TDS to increase the Revolving Credit Agreement limit to $185 million. This budget, prepared on the assumption that the TSR Transaction would be completed in April 1998, assumed revenues from services of $80.2 million and from equipment sales of $13.4 million. However, the Board of Directors of TDS was advised of and examined certain projections prepared by TSR Paging management for TSR Wireless after completion of the combination of paging businesses contemplated by the Asset Contribution Agreement, based upon individual projections for the Company and TSR Wireless also prepared by TSR Paging management, which were reviewed by CSFB in evaluating the TDS Transaction. The Special Committee and its financial advisor, PaineWebber, did not consider such projections as relevant to their determination. Such projections included the following:
1997 1998 1999 2000 2001 --------- --------- --------- --------- --------- COMPANY: Net Revenues................................................... $ 84.3 77.1 78.1 89.9 100.6 EBITDA(1)...................................................... (5.7) 0.7 25.3 29.7 35.2 TSR PAGING: Net Revenues................................................... $ 65.1 90.5 123.1 163.6 210.4 EBITDA......................................................... 21.3 32.4 43.4 58.3 80.6 TSR WIRELESS: Net Revenues................................................... $ 149.4 167.6 201.2 253.4 311.0 EBITDA......................................................... 15.6 33.1 68.7 88.0 115.9
- ------------------------ (1) EBITDA represents earnings before interest, taxes, depreciation and amortization. THE FOREGOING PROJECTIONS WERE PREPARED BY TSR PAGING AND BASED UPON ASSUMPTIONS CONCERNING TSR WIRELESS REVENUES AND BUSINESS PROSPECTS, INCLUDING CERTAIN ASSUMPTIONS WITH REGARD TO THE ABILITY OF TSR WIRELESS TO INTEGRATE SUCCESSFULLY THE COMPANY'S OPERATIONS WITH THOSE OF TSR PAGING AND THE FUTURE SUCCESS OF THE COMBINED BUSINESS. THE PROJECTIONS WERE ALSO BASED UPON OTHER REVENUE AND OPERATING ASSUMPTIONS WHICH MAY DIFFER MATERIALLY FROM ACTUAL RESULTS. PROJECTED INFORMATION OF THIS TYPE IS BASED UPON ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF TSR WIRELESS. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN ADDITION, THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES 15 ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO TDS BY TSR PAGING AND CONSIDERED IN CONNECTION WITH ITS EVALUATION OF THE TSR TRANSACTION. NONE OF TDS, PURCHASER, THE COMPANY, TSR PAGING OR TSR WIRELESS OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS OR ANY DUTY TO UPDATE SUCH PROJECTIONS IN THE FUTURE BASED UPON ACTUAL RESULTS OR OTHER EVENTS. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF TDS AND PURCHASER FOR THE OFFER AND THE MERGER The purpose of the Offer and the Merger is for TDS indirectly to acquire the entire equity interest in, the Company in accordance with the obligations of TDS under the Asset Contribution Agreement. See "SPECIAL FACTORS--BACKGROUND OF THE OFFER AND THE MERGER--TSR Negotiations." The purpose of the Merger is for TDS indirectly to acquire all Common Shares not purchased pursuant to the Offer. Upon consummation of the Merger, the Company will become a direct wholly owned subsidiary of TDS. The acquisition of the entire equity interest in the Company has been structured as a cash tender offer followed by a cash merger in order to provide a prompt and orderly transfer of ownership of the Company from the Public Shareholders to TDS and to provide the Public Shareholders with cash for all of their Common Shares. Under the Company's Restated Certificate of Incorporation and Delaware Law, the approval of the Board and the affirmative vote of the holders of Common Shares and Series A Common Shares entitled to cast at least a majority of the total votes to be cast by the holders of Common Shares and Series A Common Shares are required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Board of Directors of the Company has approved and adopted the Merger Agreement and the transactions contemplated thereby, and, unless the Merger is consummated pursuant to the short-form merger provisions under Delaware Law described below, the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of Common Shares and Series A Common Shares entitled to cast at least a majority of the total votes to be cast by the holders of Common Shares and Series A Common Shares. Purchaser already has sufficient voting power to cause the approval and adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other shareholder of the Company. Pursuant to the Asset Contribution Agreement, TDS is obligated to use its best efforts to cause Purchaser to complete the Merger, subject to the approval of the Merger by the Special Committee, and TDS is not required to complete a Merger which does not have the recommendation of the Special Committee. In the Merger Agreement, the Company has agreed to take all action necessary to convene a meeting of its shareholders as soon as practicable after the consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby, if such action is required by Delaware Law. TDS and Purchaser have agreed that all Series A Common Shares and Common Shares owned by them and their subsidiaries will be voted in favor of the Merger Agreement and the transactions contemplated thereby. Under Delaware Law, since Purchaser already owns 100% of the Series A Common Shares outstanding, if Purchaser acquires, pursuant to the Offer, conversion of its Series A Common Shares or otherwise, the number of Common Shares that, when added to the Common Shares owned by TDS, Purchaser or any of their affiliates, equals at least 90% of the Common Shares then outstanding, Purchaser will be able to approve the Merger without a vote of the Company's shareholders. In such event, TDS, Purchaser and the Company have agreed in the Merger Agreement to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of 16 the Company's shareholders. If after the consummation of the Offer Purchaser is not the owner of at least 90% of the outstanding Common Shares and can become the owner of at least 90% of the outstanding Common Shares by converting its Series A Common Shares into Common Shares, Purchaser currently intends to convert its Series A Common Shares into Common Shares to become the owner of at least 90% of the outstanding Common Shares. Purchaser's obligation to consummate the Offer is conditioned on there being validly tendered and not withdrawn at least the number of Common Shares that, when added to the 4,000,000 Common Shares owned by Purchaser, shall constitute 90% of the Common Shares then outstanding, so as to enable Purchaser to consummate the Merger without a vote of the Company's shareholders. If, however, fewer than such number of Common Shares are validly tendered and not withdrawn, and all other conditions set forth in Annex II of the Merger Agreement are satisfied, Purchaser may extend the Offer for a period not to exceed 20 business days after the later of (i) the initial expiration date of the Offer and (ii) the date on which all of the other conditions set forth in Annex II shall be satisfied, after which time Purchaser shall waive the Minimum Condition and acquire such fewer number of Common Shares. In such case, if the conversion of all of Purchaser's Series A Common Shares would not result in Purchaser owning at least 90% of the Common Shares outstanding, a vote of the Company's shareholders will be required under Delaware Law, and a significantly longer period of time will be required to effect the Merger. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE OFFER Pursuant to the Merger Agreement, upon completion of the Offer, TDS and Purchaser intend to effect the Merger in accordance with the terms of the Merger Agreement. See "SPECIAL FACTORS-- The Merger Agreement". Pursuant to the Asset Contribution Agreement, TDS is obligated to use its best efforts to cause Purchaser to complete the Merger, subject to the approval of the Merger by the Special Committee and TDS is not required to complete a Merger which does not have the recommendation of the Special Committee. Upon consummation of the Merger, the Surviving Corporation will become a privately held corporation and TDS and TSR Wireless, in accordance with the terms and conditions of the Asset Contribution Agreement, will combine their respective paging businesses. TDS will cause the Surviving Corporation to contribute substantially all of the assets and certain, limited, liabilities of the Company, and TSR Paging would contribute all of its assets and liabilities into TSR Wireless. TSR Wireless would not assume approximately $185 million of debt owed by the Company to TDS pursuant to the Revolving Credit Agreement. The Surviving Corporation would have a 30% interest and TSR Paging would have a 70% interest in TSR Wireless, in each case subject to adjustment pursuant to the terms of the Asset Contribution Agreement. Accordingly, Public Shareholders will not have the opportunity to participate in the earnings and growth of TSR Wireless and will not have any right to vote on corporate matters. Similarly, Public Shareholders will not face the risk of losses generated by TSR Wireless's operations or decline in the value of TSR Wireless. Following the consummation of the Merger, the Common Shares will no longer be quoted on the American Stock Exchange (the "Amex") and the registration of the Common Shares under the Securities Exchange Act of 1934 (the "Exchange Act") will be terminated. Accordingly, following the Merger there will be no publicly traded equity securities of the Company outstanding and the Company will no longer be required to file periodic reports with the Commission. See "THE TENDER OFFER--11. Effect of the Offer on the Market for Common Shares; American Stock Exchange, Inc. and Exchange Act Registration". For a discussion of certain federal income tax consequences of the Offer and the Merger, see "THE TENDER OFFER--5. Certain Federal Income Tax Consequences." 17 RIGHTS OF SHAREHOLDERS IN THE MERGER No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, shareholders who have not tendered their Common Shares will have certain rights under Delaware Law to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Common Shares. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Common Shares, as of the day prior to the date on which the shareholders' vote was taken approving the Merger or similar business combination (excluding any element of value arising from the accomplishment or expectation of the Merger), required to be paid in cash to such dissenting holders for their Common Shares. In addition, such dissenting shareholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Common Shares. In determining the fair value of the Common Shares, the court is required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Common Shares, including, among other things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be the same as or more or less than the purchase price per Common Share in the Offer or the Merger Consideration. In addition, several decisions by Delaware courts have held that, in certain circumstances, a controlling shareholder of a company involved in a merger has a fiduciary duty to other shareholders which requires that the merger be fair to such other shareholders. In determining whether a merger is fair to minority shareholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the shareholders and whether there was fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER AND RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available to minority shareholders in a cash-out merger is the right to appraisal described above. However, a damages remedy or injunctive relief may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. See Schedule IV attached hereto for a description of appraisal rights under Delaware Law, as well as a reproduction of the text of Section 262 of Delaware Law. THE MERGER AGREEMENT The following is a summary of the Merger Agreement, a copy of which is filed as an Exhibit to the Schedule 14D-1 filed by TDS and Purchaser with the Commission in connection with the Offer. Such summary is qualified in its entirety by reference to the Merger Agreement. THE OFFER. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable after the date thereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to commence the Offer and accept for payment, and pay for any Common Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition, the Asset Contribution Agreement Condition and certain other conditions that are described in "THE TENDER OFFER--12. Certain Conditions of the Offer" hereof. Purchaser and TDS have agreed that without the consent of the Company no change in the Offer may be made which decreases the price per Common Share or changes the form of consideration payable in the Offer or which reduces the maximum number of Common Shares to be purchased in the Offer or which modifies or adds to the conditions to the Offer in addition to those set forth in "THE TENDER OFFER--12. Certain Conditions of the Offer" or which extends the Offer except as expressly permitted by the Merger Agreement. Pursuant to the Merger Agreement, in the event all conditions set forth in the Merger Agreement shall have been satisfied other than the Minimum Condition, Purchaser may extend the Offer for a period or periods aggregating not more than 20 business days after the later of (i) the initial Expiration Date and (ii) the date on which all other conditions set forth 18 in the Merger Agreement shall have been satisfied, after which time (or earlier if TDS does not extend the Offer) Purchaser shall waive the Minimum Condition and consummate the Offer. THE MERGER. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, and in accordance with Delaware Law, at the Effective Time, Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation of the Merger and will become a direct wholly owned subsidiary of TDS. Upon consummation of the Merger, each issued and then outstanding Common Share (other than any Common Shares held in the treasury of the Company or owned by Purchaser, TDS or any direct or indirect wholly owned subsidiary of TDS or the Company, and other than Common Shares held by shareholders who shall not have voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such Common Shares in accordance with Section 262 of Delaware Law) shall be canceled and shall be converted automatically into the right to receive the Merger Consideration. Pursuant to the Merger Agreement, each share of common stock, par value $1.00 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $1.00 per share, of the Surviving Corporation. The Merger Agreement provides that the directors of Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and that the officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. The Merger Agreement provides that, at the Effective Time, the Certificate of Incorporation of Purchaser will be the Certificate of Incorporation of the Surviving Corporation. The Merger Agreement also provides that the By-laws of Purchaser will be the By-laws of the Surviving Corporation. The Surviving Corporation or the designated paying agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement to any holder of Common Shares such amounts that the Surviving Corporation or the paying agent is required to deduct and withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended, the rules and regulations promulgated thereunder or any provision of state, local or foreign tax law. AGREEMENTS OF TDS, PURCHASER AND THE COMPANY. Pursuant to the Merger Agreement, the Company shall, if required by applicable law in order to consummate the Merger, at TDS's request, duly call, give notice of, convene and hold a special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby (the "Shareholders' Meeting"). At the Shareholders' Meeting, TDS and Purchaser shall cause all Series A Common Shares and Common Shares then owned by them to be voted in favor of the approval and adoption of the Merger Agreement and the Merger. Purchaser currently has sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. In the event that Purchaser acquires such number of Common Shares that, when taken together with the Common Shares previously owned by Purchaser, constitute at least 90% of the then outstanding Common Shares, the parties have agreed to take all necessary and appropriate action to cause the Merger to become effective, in accordance with Section 253 of Delaware Law, as soon as practicable after the consummation of the Offer, without a meeting of the shareholders of the Company. The Merger Agreement provides that the Company shall, if required by applicable law, as soon as practicable following consummation of the Offer, file a preliminary proxy statement with the Commission under the Exchange Act (the "Proxy Statement"), and will use its reasonable best efforts to respond to any comments of the Commission or its staff and to cause the Proxy Statement to be mailed to the Company's shareholders. The Company shall notify TDS promptly of the receipt of any comments of the Commission or its staff and of any request by the Commission or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply TDS with copies of all correspondence between 19 the Company or any of its representatives, on the one hand, and the Commission and its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the approval of this Agreement by the Company's shareholders there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will promptly notify TDS thereof and prepare and mail to its shareholders such an amendment or supplement. The Company will not mail any Proxy Statement or any amendment or supplement thereto, to which TDS reasonably objects. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, between the date of the Merger Agreement and the Effective Time, unless TDS shall otherwise agree in writing, the businesses of the Company and its subsidiaries shall be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course and substantially in accordance with past practice, except with respect to certain licenses issued by the Federal Communications Commission ("FCC") and applications for licenses issued by the FCC and certain reductions in planned license build-outs. The Company and TDS are each obligated under the Merger Agreement to give each other prompt notice of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate; (ii) any failure of the Company, TDS or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it thereunder and (iii) any change or event which has or is reasonably likely to have a material adverse effect on the Company or TDS and its subsidiaries, as the case may be. The Merger Agreement provides that for six years from and after the Effective Time, TDS agrees, to the extent permitted by law, to cause the Surviving Corporation to indemnify and hold harmless all current officers and directors of the Company and of its subsidiaries to the same extent such persons are currently indemnified by the Company pursuant to the Company's Restated Certificate of Incorporation and By-Laws for acts or omissions occurring at or prior to the Effective Time. TDS will cause to be maintained for a period of not less than six years from the Effective Time the current directors' and officers' insurance and indemnification policy of TDS to the extent that it provides coverage for events occurring prior to the Effective Time for all directors and officers of the Company as of the date of the Merger Agreement. Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, each of the parties thereto shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, in the most expeditious manner practicable, transactions contemplated by the Merger Agreement, including (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from governmental authorities and the making of all necessary registrations and filings (including filings with governmental authorities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by any governmental authority, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any claims, investigations, actions, lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated thereby, including seeking to have any stay or temporary restraining order entered by any court or other governmental authority vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by the Merger Agreement. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of the Merger Agreement, the proper officers and directors of each party to the Merger Agreement and the Surviving Corporation shall use their reasonable best efforts to take all such action. STOCK OPTIONS. Subject to any restrictions under Section 16(b) of the Exchange Act, the Company has agreed to use its reasonable best efforts to cause each holder of an outstanding option with an exercise price less than the Merger Consideration to purchase Common Shares granted under the 1994 Long Term Incentive Plan to agree in writing prior to the Effective Time that (i) such holder shall be entitled to receive from the Company on the Closing Date, in lieu of such option, an amount in cash in respect of 20 each Common Share subject to such option equal to the excess, if any, of the Merger Consideration over the per share exercise price of such option (it being understood that if there is no such excess with respect to any such option, such holder will not be entitled to receive any cash, securities or other consideration with respect thereto) and (ii) such option shall be canceled immediately prior to the Effective Time. The Company has terminated the 1994 Long Term Incentive Plan effective as of February 10, 1998 and no new options will be granted after such date. NO SOLICITATION. From the date of the Merger Agreement through the Effective Time or the earlier termination of the Merger Agreement, the Company has agreed not to, and shall use its best efforts to cause its representatives not to, directly or indirectly, enter into, solicit, initiate or continue any discussions or negotiations with, or encourage or respond to any inquires or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any other way with, any person, other than TDS or TSR Paging and their respective representatives, concerning any sale of all or any substantial portion of the assets or business of the Company, or of any shares of capital stock of the Company or its subsidiaries, or any merger, consolidation, liquidation, dissolution or exclusive licensing arrangement or similar transaction involving the Company or its subsidiaries (each such transaction being referred to herein as a "Proposed API Acquisition Transaction"); provided, however, that prior to the acceptance for payment of Common Shares pursuant to the Offer, to the extent required by the fiduciary obligations of the Board of Directors of the Company, as determined in good faith by the Board based on the written advice of outside counsel (a copy of which written advice shall be promptly furnished to TDS), the Company may, in response to unsolicited requests therefor, participate in discussions or negotiations with, or furnish information pursuant to an appropriate confidentiality agreement approved by the Board to, any person. TDS agreed to a similar non-solicitation covenant in the Asset Contribution Agreement and also agreed with in the Asset Contribution Agreement to impose a similar covenant on the Company in the Merger Agreement, except that the agreement does not contain the proviso stated above permitting TDS to respond to or participate in discussions or negotiations with, or furnish information to, any other person based upon the advice of outside counsel that the fiduciary obligations of the TDS board of directors require that it do so. The Company has agreed that neither the Board of Directors of the Company nor any committee thereof (including the Special Committee) shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to TDS or Purchaser, the approval or recommendation by the Board or any such committee of the Offer, this Agreement or the Merger or (ii) approve or recommend, or propose to approve or recommend, any Proposed API Acquisition Transaction. Notwithstanding the foregoing, the Board of Directors of the Company or any committee thereof, to the extent required by the fiduciary obligations thereof, as determined in good faith by the Board or such committee, as the case may be, based on the written advice of outside counsel (a copy of which written advice shall be promptly furnished to TDS), may approve or recommend (and, in connection therewith, withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger) a superior proposal and the Company may take such actions as are contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated under the Exchange Act. For purposes of this Agreement, "superior proposal" means a bona fide written proposal made by a third party to acquire the Company pursuant to a tender or exchange offer, a merger, a statutory share exchange, a sale of all or substantially all its assets or otherwise on terms which the Special Committee determines in its good faith reasonable judgment (based on the advice of independent financial advisors) to be more favorable to the Company and its shareholders than the Offer and the Merger and for which financing, to the extent required, is then fully committed or which, in the reasonable good faith judgment of the Special Committee (based on the advice of independent financial advisors), is reasonably capable of being financed by such third party. 21 REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties of the parties thereto, including representations by the Company, TDS and Purchaser as to the enforceability of the Merger Agreement and by the Company as to the absence of certain changes or events concerning the Company's business, compliance with law, corporate status and capitalization and the accuracy of financial statements and filings with the Commission. The representations and warranties given by the Company to TDS in the Merger Agreement are substantially the same as those given by TDS to TSR Paging and TSR Wireless in the Asset Contribution Agreement. CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (i) to the extent required by Delaware Law and the Company's Restated Certificate of Incorporation, the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the affirmative vote or consent of the holders of the Common Shares; (ii) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority which prohibits the consummation of the transactions contemplated by the Merger Agreement on the terms thereof; and (iii) Purchaser shall have purchased all Common Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to the obligations of TDS or Purchaser if, in breach of the Merger Agreement or the terms of the Offer, Purchaser fails to accept for payment the Common Shares tendered pursuant to the Offer. In addition, TDS's obligation to effect the Merger is subject to the Asset Contribution Agreement being in full force and effect and not terminated in accordance with the terms thereof and all of the conditions to closing set forth therein shall have been satisfied or waived. TERMINATION; FEES AND EXPENSES. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of any matters presented in connection with the Merger by the shareholders of the Company: (i) by mutual written consent duly authorized by the Boards of Directors of TDS and the Company, if such termination is also approved by the Special Committee; or (ii) by either TDS or the Company if (A) the Effective Time shall not have occurred on or before September 30, 1998; PROVIDED, HOWEVER, that such right to terminate shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (B) there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (iii) by TDS if due to an occurrence or circumstance that would result in a failure to satisfy any condition to the Offer, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Common Shares for payment thereunder or (C) failed to pay for Common Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Common Shares shall have been caused by or resulted from the failure of TDS or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by TDS or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement; or (iv) by the Company, upon approval of the Board and the Special Committee, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions to the Offer, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Common Shares for payment thereunder or (C) failed to pay for Common Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Common Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the 22 Company of any material representation or warranty of it contained in the Merger Agreement; or (v) by the Company, upon approval of the Board and the Special Committee, (A) if any representation or warranty of TDS and Purchaser in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement, or (B) TDS or Purchaser shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of TDS or Purchaser to be performed or complied with by it under the Merger Agreement; or (vi) by TDS, upon approval of the Board of Directors of TDS, if any representation or warranty of the Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement; or the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; or (vii) by TDS if the Board of Directors of the Company or any committee thereof (including the Special Committee) (A) shall withdraw, modify or change in any adverse manner to TDS or Purchaser its approval of the Merger Agreement, the Offer or the Merger, (B) shall approve or recommend any Proposed API Acquisition Transaction in each case, other than by TDS or an affiliate of TDS, or (C) shall resolve to take any of the actions specified in clauses (A) or (B) above. In the event of the termination of the Merger Agreement, the Merger Agreement shall forthwith become void. All fees and expenses incurred in connection with the Offer, the Merger, the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such fees and expenses, whether or not the Offer or Merger is consummated. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER In considering the recommendation of the Board and the Special Committee with respect to the Offer and the Merger and the fairness of the consideration to be received in the Offer and the Merger, shareholders should be aware that certain officers and directors of the Company have interests in the Offer and the Merger which are described below and which may present them with certain potential conflicts of interest. Shareholders also should be aware that TDS and Purchaser have certain interests that present actual or potential conflicts of interest in connection with the Offer and the Merger. As a result of Purchaser's current ownership of 12,500,000 Series A Common Shares and 4,000,000 Common Shares, constituting 100% of the currently outstanding Series A Common Shares and approximately 52.3% of the outstanding Common Shares for a combined total of approximately 81.9% of the Company's outstanding classes of capital stock and approximately 98.1% of their combined voting power and its nominees constituting a majority of the Company's directors, Purchaser may be deemed to control the Company. The Board was aware of these actual and potential conflicts of interest and considered them along with the other matters described under "SPECIAL FACTORS-- Recommendation of the Special Committee and the Company's Board; Fairness of the Offer and the Merger". TDS and Purchaser have been advised by the executive officers, directors and affiliates of the Company that such persons intend to tender Common Shares owned by them pursuant to the Offer. EXECUTIVE OFFICER COMPENSATION AND SEVERANCE ARRANGEMENTS. The Company has entered into the executive officer compensation and severance arrangements set forth below: TERRENCE T. SULLIVAN. Pursuant to a compensation and severance arrangement approved by the Chairman of the Company, Mr. Terrence T. Sullivan is entitled to, among other things, (i) a salary of $195,000 effective in September 1996, (ii) a target bonus opportunity of 15% of such base salary in 1996 (which was 23 subsequently adjusted to 24%), (iii) a target bonus percentage of 50% for 1997 (which was subsequently adjusted to 75%) and (iv) a severance allowance of up to one year and six months of his base salary in the event that a change-in-control of the Company results in the constructive termination of Mr. Sullivan. In addition, Mr. Sullivan has been awarded additional automatic stock options with respect to 6,000 Common shares (in which he is currently vested) for functioning as the Company's CEO for the last four months of 1996 and 32,000 Common Shares (16,000 of which he is currently vested) for the remaining years of the Company Stock Option Program. Such awards, together with Mr. Sullivan's previous awards, total 50,000 stock options. Mr. Sullivan has also been awarded an additional performance-based stock option with respect to 13,872 shares for the 1996 performance period. He is also eligible to receive a performance-based stock option award for the remaining years of the Company Stock Option Program for a total of up to 20,000 stock option shares per year at target performance. The exact number of performance-based stock option awards is dependent upon Company performance in each of the remaining performance periods. The performance of the Company at a level greater than, or less than, the target level of performance will result in an award of as many as 40,000 shares or as few as zero shares, respectively, for each of the performance periods. The number of shares awarded under this stock option opportunity will be approved by the Chairman of the Company. DENNIS M. BESTE. Pursuant to a compensation and severance agreement approved by the Chairman of the Company, Mr. Dennis M. Beste is entitled to, among other things, (i) a salary of $130,000 per year effective in January 1996, (ii) a target bonus opportunity of 35% of salary in 1997, and (iii) a severance allowance of up to one year of his base salary in the event that a change-in-control of the Company results in the constructive termination of Mr. Beste. In addition, Mr. Beste has been awarded automatic stock options with respect to 24,000 Common Shares (12,000 of which he is currently vested) for the remaining years of the Company Stock Option Program. Mr. Beste is also eligible to receive a performance-based stock option award for each of the remaining years of the Company Stock Option Program, beginning January 1, 1997, for a total of up to 12,000 Common Shares per year at target performance. The exact number of performance-based stock option awards is dependent on Company performance in each of the three remaining performance periods. The performance of the Company at a level greater than, or less than, the target level of performance will result in an award of as many as 24,000 shares or as few as zero shares, respectively, for each of the performance periods. The number of shares awarded under this stock option opportunity will be approved by the Chairman. MICHELLE M. HAUPT. In March 1997 Ms. Michelle M. Haupt entered into an Agreement Regarding Severance with the Company whereby the Company approved a severance allowance of up to one year of her base salary in the event that a change-in-control of the Company results in her constructive termination. Ms. Haupt is also entitled to a target bonus opportunity of 35% of salary in 1997. In addition, Ms. Haupt was previously awarded an automatic stock option with respect to 3,000 Common Shares (2,000 of which she is currently vested). LAWRENCE J. LARSEN. Pursuant to a compensation and severance arrangement approved by the Chairman of the Company, Mr. Lawrence J. Larsen is entitled to, among other things, (i) a salary of $130,000, effective in October, 1997, (ii) a target bonus opportunity of 35% of salary in 1997, and (iii) a severance allowance of up to one year of his base salary in the event that a change-in-control of the Company results in the constructive termination of Mr. Larsen. In addition, Mr. Larsen is eligible to receive an automatic stock option award with respect to 24,000 Common Shares (12,000 of which he would be currently vested) for the remaining years of the Company Stock Option Program. Mr. Larsen is also eligible to receive a performance-based stock option award for each of the remaining years of the Company Stock Option Program, beginning January 1, 1998, for a total of up to 12,000 Common Shares per year at target performance. The exact number of performance-based stock option awards is dependent on Company performance in each of the two remaining performance periods. The performance of the Company at a level greater than, or less than, the target level of performance would result in an award of as many as 24 24,000 shares or as few as zero shares respectively, for each of the performance periods. The number of shares awarded under this stock option opportunity will be approved by the Chairman. LAWRENCE A. PIUMBROECK. In March 1997 Mr. Piumbroeck entered into an Agreement Regarding Severance with the Company whereby the Company approved a severance allowance of up to one year of his base salary in the event that a change-in-control of the Company results in his constructive termination. In addition, Mr. Piumbroeck has been awarded automatic stock options with respect to 16,000 Common Shares (8,000 of which he is currently vested) for the remaining years of the Company Stock Option Program. Such awards, together with Mr. Piumbroeck's previous awards, total 31,000 stock options. Mr. Piumbroeck has also been awarded additional performance-based stock options with respect to 750 shares and 3,200 shares for the 1995 and 1996 performance periods, respectively. Mr. Piumbroeck is also eligible to receive a performance-based stock option award for each of the remaining years of the Company Stock Option Program, beginning January 1, 1997, for a total of up to 12,000 Common Shares per year at target performance. The exact number of performance-based stock option awards is dependent on Company performance in each of the three remaining performance periods. The performance of the Company at a level greater than, or less than, the target level of performance will result in an award of as many as 24,000 shares or as few as zero shares respectively. The number of shares awarded under this stock option opportunity will be approved by the Chairman. MERGER INCENTIVE PROGRAM. On April 1, 1997, the Company adopted the Merger Incentive Program (the "Merger Program"). The purpose of the Merger Program is to provide incentives to participants of the Merger Program to exercise maximum effort to raise the value of the Company's equity during the term of the Merger Program. To be eligible to participate in the Merger Program, an employee must be employed by the Company on the closing date of any transaction between TDS and any individual, entity or group or between the Company and any individual, entity or group that reduces TDS's voting control of the Common Shares below 50% through a merger; or other transaction that results in a sale or disposition of all or substantially all of the assets of the Company (a "Transaction"). Each of the executive officers named below is eligible to participate in the Merger Program. The Merger Program commenced on April 1, 1997 and terminates on June 30, 1998 or on the closing date of a Transaction, whichever is earlier, unless extended by the Board of Directors of the Company. The maximum incentive awards for participants will be equal to the greater of Column A or Column B (the "Maximum Award"). The Maximum Award for Terrence T. Sullivan will be equal to the greater of $195,000 or 100% of his Base Salary (the"CEO Award").
COLUMN A COLUMN B ----------- ----------------------- Dennis M. Beste............................. $ 78,000 40% of CEO Award Lawrence A. Piumbroeck...................... $ 78,000 40% of CEO Award Lawrence J. Larsen.......................... $ 78,000 40% of CEO Award Michelle M. Haupt........................... $ 78,000 40% of CEO Award
25 BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY SECURITY OWNERSHIP OF THE COMPANY BY TDS, PURCHASER AND CERTAIN BENEFICIAL OWNERS. The following table sets forth, at December 31, 1997, information regarding TDS, Purchaser and each person who beneficially owns more than 5% of any class of the Company's securities.
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF PERCENT OF NAME AND ADDRESS TITLE OF CLASS(1) OWNERSHIP(2) CLASS VOTING POWER - ------------------------------------ ----------------------- ------------- ----------- ------------- Telephone and Data Systems, Inc. 30 North LaSalle Street Chicago, Illinois 60602(3)......... Common Shares 4,000,000 52.3% 2.0% Series A Common Shares 12,500,000 100.0% 98.1% Dimensional Funds Advisors Inc. 1299 Ocean Avenue 11th Floor Santa Monica, California 90401(4)........................... Common Shares 523,600 6.8% *
- -------------------------- * Less than 1% (1) The Series A Common Shares are convertible on a share-for-share basis at any time into Common Shares. (2) The nature of beneficial ownership is sole voting and investment power unless otherwise stated in these footnotes. (3) Such Common Shares and Series A Common Shares were transferred by TDS to Purchaser on February 9, 1998. (4) Based on a Schedule 13G filed with the Commission. Such Schedule 13G reported that Dimensional Funds Advisors, Inc. had sole voting power with respect to 399,400 Common Shares and that persons who are officers at Dimensional Funds Advisors, Inc. also serve as officers of DFA Investment Dimensions Group Inc. (the "Fund") and the DFA Investment Trust Company (the "Trust"), each an open-end management investment company registered under the Investment Company Act of 1940. In their capacities as officers of the Fund and the Trust, these persons vote 112,200 additional Common Shares which are owned by the Fund and 12,000 Common Shares which are owned by the Trust. Such Schedule 13G states that all such Common Shares are owned by advisory clients of Dimensional Funds Advisors Inc. which disclaims beneficial ownership of all such Common Shares. 26 SECURITY OWNERSHIP OF THE COMPANY BY DIRECTORS AND EXECUTIVE OFFICERS OF TDS AND THE TRUSTEES OF THE VOTING TRUST. The following table sets forth, at December 31, 1997, information with respect to the beneficial ownership of the Common Shares of the Company by each director and executive officer of TDS and each Trustee of The Voting Trust.
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF PERCENT OF NAME TITLE OF CLASS OWNERSHIP(1) CLASS VOTING POWER - -------------------------------------------- --------------- ------------- ----------- ------------- LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(2)......................... Common Shares 19,741 * * James Barr III.............................. -- -- -- -- Donald R. Brown............................. -- -- -- -- LeRoy T. Carlson............................ Common Shares 1,000 * * LeRoy T. Carlson, Jr.(3).................... Common Shares 1,000 * * Letitia G.C. Carlson........................ -- -- -- -- Walter C.D. Carlson......................... -- -- -- -- Michael K. Chesney.......................... -- -- -- -- George L. Dienes............................ -- -- -- -- Melanie J. Heald............................ -- -- -- -- C. Theodore Herbert......................... Common Shares 1,000 * * Rudolph E. Hornacek......................... -- -- -- -- Michael G. Hron............................. Common Shares 400 * * Ross J. McVey(4)............................ Common Shares 400 * * Donald C. Nebergall......................... -- -- -- -- H. Donald Nelson............................ -- -- -- -- George W. Off............................... -- -- -- -- Martin L. Solomon........................... -- -- -- -- Karen M. Stewart............................ -- -- -- -- Terrence T. Sullivan(5)..................... Common Shares 44,006 * * Murray L. Swanson........................... -- -- -- -- Edward W. Towers............................ -- -- -- -- Herbert S. Wander........................... -- -- -- -- Donald W. Warkentin......................... -- -- -- -- Byron A. Wertz.............................. -- -- -- -- Scott H. Williamson......................... -- -- -- -- Gregory J. Wilkinson(6)..................... -- 500 * *
- -------------------------- * Less than 1% (1) Each person has the sole power to vote or direct the vote and the sole power to dispose or direct the disposition of the indicated number of Common Shares, unless otherwise indicated. (2) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Tax-Deferred Savings Plan (the "Plan"). Does not include 57,782 Common Shares purchased by employee salary deferrals as to which voting power is passed through to Plan participants. If any Plan participant does not exercise such participant's passed-through voting power in a timely manner, the Trustee for the Plan shall exercise such voting power as directed by the investment management committee, which shall act in the best interest of such Plan participant. (3) Such Common Shares are held by Mr. Carlson's wife. (4) Includes 200 Common Shares held by Mr. McVey's wife. (5) Includes 43,872 Common Shares that Mr. Terrence T. Sullivan may purchase pursuant to stock options that were exercisable as of December 31, 1997 or exercisable within 60 days of December 31, 1997. (6) Held in the name of the person's spouse. 27 SECURITY OWNERSHIP OF THE COMPANY BY MANAGEMENT. The following table sets forth, at December 31, 1997, information with respect to the beneficial ownership of Common Shares by each director of the Company and each executive officer of the Company.
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF PERCENT OF NAME TITLE OF CLASS OWNERSHIP(1) CLASS VOTING POWER - -------------------------------------------- --------------- ------------- ----------- ------------- LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(2)..................... Common Shares 19,741 * * LeRoy T. Carlson, Jr.(3).................... Common Shares 1,000 * * James Barr III.............................. -- -- -- -- Debora M. de Hoyos.......................... -- -- -- -- Jean Burhardt Keffeler...................... Common Shares 4,520 * * Edwin L. Russell............................ Common Shares 4,020 * * Murray L. Swanson........................... -- -- -- -- Terrence T. Sullivan(4)..................... Common Shares 44,006 * * Dennis M. Beste(5).......................... Common Shares 12,000 * * Michelle M. Haupt(6)........................ Common Shares 3,915 * * James F. Kelly(7)........................... Common Shares 12,000 * * Larry A. Piumbroeck(8)...................... Common Shares 23,751 * * Lawrence Larsen............................. -- -- * * Michael Hron................................ Common Shares 400 * *
- -------------------------- * Less than 1% (1) The nature of beneficial ownership is sole voting and investment power unless otherwise specified. (2) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Tax-Deferred Savings Plan (the "Plan"). Does not include 57,782 Common Shares purchased by employee salary deferrals as to which voting power is passed through to Plan participants. If any Plan participant does not exercise such participant's passed-through voting power in a timely manner, the Trustee for the Plan shall exercise such voting power as directed by the investment management committee, which shall act in the best interest of such Plan participant. (3) Such shares are held by Mr. Carlson's wife. (4) Includes 43,872 Common Shares that Mr. Terrence T. Sullivan may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (5) Includes 12,000 Common Shares that Mr. Dennis M. Beste may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (6) Includes 2,000 Common Shares that Ms. Michelle M. Haupt may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (7) Includes 12,000 Common Shares that Mr. James F. Kelly may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Mr. Kelly resigned from the Company on January 30, 1998. (8) Includes 22,950 Common Shares that Mr. Larry A. Piumbroeck may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. DESCRIPTION OF TDS SECURITIES. Several directors and executive officers of the Company hold ownership interests indirectly in the Company by virtue of their ownership of the capital stock of TDS. See "Beneficial Ownership of TDS by Directors and Executive Officers of the Company" below: The authorized capital stock of TDS consists of 100,000,000 Common Shares, $1.00 par value (the "TDS Common Shares"), 25,000,000 Series A Common Shares, $1.00 par value (the "TDS Series A Common Shares"), and 5,000,000 Preferred Shares, without par value (the "TDS Preferred Shares"). As of December 31, 1997, 53,648,683 TDS Common Shares (excluding Common Shares held by TDS and a 28 subsidiary of TDS), 6,936,277 TDS Series A Common Shares and 324,667 TDS Preferred Shares were outstanding. The TDS Series A Common Shares have ten votes per share, and TDS Common Shares and outstanding TDS Preferred Shares have one vote per share. The holders of TDS Series A Common Shares, TDS Common Shares and TDS Preferred Shares vote as a single group, except with respect to matters as to which the Iowa Business Corporation Act grants class voting rights and with respect to the election of directors. With respect to the election of directors, the holders of TDS Common Shares and the TDS Preferred Shares issued before October 31, 1981, voting as a group, are entitled to elect 25% of the board of directors of TDS, rounded up to the nearest whole number, and the holders of TDS Series A Common Shares and TDS Preferred Shares issued after October 31, 1981, voting as a group, are entitled to elect the remaining members of the board of directors of TDS. PRINCIPAL SHAREHOLDERS OF TDS. In addition to the persons listed under "Beneficial Ownership of TDS by Directors and Executive Officers of the Company," the following table sets forth information regarding the persons who beneficially own more than 5% of any class of the voting securities of TDS. Such information is as of December 31, 1997, except as otherwise indicated. The nature of beneficial ownership in this table is sole voting and investment power, except as otherwise set forth in the footnotes.
PERCENT OF SHARES OF TDS PERCENT OF TDS SHAREHOLDER'S NAME AND ADDRESS TITLE OF CLASS CLASS OWNED TDS CLASS VOTING POWER - --------------------------------------- -------------------- ------------- ----------- ------------- The Equitable Companies Inc.(1) 787 Seventh Avenue New York, New York 10019.............. TDS Common Shares 10,988,100 20.4% 8.9% Franklin Mutual Advisers, Inc. (2) 51 John F. Kennedy Parkway Short Hills, New Jersey 07078......... TDS Common Shares 5,279,200 9.8% 4.3% Massachusetts Financial Services Company (3) 500 Boylston Street Boston, Massachusetts 02116........... TDS Common Shares 1,907,100 3.6% 1.6% William and Betty McDaniel 160 Stowell Road Salkum, Washington 98582.............. TDS Preferred Shares 46,666 14.4% * Bennet R. Miller 1212 Wea Avenue Lafayette, Indiana 47905.............. TDS Preferred Shares 30,000 9.2% * Roland G. and Bette B. Nehring 5253 North Dromedary Road Phoenix, Arizona 85018................ TDS Preferred Shares 20,012 6.2% * The Peterson Revocable Living Trust Kenneth M. & Audrey M. Peterson, Trustees 108 Avocado Lane Weslaco, Texas 78596.................. TDS Preferred Shares 20,637 6.4% *
- -------------------------- * Less than 1% (1) Based on the most recent Schedule 13G (Amendment No. 11) filed with the Commission on February 17, 1998. Includes shares held by the following affiliates: The Equitable Life Assurance Society of the United States-- 4,176,200 shares; Alliance Capital Management, L.P.-- 6,782,543 shares; Wood, Struthers & Winthrop Management Corp.-- 28,976 shares; and Donaldson Lufkin & Jenrette Securities Corporation-- 381 shares. In such Schedule 13G, Equitable reported sole voting power with respect to 11,428,250 shares, shared voting power with respect to 84,600 shares, sole dispositive power with respect to 11,790,690 shares and shared dispositive power 29 with respect to 915 shares. Alpha Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle and AXA-UAP, corporations organized under the laws of France, are affiliates of The Equitable Companies, Inc. (2) Based on the most recent Schedule 13D (Amendment No. 4) filed with the Commission on April 9, 1997. Such Schedule 13D reports that Franklin Mutual Advisers, Inc. exercised sole voting and investment power with respect to all such shares. Such Schedule 13D is also filled on behalf of Franklin Resources, Inc., the TDS holding company of Franklin Mutual Advisers, Inc., and by Charles B. Johnson and Rupert H. Johnson, Jr., principal shareholders of such TDS holding company. (3) Based on the most recent Schedule 13G (Amendment No. 1) filed with the Commission. Such Schedule 13G reported that Massachusetts Financial Services Company exercised sole voting and investment power with respect to all such shares. BENEFICIAL OWNERSHIP OF TDS BY DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table sets forth the number of TDS Common Shares and TDS Series A Common Shares beneficially owned by each director of the Company and by each executive officer as of December 31, 1997.
AMOUNT AND NATURE OF NAME OF INDIVIDUAL OR BENEFICIAL PERCENT OF PERCENT OF NUMBER OF PERSONS IN GROUP TITLE OF TDS CLASS OWNERSHIP (1) TDS CLASS VOTING POWER - ------------------------------- ---------------------------- ------------- ----------- ------------- LeRoy T. Carlson, Jr., Walter C.D. Carlson, Letitia G. C. Carlson, Donald C. Nebergall and Melanie J. Heald(2)........... TDS Series A Common Shares 6,337,187 91.4% 51.5% LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(3)............ TDS Common Shares 1,008 * * TDS Series A Common Shares 146,576 2.1% 1.2% LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(4)............ TDS Common Shares 2,300 * * LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(5)............ TDS Common Shares 59,957 * * LeRoy T. Carlson, Jr.(6)....... TDS Common Shares 157,760 * * James Barr III(8).............. TDS Common Shares 19,958 * * Debora M. de Hoyos(9).......... -- -- -- -- Jean Burhardt Keffeler......... -- -- -- -- Edwin L. Russell(7)............ TDS Common Shares 5,713 * * TDS Series A Common Shares 6,368 * * Murray L. Swanson(7)(10)....... TDS Common Shares 47,324 * * TDS Series A Common Shares 2,506 * * Terrence T. Sullivan........... -- -- -- -- Dennis M. Beste................ -- -- * * Michelle M. Haupt.............. -- -- -- -- James F. Kelly(11)............. -- -- * * Larry A. Piumbroeck............ TDS Common Shares 357 * * Lawrence J. Larsen............. -- -- -- -- Michael Hron................... TDS Common Shares 1,000 * *
- -------------------------- * Less than 1% (1) The nature of beneficial ownership for shares in this column is sole voting and investment power, except as otherwise set forth in these footnotes. (2) The shares of TDS listed are held by the persons named as trustees under a voting trust which expires June 30, 2009, created to facilitate long-standing relationships among the trust certificate holders. Under the terms of the voting trust, the trustees hold and vote the TDS Series A Common Shares held in the trust. If the voting trust were terminated, the following persons would each be deemed to own beneficially over 5% of the outstanding TDS Series A Common Shares: Margaret D. Carlson (wife of LeRoy T. Carlson), LeRoy T. Carlson, Jr., Walter 30 C.D. Carlson, Prudence E. Carlson, Letitia G. C. Carlson (children of LeRoy T. Carlson and Margaret D. Carlson), and Donald C. Nebergall, as trustee under certain trusts for the benefit of the heirs of LeRoy T. and Margaret D. Carlson and an educational institution. (3) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Employees' Pension Trust I. Such members disclaim beneficial ownership of such shares. (4) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Wireless Companies' Pension Plan. Such members disclaim beneficial ownership of such shares. (5) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does not include 142,575 TDS Common Shares purchased with employee salary deferrals as to which voting and investment control is passed-through to Plan participants. If any Plan participant does not exercise his passed-through voting power in a timely manner, the Trustee for the Plan shall exercise such voting power as directed by the investment management committee, which shall act in the best interest of such Plan participant. (6) Includes 152,297 TDS Common Shares that Mr. LeRoy T. Carlson, Jr. may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Does not include 1,068,186 TDS Series A Common Shares (15.4% of class) held in the voting trust referred to in footnote (2) above, of which 1,037,084 shares are held for the benefit of Mr. LeRoy T. Carlson, Jr. Beneficial ownership is disclaimed as to 31,102 TDS Series A Common Shares held for the benefit of his wife, his children and others in such voting trust. (7) Includes shares as to which voting and/or investment power is shared with his wife. (8) Includes 16,000 TDS Common Shares that Mr. Barr may purchase pursuant to stock options and/or stock appreciation rights which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (9) Does not include 6,401 TDS Series A Common Shares held for the benefit of Ms. de Hoyos in the voting trust referred to in footnote (2) above. Ms. de Hoyos disclaims beneficial ownership of all other TDS Series A Common Shares held in such voting trust with respect to which Walter C.D. Carlson, Ms. de Hoyos' spouse, acts as trustee, and of 405 TDS Common Shares owned directly by Walter C.D. Carlson. (10) Includes 28,541 TDS Common Shares that Mr. Swanson may purchase pursuant to stock options and/or stock appreciation rights which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (11) Mr. Kelly resigned from the Company on January 30, 1998. SECURITY OWNERSHIP OF TDS BY DIRECTORS AND EXECUTIVE OFFICERS OF TDS The following table sets forth at December 31, 1997, the number of Common Shares and Series A Common Shares beneficially owned, and the percentage of the outstanding shares of each such class so owned by each director and executive officer of TDS.
AMOUNT AND NATURE OF NAME OF INDIVIDUAL OR BENEFICIAL PERCENT OF PERCENT OF NUMBER OF PERSONS IN GROUP TITLE OF CLASS OWNERSHIP (1) CLASS VOTING POWER - ------------------------------- ---------------------------- ------------- ----------- ------------- LeRoy T. Carlson, Jr., Walter C.D. Carlson, Letitia G.C. Carlson, Donald C. Nebergall and Melanie J. Heald(2)........... Series A Common Shares 6,337,187 91.4% 51.4% LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(3)........ Common Shares 1,008 * * Series A Common Shares 146,576 2.1% 1.2%
31
AMOUNT AND NATURE OF NAME OF INDIVIDUAL OR BENEFICIAL PERCENT OF PERCENT OF NUMBER OF PERSONS IN GROUP TITLE OF CLASS OWNERSHIP (1) CLASS VOTING POWER - ------------------------------- ---------------------------- ------------- ----------- ------------- LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(4)........ Common Shares 2,300 * * LeRoy T. Carlson, Jr., C. Theodore Herbert and Michael G. Hron(5)........ Common Shares 59,957 * * LeRoy T. Carlson(6)............ Common Shares 62,407 * * Series A Common Shares 51,975 * * LeRoy T. Carlson, Jr.(7)(12)... Common Shares 157,760 * * Walter C.D. Carlson(8)......... Common Shares 405 * * Letitia G.C. Carlson(9)........ Common Shares 470 * * Murray L. Swanson(10)(13)...... Common Shares 47,324 * * Series A Common Shares 2,506 * * Rudolph E. Hornacek(11)........ Common Shares 20,233 * * Series A Common Shares 1,669 * * James Barr III(14)............. Common Shares 19,958 * * Donald C. Nebergall(12)........ Common Shares 1,463 * * Donald R. Brown(10)............ Common Shares 4,001 * * Series A Common Shares 4,735 * * Herbert S. Wander.............. Common Shares 334 * * George W. Off.................. Common Shares 1,127 * * Series A Common Shares 1,127 * * Martin L. Solomon.............. Common Shares 15,000 * * Kevin A. Mundt................. -- -- -- -- H. Donald Nelson............... Common Shares 4,098 * * Series A Common Shares 5,308 * * Donald W. Warkentin(15)........ Common Shares 29,566 * * Terrence T. Sullivan........... -- -- -- -- Michael K. Chesney(16)......... Common Shares 15,229 * * George L. Dienes(17)........... Common Shares 68,100.25 * * C. Theodore Herbert(18)........ Common Shares 39,996 * * Karen M. Stewart(19)........... Common Shares 10,761 * * Edward W. Towers(20)........... Common Shares 21,663 * * Herbert S. Wander.............. Common Shares 334 * * Byron A. Wertz(21)............. Common Shares 17,512 * * Series A Common Shares 19,461 * * Gregory J. Wilkinson(22)....... Common Shares 18,063 * * Series A Common Shares 731 * * Scott H. Williamson(23)........ Common Shares 11,782 * *
- -------------------------- * Less than 1% (1) The nature of beneficial ownership for shares in this column is sole voting and investment power, except as otherwise set forth in these footnotes. (2) The shares listed are held by the persons named as trustees under a voting trust which expires June 30, 2009, created to facilitate longstanding relationships among the trust certificate holders. Under the terms of the voting trust, the trustees hold and vote the Series A Common Shares held in the trust. If the voting trust were terminated, the following persons would each be deemed to own beneficially more than 5% of the outstanding Series A Common Shares: Margaret D. Carlson (wife of LeRoy T. Carlson), LeRoy T. Carlson, Jr., Walter C.D. Carlson, Prudence E. Carlson, Letitia G.C. Carlson (children of LeRoy T. Carlson and Margaret D. Carlson) and Donald C. Nebergall, as trustee under certain trusts for the benefit of the heirs of LeRoy T. and Margaret D. Carlson and an educational institution. (3) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Employees' Pension Trust I. Such members disclaim beneficial ownership of all such shares, except for shares held for their individual benefit in such plan. 32 (4) Voting and investment control is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Wireless Companies' Pension Plan. Such members disclaim beneficial ownership of such shares. (5) Voting and investment control with respect to Company-match shares is shared by the persons named as members of the investment management committee of the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does not include 142,575 Common Shares acquired by employee salary deferrals as to which voting and investment control is passed-through to Plan participants. If any Plan participant does not exercise his passed-through voting power in a timely manner, the Trustee for the Plan shall exercise such voting power as directed by the investment management committee, which shall act in the best interest of such Plan participant. (6) Includes 55,978 Common Shares that Mr. LeRoy T. Carlson may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Includes 51,975 Series A Common Shares held by Mr. Carlson's wife. Mr. Carlson disclaims beneficial ownership of such shares. Does not include 252,668 Series A Common Shares held for the benefit of LeRoy T. Carlson, 630,525 Series A Common Shares held for the benefit of Mr. Carlson's wife or 50,526 Series A Common Shares held for the benefit of certain grandchildren of Mr. Carlson (an aggregate of 933,719 shares, or 13.5% of class) in the voting trust described in footnote (2). Beneficial ownership is disclaimed as to Series A Common Shares held for the benefit of his wife and grandchildren in such voting trust. (7) Includes 152,297 Common Shares that Mr. LeRoy T. Carlson, Jr. may purchase pursuant to stock options that were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Does not include 1,068,186 Series A Common Shares (15.4% of class) held in the voting trust described in footnote (2), of which 1,037,084 shares are held for the benefit of Mr. LeRoy T. Carlson, Jr. Beneficial ownership is disclaimed with respect to an aggregate of 31,102 Series A Common Shares held for the benefit of his wife, his children and others in such voting trust. (8) Does not include 1,087,366 Series A Common Shares (15.7% of class) held in the voting trust described in footnote (2), of which 1,058,143 shares are held for the benefit of Mr. Walter C.D. Carlson. Beneficial ownership is disclaimed with respect to an aggregate of 29,223 Series A Common Shares held for the benefit of his wife and children in such voting trust. (9) Does not include 1,070,127 Series A Common Shares (15.4% of class) held in the voting trust described in footnote (2), of which 1,061,477 shares are held for the benefit of Dr. Letitia G.C. Carlson. Beneficial ownership is disclaimed with respect to an aggregate of 8,650 Series A Common Shares held for the benefit of her husband and child in such voting trust. (10) Beneficial ownership is disclaimed by Mr. Donald R. Brown with respect to 1,862 Common Shares held by his wife. (11) Includes 12,374 Common Shares that Mr. Rudolph E. Hornacek may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Does not include 1,669 Series A Common Shares held as custodian for his children, for which beneficial ownership is disclaimed. (12) Does not include 641,540 Series A Common Shares (9.2% of class) held as trustee under trusts for the benefit of the heirs of LeRoy T. and Margaret D. Carlson and an educational institution, or 31 Series A Common Shares held for the benefit of Mr. Donald C. Nebergall, which are held in the voting trust described in footnote (2). (13) Includes 28,541 Common Shares that Mr. Murray L. Swanson may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (14) Includes 16,000 Common Shares that Mr. James Barr III may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (15) Includes 29,026 Common Shares that Mr. Donald W. Warkentin may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (16) Includes 15,014 Common Shares that Mr. Michael K. Chesney may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (17) Includes 58,639.25 Common Shares that Mr. George L. Dienes may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (18) Includes 15,787 Common Shares that Mr. C. Theodore Herbert may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. (19) Includes 8,447 Common Shares that Ms. Karen M. Stewart may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. 33 (20) Includes 15,245 Common Shares that Mr. Edward W. Towers may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Beneficial ownership is disclaimed with respect to an aggregate of 1,007 Common Shares held for the benefit of his wife and son. (21) Includes 17,512 Common Shares that Mr. Byron A. Wertz may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Does not include 44,008 Series A Common Shares held for the benefit of people not in Mr. Wertz's immediate family in voting trust with Mr. Wertz acting as trustee. (22) Includes 11,593 Common Shares that Mr. Gregory J. Wilkinson may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. Beneficial ownership is disclaimed with respect to 17 Series A Common Shares held by his wife. (23) Includes 10,923 Common Shares that Mr. Scott H. Williamson may purchase pursuant to stock options which were exercisable on December 31, 1997 or exercisable within 60 days of December 31, 1997. RELATED PARTY TRANSACTIONS COMPENSATION COMMITTEE INTERLOCKS; BOARD OF DIRECTORS INTERLOCKS; AND INSIDER PARTICIPATION. LeRoy T. Carlson, Jr., President (Chief Executive Officer) of TDS, makes annual executive compensation decisions for TDS other than for himself. The Stock Option Compensation Committee of the Board of Directors of TDS makes annual executive compensation decisions for the President of TDS and approves long-term compensation awards for the executive officers of TDS. The Stock Option Compensation Committee of TDS is composed of members of the TDS Board of Directors who are not officers or employees of TDS or any of its subsidiaries, and who are not directors of any TDS subsidiaries. LeRoy T. Carlson, Jr., is a member of the Board of Directors of TDS and the Company. LeRoy T. Carlson, Jr. is also the Chairman of the Company and, as such, approves annual compensation for the executive officers of the Company. LeRoy T. Carlson, Jr. is compensated by TDS for his services to TDS and all of its subsidiaries. However, TDS is reimbursed by the Company for a portion of Mr. Carlson's salary and bonus paid by TDS pursuant to the Intercompany Agreement described below. Such reimbursement in the aggregate was less than $100,000 for 1997, 1996 and 1995. The President of the Company, who is also a director of the Company, participates in executive compensation decisions for executive officers of the Company, other than with respect to himself. The Stock Option Compensation Committee of the Company consists of Edwin L. Russell and Jean Burhardt Keffeler. The principal functions of the Stock Option Compensation Committee are to consider and approve long-term compensation under the Company's 1994 Long-Term Incentive Plan. The Company's Stock Option Compensation Committee is composed of members of the Board of Directors who are not officers or employees of TDS or the Company or their subsidiaries, and who are not eligible to receive options under the Company's 1994 Long-Term Incentive Plan. LeRoy T. Carlson, Jr. is a trustee and beneficiary of The Voting Trust which controls TDS, which controls the Company. See "BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY-- Beneficial Ownership of TDS by Directors and Executive Officers of the Company." LeRoy T Carlson, Jr., Murray L. Swanson and James Barr III are directors of both TDS and the Company and Debora M. de Hoyos, a director of the Company, is the wife of Walter C.D. Carlson, a director of TDS and brother of LeRoy T. Carlson, Jr. AGREEMENTS BETWEEN THE COMPANY AND TDS. The Company has entered into certain agreements with TDS to provide for certain transactions and relationships. These agreements were executed while the Company was a wholly owned subsidiary of TDS and are not the result of arm's length negotiations. There can be no assurance that such arrangements will continue or that the terms of such arrangements will not be modified in the future. If additional transactions occur in the future, there can be no assurance that the terms of such future transactions will be favorable to the Company or will continue to provide the Company with the same level of support for the Company's financing and other needs as TDS has provided in the past. The principal arrangements that exist between the Company and TDS are summarized below. 34 EXCHANGE AGREEMENT. The Company and TDS are parties to an Exchange Agreement (the "Exchange Agreement"). The Exchange Agreement grants TDS the right to purchase additional Common Shares sold by the Company to the extent necessary for TDS to maintain its proportionate interest in Common Shares. For purposes of calculating TDS's proportionate interest in Common Shares, the Series A Common Shares are treated as if converted into Common Shares. Upon notice to the Company, TDS is entitled to subscribe to each issuance in full or in part at its discretion. If TDS decides to waive, in whole or in part, one or more of its purchase opportunities, the number of Common Shares subject to purchase as a result of subsequent issuances will be reduced. If TDS elects to exercise its purchase rights, it is required to pay for all Common Shares issued to it by the Company with cash, cancellation of indebtedness owed by the Company to TDS or such other consideration as is reasonably acceptable to the Company. Depending on the price per Common Share paid by TDS upon exercise of these rights, the issuance of Common Shares by the Company pursuant thereto could have a dilutive effect on other shareholders of the Company. The Exchange Agreement also contains provisions which contemplate that the Company may issue to TDS from time to time additional Series A Common Shares. Any such issuance could have the effect of maintaining or increasing TDS's relative ownership of capital stock and voting power in the Company. CORPORATE OPPORTUNITY ARRANGEMENTS. The Company's Restated Certificate of Incorporation provides that the Company may not, directly or indirectly, without the written consent of TDS, own, invest or otherwise have an interest in, lease, operate or manage any business other than a business engaged solely in the construction ownership or management of radio paging systems. However, there can be no assurance that TDS will give such consent with respect to any business opportunities. In addition, TDS could impose conditions on any such consent. The Restated Certificate of Incorporation also restricts the circumstances under which the Company is entitled to claim that an opportunity, transaction, agreement or other arrangement to which TDS, or any person in which TDS has or acquires a financial interest, is or should be the property of the Company or its subsidiaries. In general, so long as at least 500,000 Series A Common Shares are outstanding, the Company will not be entitled to any such "corporate opportunity" unless it relates solely to the construction of, the ownership of interests in or the management of radio paging systems other than a system that is ancillary to and integrated with another communications system. The Exchange Agreement provides that TDS and its subsidiaries and affiliates (other than the Company and its subsidiaries) will retain all their existing radio paging operations that have previously been offered for sale to the Company and that the Company has decided not to acquire. The Exchange Agreement also provides that TDS will give the Company the opportunity to negotiate the purchase of any radio paging operations acquired by TDS or its other subsidiaries in the future, except for such operations that are ancillary to and integrated with other communications systems, where there are restrictions on a sale of such operations or where, in the reasonable judgment of TDS, there are material adverse consequences to TDS that may result therefrom. REVOLVING CREDIT AGREEMENT. Pursuant to the Revolving Credit Agreement between the Company and TDS, the Company may borrow up to an aggregate of $185 million from TDS, at an interest rate equal to 1 1/2% above the prime rate announced from time to time by the LaSalle National Bank of Chicago on the unpaid principal amount, with interest payable on demand at a rate equal to 3 1/2% above such prime rate on any overdue principal or overdue installment of interest. The advances made by TDS under the Revolving Credit Agreement are unsecured. Interest on the balance due under the Revolving Credit Agreement is payable quarterly and no principal is payable until the earlier of January 1, 1999, or six months after such time that TDS's ownership of the Company falls below 70%, subject to acceleration under certain circumstances, at which time the entire principal balance due under the Revolving Credit Agreement then outstanding is scheduled to become due and payable. The Company has determined that it was in violation of a covenant under the Revolving Credit Agreement with TDS relating to maintaining a 35 certain ratio of equity to liabilities. The Company has obtained a waiver of the covenant from TDS through January 1, 1999. In absence of such waiver, the entire amount outstanding under the Revolving Credit Agreement would have become immediately due and payable at the discretion of TDS. The Company may prepay the balance due under the Revolving Credit Agreement at any time, in whole or in part, without premium. Any principal so repaid is available for the Company to borrow during the remaining term of the Revolving Credit Agreement, subject to the satisfaction of certain conditions. Interest expense incurred by the Company to TDS totaled $7.0 million, $11.8 million and $16.1 million for the years ended December 31, 1995, 1996 and 1997, respectively. Borrowings in an aggregate amount of $94.5 million, $140.0 million and $180.0 million were outstanding as of December 31, 1995, 1996 and 1997, respectively. The greatest amount outstanding in 1995 was $94.5 million, in 1996 was $140.0 million and in 1997 was $180.0 million. The Revolving Credit Agreement provides that the Company will not, without the prior written consent of TDS: (i) purchase or redeem any shares of its stock or declare or pay any dividends thereon, except to the extent of one-half of the cumulative consolidated net income, if any, of the Company for the period from and after January 1, 1994, or make any other distribution to its shareholders other than normal dividends payable with respect to Preferred Stock which may be issued; (ii) permit its consolidated equity to be less than 30% of consolidated liabilities (including certain adjustments); (iii) incur or guarantee any indebtedness that is senior to the Revolving Credit Agreement; (iv) with certain exceptions, create any lien on any of the Company's assets; or (v) enter into certain contracts for the purchase of materials, supplies or other property or services. The Revolving Credit Agreement provides that if certain "events of default" occur, TDS may immediately declare the amount under the Revolving Credit Agreement due and payable and terminate the Revolving Credit Agreement. Events of default under the Revolving Credit Agreement include the failure to pay interest or principal, the breach of specified covenants (including the covenants specified in the immediately preceding paragraph and covenants to furnish to TDS specified financial information, permit TDS to visit and inspect the Company's properties, maintain customary levels of insurance, and pay all taxes and other liabilities of the Company), any default under certain other indebtedness, and certain judgments, defaults and events of bankruptcy or insolvency. TAX ALLOCATION AGREEMENT. The Company has entered into a Tax Allocation Agreement with TDS (the "Tax Allocation Agreement") under which the Company and its subsidiaries will continue to join in filing consolidated federal income tax returns with the TDS affiliated group unless TDS requests otherwise. For tax years ended prior to January 1, 1994, TDS has reimbursed or will reimburse the Company for the reduction in the provision for federal income taxes reflected in TDS's consolidated statements of income resulting from the inclusion of the Company and its subsidiaries in the TDS affiliated group. For tax years beginning after December 31, 1993, TDS no longer reimburses the Company on a current basis for losses or credits used by the TDS affiliated group. Instead, the Company will be compensated (by an offset to amounts the Company would otherwise be required to pay to TDS for federal income taxes) for TDS's use of tax benefits at such time as the Company could utilize such benefits on a separate return basis. The Company will be required to pay to TDS an amount equal to the greater of the federal income tax liability of the Company, calculated as if it were a separate affiliated group (including any minimum tax liability, notwithstanding the absence of consolidated group liability for minimum tax) or the tax calculated using the average tax rate (before taking into account tax credits) of the TDS affiliated group. Any deficiency in tax thereafter proposed by the Internal Revenue Service for any consolidated return year that involves income, deductions or credits of the Company or its subsidiaries, and any claim for refund of tax for any consolidated return year that involves such items, will be contested or prosecuted at the sole discretion of TDS and at the expense of the Company. To the extent that any deficiency in tax or refund of tax is finally determined to be attributable to the income, deductions or credits of the Company, such deficiency or refund will be payable by or to the Company. 36 If the Company ceases to be a member of the TDS affiliated group, and for a subsequent year the Company or its subsidiaries are required to pay a greater amount of federal income tax than they would have paid if they had not been members of the TDS group after December 31, 1993, TDS will reimburse the Company for the excess amount of tax, without interest. In determining the amount of reimbursement, any profits or losses from new business activities acquired by the Company or its subsidiaries after the Company leaves the TDS group will be disregarded. No reimbursement will be required if at any time in the future fewer than 500,000 Series A Common Shares are outstanding. Nor will reimbursement be required on account of the income of any subsidiary of the Company if more than 50% of the voting power of such subsidiary is held by a person or group other than a person or group owning more than 50% of the voting power of TDS. Rules similar to those described above will be applied to any state or local franchise or income tax liabilities to which TDS and the Company and its subsidiaries are subject and which are required to be determined on a unitary, combined or consolidated basis. Payments under the Tax Allocation Agreement by one party to the other are required to be increased by an amount sufficient so that after deduction of any federal, state or local taxes payable in respect of the receipt of such payments, the net amount received will equal the amount that would have been payable had no deduction been made. CASH MANAGEMENT AGREEMENT. The Company has from time to time deposited its excess cash with TDS for investment under TDS's cash management programs pursuant to the terms of a Cash Management Agreement (the "Cash Management Agreement"). To the extent of the Company's normal working capital requirements, such cash is deposited into an account (which may include cash from other participants in TDS's cash management programs) and then invested in the name of a nominee for each participant in such account. The Company is credited with, and may withdraw on demand, its pro rata share of investment income from such account minus its pro rata share of costs attributable to such investment income. Funds in excess of the Company's normal working capital requirements that are deposited under the Cash Management Agreement are available to the Company on demand and bear interest each month at the 30-day Commercial Paper Rate reported in The Wall Street Journal on the last business day of the preceding month, plus 1/4%, or such higher rate as TDS may in its discretion offer on such demand deposits. The Company may elect to place funds for a longer period than on demand in which event, if such funds are placed with TDS, they will bear interest at the Commercial Paper Rate for investments of similar maturity plus 1/4%, or at such higher rate as TDS may in its discretion offer on such investments. LNTERCOMPANY AGREEMENT. In order to provide for certain transactions and relationships between the parties, the Company and TDS have agreed under an Intercompany Agreement (the "Intercompany Agreement"), among other things, as follows: SERVICES. The Company and TDS make available to each other from time to time services relating to operations, marketing, human resources, accounting, customer services, customer billing, finance, and general administration, among others. Unless otherwise provided by written agreement, services provided by TDS or any of its subsidiaries are charged and paid for in conformity with the customary practices of TDS for charging TDS's non-telephone company subsidiaries. Payments by the Company to TDS for such services totaled $5.8 million in 1995, $5.9 million in 1996 and $6.1 million in 1997. For services provided to TDS, the Company receives payment for the salaries of its employees and agents assigned to render such services (plus 40% of the cost of such salaries in respect of overhead) for the time spent rendering such services, plus out-of-pocket expenses. Payments by TDS to the Company for such services were nominal in 1995, 1996 and 1997. EQUIPMENT AND MATERIALS. The Company and its subsidiaries purchase materials and equipment from TDS and its subsidiaries on the same basis as materials and equipment are purchased by any TDS affiliate from another TDS affiliate. Purchases by the Company and its subsidiaries from TDS affiliates totaled $296,000 in 1995, $244,000 in 1996 and $72,000 in 1997. 37 ACCOUNTANTS AND LEGAL COUNSEL. The Company has agreed to engage the firm of independent public accountants either selected by TDS or selected by the Audit Committee of the Company and acceptable to TDS for purposes of auditing the financial statements of the Company, including the financial statements of its direct and indirect subsidiaries, and for purposes of providing tax, data processing and all other accounting services and advice. The Company also has agreed that, in any case where legal counsel is to be engaged to represent the parties for any purpose, TDS has the right to select the counsel to be engaged, which may be the same counsel selected to represent TDS unless such counsel deems there to be a conflict. If TDS and the Company use the same counsel, each is responsible for the portion of the fees and expenses of such counsel determined by such counsel to be allocable to each. INDEMNIFICATION. The Company will indemnity TDS and its subsidiaries against certain losses, claims, damages or liabilities including those arising out of: (i) the conduct by the Company and its subsidiaries of their respective businesses (except where the loss, claim, damage or liability arises from TDS's gross negligence or willful misconduct); and (ii) any inaccurate representation or breach of warranty under the Intercompany Agreement. TDS will similarly indemnify the Company and its subsidiaries with respect to losses, claims, damages or liabilities arising out of (i) the conduct by TDS of its nonpaying businesses before January 1, 1994 (except where the loss, claim, damage or liability arises from the Company's gross negligence or willful misconduct); and (ii) any inaccurate representation or breach of warranty under the Intercompany Agreement. DISPOSAL OF COMPANY SECURITIES. TDS will not dispose of any securities of the Company held by it if such disposition would result in the loss of any license or other authorization held by the Company and such loss would have a material adverse effect on the Company and its subsidiaries, taken as a whole. TRANSFER OF ASSETS. Without the prior written consent of TDS, neither the Company nor any of its subsidiaries may transfer (by sale, merger or otherwise) more than 15% of its consolidated assets unless the transferee agrees to become subject to the Intercompany Agreement. REGISTRATION RIGHTS AGREEMENT. Under a Registration Rights Agreement (the "Registration Rights Agreement"), the Company has agreed, upon the request of TDS, to file one or more registration statements under the Securities Act of 1933, as amended, or take other appropriate action under the laws of foreign jurisdictions in order to permit TDS to offer and sell, domestically or abroad, any debt or equity securities of the Company that TDS may hold at any time. TDS will pay all costs relating thereto and any underwriting discounts and commissions relating to any such offering, except that the Company will pay the fees and expenses of its counsel and accountants, and any trustees, transfer agents or other agents appointed in connection therewith. TDS has the right to select the counsel the Company retains to assist it in fulfilling any of its obligations under the Registration Rights Agreement. There is no limitation on the number or frequency of the occasions on which TDS may exercise its registration rights, except that the Company will not be required to comply with any registration request unless, in the case of a class of equity securities, the request involves at least the lesser of one million shares or 1 % of the total number of shares of such class then outstanding, or, in the case of a class of debt securities, the principal amount of debt securities covered by the request is at least $5 million. The Company has also granted TDS the right to include securities of the Company owned by TDS in certain registration statements covering offerings by the Company and will pay all costs of such offerings other than incremental costs attributable to the inclusion of securities of the Company owned by TDS in such registration statements and TDS will pay the fees and expenses of its counsel and all underwriting discounts and commissions. The Company will indemnify TDS, its officers and directors and each underwriter, if any, and controlling persons of TDS or any such underwriter against certain liabilities arising under the laws of any country in respect of any registration or other offering covered by the Registration Rights Agreement. The Company has the right to require TDS to delay any exercise by TDS of its rights to require registration and 38 other actions for a period of up to 90 days if, in the judgment of the Company, any underwritten offering by the Company for its account then being conducted or about to be conducted would be materially adversely affected. TDS has further agreed that it will not include any securities of the Company owned by TDS in any registration statement of the Company which, in the judgment of the managing underwriters, would materially adversely affect any offering by the Company. The rights of TDS under the Registration Rights Agreement are transferable to non-affiliates of TDS. INSURANCE COST SHARING AGREEMENT. Pursuant to an Insurance Cost Sharing Agreement (the "Insurance Cost Sharing Agreement"), the Company and its subsidiaries, and their officers, directors and employees are afforded coverage under certain insurance policies purchased by TDS. A portion of the premiums payable under each such policy is allocated by TDS to the Company on the same basis as premiums were allocated before the Insurance Cost Sharing Agreement was entered into, or on such other reasonable basis as TDS may select from time to time. If TDS decides to change the allocation of premiums at any time, TDS will consult with the Company before the change is made, but the decision whether to make the change will be in the reasonable discretion of TDS. Management of the Company believes that the amounts payable by the Company under the Insurance Cost Sharing Agreement are generally more favorable than the premiums the Company would pay if it were to obtain coverage under separate policies. The Company paid insurance premiums of $329,000, $604,000 and $756,000 in 1995, 1996 and 1997, respectively. EMPLOYEE BENEFIT PLANS AGREEMENT. Under an Employee Benefit Plans Agreement, in connection with the purchase by employees of the Company of TDS Common Shares, $1.00 par value, under the TDS Employee Stock Purchase Plan, the Company has agreed to reimburse TDS in an amount equal to the excess of the fair market value of such TDS Common Shares on the date of purchase over the amount paid for such shares plus amounts paid or to be paid by TDS for taxes, less any amounts paid by the Company's employees for withholding taxes. OTHER ARRANGEMENTS. Walter C. D. Carlson, a director of TDS, Michael G. Hron, Secretary of TDS, the Company and certain other subsidiaries of TDS, William S. DeCarlo, the Assistant Secretary of TDS and certain subsidiaries of TDS, Stephen P. Fitzell, the Secretary of certain subsidiaries of TDS, and Sherry S. Treston, the Assistant Secretary of certain subsidiaries of TDS, are partners of Sidley & Austin, the principal law firm of TDS and its subsidiaries. Walter C.D. Carlson is also a trustee and beneficiary of the voting trust which controls the Company and TDS. He is the husband of Debora M. de Hoyos, a director of the Company. FEES AND EXPENSES The following is an estimate of expenses to be incurred in connection with the Offer and the Merger, other than: (i) the fees and expenses of PaineWebber (see "SPECIAL FACTORS--Opinion of Financial Advisor to the Special Committee and "THE TENDER OFFER--14. Fees and Expenses"); and (ii) the fees and expenses of CSFB (see "SPECIAL FACTORS--Analysis of Financial Advisor to TDS" and "THE TENDER OFFER--14. Fees and Expenses"). The Merger Agreement provides that all costs and 39 expenses incurred in connection with the Offer and the Merger will be paid by the party incurring such costs and expenses. Expenses to be paid by Purchaser and its affiliates: Legal Fees.............................................................. $ 200,000 Printing and Mailing.................................................... $ 250,000 Advertising............................................................. $ 71,430 Filing Fees............................................................. $ 1,824 Depositary Fees......................................................... $ 10,000 Information Agent Fees.................................................. $ 5,000 Miscellaneous........................................................... $ 6,500 --------- Total............................................................... $ 544,754 Expenses to be paid by the Company: Legal Fees and Expenses................................................. $ 40,000 Printing and Mailing.................................................... $ 30,000 Miscellaneous........................................................... $ 2,500 --------- Total............................................................... $ 72,500
40 THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment, and pay for, (and thereby purchase) all Common Shares validly tendered prior to the Expiration Date and not withdrawn as permitted by "THE TENDER OFFER--4. Withdrawal Rights". Purchaser expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the offer is open, including the occurrence of any of the conditions specified in "THE TENDER OFFER--12. Certain Conditions of the Offer", by giving oral or written notice of such extension to the Depositary. During any such extension, all Common Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Common Shares. See "THE TENDER OFFER--4. Withdrawal Rights". Subject to the applicable regulations of the Commission, Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Common Shares were theretofore accepted for payment, payment for, any Common Shares, pending receipt of any regulatory approval specified in "THE TENDER OFFER--13. Certain Legal Matters and Regulatory Approval", (ii) to terminate the Offer and not accept for payment any Common Shares upon the occurrence of any of the conditions specified in "THE TENDER OFFER--12. Certain Conditions of the Offer" and (iii) to waive any condition or otherwise amend the Offer in any respect, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the consent of the Company, Purchaser will not (i) reduce the number of Common Shares to be purchased in the Offer, (ii) reduce the price per Common Share payable pursuant to the Offer or change the form of consideration to be paid in the Offer, or (iii) modify or add conditions to the Offer in addition to those set forth in "THE TENDER OFFER--12. Certain Conditions of the Offer" (other than to waive any conditions to the extent permitted by the Merger Agreement) or (iv) except as set forth in this Section 1, extend the Offer. In the event all conditions set forth in the Merger Agreement shall have been satisfied other than the Minimum Condition, Purchaser may extend the Offer for a period or periods aggregating not more than 20 business days after the later of (i) initial Expiration Date and (ii) the date on which all other conditions set forth in the Merger Agreement shall have been satisfied, after which time Purchaser shall waive the Minimum Condition. Purchaser acknowledges that (i) Rule 14e-l(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Common Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Common Shares upon the occurrence of any of the conditions specified in "THE TENDER OFFER--12. Certain Conditions of the Offer" without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. 41 If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, Purchaser should decide to decrease the number of Common Shares being sought or to increase or decrease the consideration being offered in the Offer, such decrease in the number of Common Shares being sought or such increase or decrease in the consideration being offered will be applicable to all shareholders whose Common Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Common Shares being sought or such increase or decrease in the consideration being offered is first published, sent or given to holders of such Common Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Common Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Common Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Common Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR COMMON SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment, and will pay for, all Common Shares validly tendered prior to the Expiration Date and not properly withdrawn, promptly after the latest to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions to the Offer set forth in "THE TENDER OFFER--12. Certain Conditions of the Offer". Subject to applicable rules of the Commission and the terms and conditions of the Merger Agreement, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Common Shares pending receipt of any regulatory approval specified in "THE TENDER OFFER--13. Certain Legal Matters and Regulatory Approvals" or in order to comply in whole or in part with any other applicable law. In all cases, payment for Common Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Common Shares (the "Common Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Common Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares", (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (iii) any other documents required under the Letter of Transmittal. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Common Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Common Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Common Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving 42 payments from Purchaser and transmitting such payments to tendering shareholders whose Common Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Common Shares be paid, regardless of any delay in making such payment. If any tendered Common Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Common Share Certificates are submitted evidencing more Common Shares than are tendered, Common Share Certificates evidencing unpurchased Common Shares will be returned, without expense to the tendering shareholder (or, in the case of Common Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares", such Common Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser shall increase the consideration offered to any holders of Common Shares pursuant to the Offer, such increased consideration shall be paid to all holders of Common Shares that are purchased pursuant to the Offer, whether or not such Common Shares were tendered prior to such increase in consideration. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Common Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Common Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING COMMON SHARES. In order for a holder of Common Shares validly to tender Common Shares pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) the Common Share Certificates evidencing tendered Common Shares must be received by the Depositary at such address or such Common Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary (including an Agent's Message if the tendering shareholder has not delivered a Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Common Shares which are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. THE METHOD OF DELIVERY OF COMMON SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to the Common Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make a book-entry delivery of Common Shares by causing such Book-Entry Transfer Facility 43 to transfer such Common Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Common Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing referred to as an "Eligible Institution"), except in cases where Common Shares are tendered (i) by a registered holder of Common Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Common Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Common Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Common Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Common Share Certificate, with the signature(s) on such Common Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY. If a shareholder desires to tender Common Shares pursuant to the Offer and the Common Share Certificates evidencing such shareholder's Common Shares are not immediately available or such shareholder cannot deliver the Common Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Common Shares may nevertheless be tendered, provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (iii) the Common Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Common Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal are received by the Depositary within three Amex trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, payment for Common Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Common Share Certificates evidencing such Common Shares, or a Book-Entry Confirmation of the delivery of such Common Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal. 44 DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Common Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. Subject to the terms of the Merger Agreement, Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity in the tender of any Common Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Common Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, TDS, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Common Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Common Shares or other securities issued or issuable in respect of such Common Shares on or after February 11, 1998). All such proxies shall be considered coupled with an interest in the tendered Common Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Common Shares for payment. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Common Shares (and such other Common Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Common Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Common Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Common Shares, Purchaser must be able to exercise full voting rights with respect to such Common Shares. The acceptance for payment by Purchaser of Common Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF COMMON SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDERS CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. 4. WITHDRAWAL RIGHTS. Tenders of Common Shares made pursuant to the Offer are irrevocable except that such Common Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after April 18, 1998. If Purchaser extends the Offer, is delayed in its acceptance for payment of Common Shares or is unable to accept Common Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of 45 Purchaser, retain tendered Common Shares, and such Common Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Common Shares to be withdrawn, the number of Common Shares to be withdrawn and the name of the registered holder of such Common Shares, if different from that of the person who tendered such Common Shares. If Common Share Certificates evidencing Common Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Common Share Certificates, the serial numbers shown on such Common Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Common Shares have been tendered for the account of an Eligible Institution. If Common Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares", any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Common Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, TDS, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Common Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Common Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares". 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Sales of Common Shares pursuant to the Offer will be taxable transactions for federal income tax purposes. A holder of Common Shares who tenders such shares will recognize gain or loss in an amount equal to the difference between the amount of cash received and such holder's tax basis in his or her shares. Any gain or loss recognized on the sale will be capital gain or loss, assuming that the tendering shareholder's Common Shares were "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") at the time of sale. The excess of long-term capital gains over net short-term capital losses is generally taxed at a lower rate than ordinary income for noncorporate taxpayers. Such taxpayers generally are subject to a maximum rate of 28% on gain realized on the disposition of a capital asset held for more than one year but not more than 18 months, and a maximum rate of 20% on gain realized on the disposition of a capital asset held for more than 18 months. The Merger is structured to qualify as a tax-free reorganization under the Code. Assuming the Merger so qualifies, for federal income tax purposes (i) no gain or loss will be recognized by the Purchaser or the Company as a result of the Merger, (ii) none of TDS, the Company, the Purchaser or any direct or indirect wholly owned subsidiary of TDS or the Company will recognize gain or loss as a result of the conversion of its common stock, par value $1.00 per share, of Purchaser into Company capital stock, (iii) the holding period and basis applicable to any Company capital stock received in the Merger will be the same as the holding period and basis attributable to the Common Stock of Purchaser that is converted into such Company capital stock in the Merger, (iv) each holder of Common Shares (other than TDS, the Company, the Purchaser, or any direct or indirect wholly owned subsidiary of TDS or the Company) will recognize gain or loss equal to the difference between the amount of cash such holder receives upon the Merger and such holder's tax basis in such shares, and (v) each holder of Common Shares who dissents from the Merger, and demands and perfects his or her appraisal rights under Delaware Law, will recognize gain or 46 loss measured by the difference between the deemed "fair value" and such holder's tax basis in such shares. Assuming that the holder's Common Shares were "capital assets" within the meaning of Section 1221 of the Code, any gain or loss the holder recognizes as a result of the Merger will be capital gain or loss, and generally will be subject to tax at the rates discussed in the preceding paragraph. THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY, AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE OFFER OR THE MERGER. IN ADDITION, THE DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES OR TO TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE (FOR EXAMPLE, INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES, TAX-EXEMPT ORGANIZATIONS, FOREIGN ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES). IT ALSO DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE OFFER OR THE MERGER. THE DISCUSSION SET FORTH ABOVE IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. NO RULINGS HAVE BEEN, OR WILL BE, SOUGHT FROM THE INTERNAL REVENUE SERVICE CONCERNING THE TAX CONSEQUENCES OF THE OFFER OR THE MERGER. EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC CONSEQUENCES OF THE OFFER OR THE MERGER TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS. 6. PRICE RANGE OF COMMON SHARES; DIVIDENDS. The Common Shares principally are traded on Amex under the symbol "APP" and listed in the newspapers as "AmPaging." As of February 11, 1997, the Company's Common Shares were held by 111 record owners. All of the Series A Common Shares were held by TDS. No public trading market exists for the Series A Common Shares, but the Series A Common Shares are convertible on a share-for-share basis into Common Shares. The high and low sales prices of the Common Shares as reported by the Amex were as follows:
COMMON SHARES -------------------- CALENDAR PERIOD HIGH LOW - -------------------------------------------------------------------------------------------- --------- --------- 1996 First Quarter............................................................................. $ 7.375 $ 6.250 Second Quarter............................................................................ 10.000 6.500 Third Quarter............................................................................. 7.563 5.500 Fourth Quarter............................................................................ 6.125 4.625 1997 First Quarter............................................................................. $ 5.125 $ 3.438 Second Quarter............................................................................ 4.000 1.313 Third Quarter............................................................................. 3.125 1.500 Fourth Quarter............................................................................ 2.875 1.875 First Quarter (through February 13, 1998)................................................. $ 2.500 $ 2.000
The Company has never paid any cash dividends and currently intends to retain any future earnings for use in the Company's business. In addition, the Revolving Credit Agreement with TDS prohibits the payment of dividends on the Company's Common Shares and Series A Common Shares, except to the 47 extent of one-half of the cumulative consolidated net income, if any, of the Company for the period after December 31, 1993. On December 22, 1997, the last full trading day prior to the announcement of TDS's original offer to acquire the Company, the closing price per Common Share as reported Amex was $2.125. On February 10, 1998, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the closing price per Common Share as reported on Amex was $2.375. On February 17, 1998, the last full trading day prior to the commencement of the Offer, the closing price per Common Share as reported on Amex was $2.44. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMMON SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Purchaser nor TDS assumes any responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Purchaser or TDS. GENERAL. The Company was formed in 1980 under Delaware Law as a wholly owned subsidiary of TDS. The Company provides one-way and two-way wireless communication and messaging services in 21 states and the District of Columbia through 35 sites and service offices, with operations concentrated in Florida and in the mid-Atlantic and Midwest regions. In 1994, the Company completed an initial public offering of Common Shares and, since that time, has made no additional underwritten public offerings of Common Shares. FINANCIAL INFORMATION. Set forth below is certain selected financial information relating to the Company which has been excerpted or derived from the audited financial statements for the fiscal years ended 1997 and 1996. In addition, Schedule V hereto sets forth the Company's audited financial statements for the fiscal years ended December 31, 1997 and 1996. 48 AMERICAN PAGING, INC. SELECTED FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Service Revenue.............................................................. $ 85,937 $ 93,841 $ 93,034 ---------- ---------- ---------- Service Operating Expenses Cost of services........................................................... 27,822 26,712 22,294 Sales and marketing........................................................ 32,767 32,862 20,661 General and administrative................................................. 29,322 37,579 34,403 Depreciation and amortization.............................................. 32,040 33,777 24,692 ---------- ---------- ---------- 121,951 130,930 102,050 ---------- ---------- ---------- Service Operating Loss....................................................... (36,014) (37,089) (9,016) ---------- ---------- ---------- Equipment Sales Revenue.................................................................... 8,476 10,346 14,116 Cost of equipment sold..................................................... 7,769 9,883 14,097 ---------- ---------- ---------- Equipment Sales Income....................................................... 707 463 19 ---------- ---------- ---------- Operating Loss............................................................... (35,307) (36,626) (8,997) ---------- ---------- ---------- Investment and Other Income/(Expense) Investment loss in joint venture........................................... (459) (1,201) (1,151) Interest income............................................................ 128 259 175 Other, net................................................................. 75 33 121 ---------- ---------- ---------- (256) (909) (855) ---------- ---------- ---------- Loss Before Interest and Income Taxes........................................ (35,563) (37,535) (9,852) Interest expense--affiliates................................................. 16,073 7,650 5,533 ---------- ---------- ---------- Loss Before Income Taxes..................................................... (51,636) (45,185) (15,385) Income tax expense........................................................... -- 342 325 ---------- ---------- ---------- Net Loss..................................................................... $ (51,636) $ (45,527) $ (15,710) ---------- ---------- ---------- ---------- ---------- ---------- Weighted Average Common Shares and Series A Common Shares (000s)............. 20,111 20,048 20,017 Net Loss per Common Shares and Series A Common Share......................... $ (2.57) $ (2.27) $ (0.78) ---------- ---------- ---------- ---------- ---------- ----------
49 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ---------------------- 1997 1996 ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Current Assets Cash and cash equivalents............................................................... $ 3,058 $ 557 Temporary investments................................................................... 61 150 Accounts receivable: Customers, net of reserves of $2,300 and $1,883, respectively......................... 9,051 12,639 Other................................................................................. 224 234 Inventory............................................................................... 6,851 8,548 Prepaid expenses and other.............................................................. 1,076 1,231 ---------- ---------- 20,321 23,359 ---------- ---------- Investments Investment in joint venture............................................................. 185 193 Marketable securities................................................................... 244 286 ---------- ---------- 429 479 ---------- ---------- Property, Plant and Equipment In service and under construction....................................................... 118,275 113,000 Less accumulated depreciation........................................................... 75,045 61,528 ---------- ---------- 43,230 51,472 ---------- ---------- Intangible Assets PCS licenses............................................................................ 60,901 60,901 Other intangibles, net of accumulated amortization of $21,227 and $17,543, respectively.......................................................................... 10,959 14,681 ---------- ---------- 71,860 75,582 ---------- ---------- Net Deferred Tax Asset.................................................................... 313 313 ---------- ---------- Total Assets.............................................................................. $ 136,153 $ 151,205 ---------- ---------- ---------- ---------- LIABILITIES AND COMMON SHAREHOLDERS' EQUITY Current Liabilities Due to affiliates Accounts payable...................................................................... $ 1,483 $ 1,486 Accrued interest...................................................................... 1,527 1,169 Accounts payable........................................................................ 942 3,401 Unearned revenue and deposits........................................................... 6,827 10,527 Accrued taxes........................................................................... 477 357 Accrued compensation.................................................................... 3,551 1,266 Other current liabilities............................................................... 2,521 2,841 ---------- ---------- 17,328 21,047 ---------- ---------- Revolving Credit Agreement--TDS........................................................... 179,990 139,960 ---------- ---------- Common Shareholders' Equity Common Shares, par value $1 per share; authorized 50,000,000 shares; issued and outstanding 7,645,446 shares in 1997 and 7,559,633 shares in 1996..................... 7,645 7,560 Series A Common Shares, par value $1 per share; authorized 50,000,000 shares; issued and outstanding 12,500,000 shares......................................................... 12,500 12,500 Additional paid-in capital.............................................................. 72,777 72,589 Retained deficit........................................................................ (154,087) (102,451) ---------- ---------- (61,165) (9,802) ---------- ---------- Total Liabilities and Common Shareholders' Equity......................................... $ 136,153 $ 151,205 ---------- ---------- ---------- ----------
50 RATIO OF EARNINGS TO FIXED CHARGES; BOOK VALUE PER SHARE. The ratio of earnings to fixed charges for the two most recent fiscal years is not relevant for the Company, given that the Company has had negative earnings in the last two fiscal years. The book value per Common Share was $(3.04) at December 31, 1997 and $(0.49) per Common Share at December 31, 1996. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at 450 Fifth Street, N.W., Washington, D. C. 20549. The information should also be available for inspection at the principal offices of the Company located at 1300 Godward Street, N.E., Suite 3100, Minneapolis, MN 55413. 8. CERTAIN INFORMATION CONCERNING PURCHASER, TDS AND THE VOTING TRUST. Purchaser is a corporation organized under the laws of Delaware and has not carried on any activities other than in connection with the Offer and the Merger. The principal offices of Purchaser are located at 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Purchaser is an direct, wholly owned subsidiary of TDS and was organized by TDS for the purpose of acquiring the Common Shares pursuant to the Offer. Purchaser currently owns 12,500,000 Series A Common Shares which have a fifteen votes per share on all matters and are convertible on a share-for-share basis into Common Shares and 4,000,000 Common Shares, constituting 100% of the currently outstanding Series A Common Shares and approximately 52.3% of the outstanding Common Shares for a combined total of approximately 81.9% of the Company's outstanding classes of capital stock and approximately 98.1% of their combined voting power. TDS is a corporation organized under the laws of Iowa. Its principal office is located at 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. TDS's principal business is that of providing diversified telecommunications services. TDS, directly and through its subsidiaries, has established local telephone, cellular telephone and radio paging operations, and is developing personal communications services. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of Purchaser and TDS and certain other information are set forth in Schedule I hereto. The Voting Trust was created under an Agreement dated June 30, 1989 ("The Voting Trust"). The principal business address of The Voting Trust is c/o TDS, 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. The Voting Trust holds TDS's Series A Common Shares, par value $1.00 per share (the "TDS Series A Common Shares") and was created to facilitate long-standing relationships among the trusts' certificate holders. Under the terms of The Voting Trust, the trustees hold and vote the TDS Series A Common Shares held in the trust. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the trustees of The Voting Trust are set forth in Schedule I hereto. Except as described in this Offer to Purchase, (i) none of Purchaser, TDS, The Voting Trust nor, to the best knowledge of Purchaser, TDS and The Voting Trust, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Purchaser, TDS, The Voting Trust or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any 51 Common Shares and (ii) none of Purchaser, TDS, The Voting Trust nor, to the best knowledge of Purchaser, TDS and The Voting Trust, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Common Shares during the past 60 days. Except as provided in the Merger Agreement, the Asset Contribution Agreement and as otherwise described in this Offer to Purchase, none of Purchaser, TDS, The Voting Trust nor, to the best knowledge of Purchaser, TDS and The Voting Trust, any of the persons listed in Schedules I and II to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guaranties against loss, guaranties of profits, division of profits or loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since January 1, 1996, neither Purchaser, TDS nor The Voting Trust nor, to the best knowledge of Purchaser, TDS and The Voting Trust, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since January 1, 1996, there have been no contacts, negotiations or transactions between any of Purchaser, TDS, The Voting Trust or any of their subsidiaries or, to the best knowledge or Purchaser, TDS and The Voting Trust, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $10 million. TDS will ensure that Purchaser has sufficient funds to acquire all the outstanding Common Shares pursuant to the Offer and the Merger. TDS will provide such funds from its working capital or its affiliates' working capital or from existing credit facilities or new credit facilities established for this purpose or from a combination of the foregoing. No decision has been made concerning which of the foregoing sources TDS will utilize. Such decision will be made based on TDS's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions and such other factors as TDS may deem appropriate. TDS anticipates that any indebtedness incurred through borrowings under credit facilities will be repaid from a variety of sources, which may include, but may not be limited to, funds generated internally by TDS and its affiliates bank refinancing, and the public or private sale of debt or equity securities. No decision has been made concerning the method TDS will employ to repay such indebtedness. Such decision will be made based on TDS's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions and such other factors as TDS may deem appropriate. 10. DIVIDENDS AND DISTRIBUTIONS. If, on or after February 11, 1998, the Company should declare or pay any dividend on the Common Shares or make any other distribution (including the issuance of additional shares of capital stock pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Common Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Common Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's rights under "THE TENDER OFFER--12. Certain Conditions of the Offer", (i) the purchase price per Common Share payable by Purchaser pursuant to the Offer will be reduced (subject to the Merger Agreement) to the extent any such dividend or distribution is payable in cash and (ii) any non-cash dividend, distribution or right shall be received and held by the tendering shareholder for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of Purchaser, 52 accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, Purchaser will be entitled to all the rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. 11. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON SHARES; AMERICAN STOCK EXCHANGE, INC. AND EXCHANGE ACT REGISTRATION. The purchase of Common Shares by Purchaser pursuant to the Offer will reduce the number of Common Shares that might otherwise trade publicly and will reduce the number of holders of Common Shares, which could adversely affect the liquidity and market value of the remaining Common Shares held by the public. The Common Shares are currently listed on the Amex. Depending upon the aggregate market value of Common Shares not acquired pursuant to the Offer and the number of Common Shares held by other parties, the Common Shares may no longer meet the requirements for continued listing on the Amex and may be delisted from the Amex. Amex-published guidelines indicate that the Amex normally considers delisting a security in the event that, among other things, the total number of public shareholders is less than 300, or the number of publicly held shares (exclusive of holdings of officers, directors, controlling shareholders or other family or concentrated holdings) is less than 200,000, or the aggregate market value of shares publicly held is less than $1.0 million. TDS intends to cause the Common Shares to be delisted for quotation by Amex following consummation of the Offer. Moveover, pursuant to the Asset Contribution Agreement, TDS is obligated to use its best efforts to cause Purchaser to complete the Merger, subject to the approval of the Merger by the Special Committee and TDS is not required to complete a Merger which does not have the recommendation of the Special Committee. The Common Shares are currently "margin securities", as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Common Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Common Shares could no longer be used as collateral for loans made by brokers. The Common Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Common Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Common Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Common Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Common Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Common Shares under the Exchange Act were terminated, the Common Shares would no longer be "margin securities" or be eligible for Amex listing of the Common Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term or provision of the Offer or the Merger Agreement, Purchaser shall not be required to accept for payment or pay for any Common Shares tendered pursuant to the Offer, and may terminate or amend the Offer, at any time on or after February 11, 1998, and before the acceptance of the Common Shares for payment, if (i) the Asset Contribution Agreement Condition is not satisfied or (ii) any of the following events or facts shall have occurred: 53 (a) there shall be threatened, instituted or pending any action, proceeding or application by any governmental authority, or by any other person, domestic or foreign, before any court or governmental authority (which, if brought by such other person, has a reasonable likelihood of success), (i)(A) challenging or seeking to, or which is reasonably likely to, make illegal, delay or otherwise directly or indirectly restrain or prohibit, or seeking to, or which is reasonably likely to, impose voting, procedural, price or other requirements, in addition to those required by Federal securities laws and Delaware Law each as in effect on the date of the Offer, in connection with the making of the Offer, the acceptance for payment of, or payment for, some of or all the Common Shares by TDS, Purchaser or any other affiliate of TDS or the consummation by TDS, Purchaser or any other affiliate of TDS of the Merger, (B) seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Offer or the Merger, (ii) seeking to impose or confirm limitations on the ability of TDS, Purchaser or any other affiliate of TDS effectively to exercise full rights of ownership of Common Shares, including, without limitation, the right to vote any Common Shares acquired or owned by TDS, Purchaser or any other affiliate of TDS on all matters properly presented to the Company's shareholders, (iii) seeking any material diminution in the benefits expected to be derived by TDS, Purchaser or any other affiliate of TDS as a result of the transactions contemplated by the Offer or the Merger, (iv) otherwise directly or indirectly relating to the Offer or the Offer Documents or which otherwise, in the sole judgment of Purchaser, might materially adversely affect the Company or any of its subsidiaries or TDS, Purchaser or any other affiliate of TDS or the value of Common Shares or (v) in the sole judgment of Purchaser, materially adversely affect the business, assets, liabilities, capitalization, results of operations, shareholders' equity, condition (financial or otherwise) or prospects of the Company or any of its subsidiaries; or (b) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction proposed, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, (i) TDS, Purchaser or any other affiliate of TDS or the Company or (ii) the Offer or the Merger by any government, legislative body or court, domestic, foreign or supranational, or Governmental Authority, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) there shall have occurred any material adverse change, or any condition, event or development that is reasonably likely to result in a material adverse change, in the business, assets, liabilities, capitalization, results of operations, shareholders' equity, condition (financial or otherwise) or prospects of the Company; or (d) there shall have occurred or been threatened (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) any extraordinary or material adverse change in the financial markets or major stock exchange indices in the United States or abroad, (iii) any change in the general political, market, economic or financial conditions in the United States that is reasonably likely to have a material adverse effect upon the business, properties, assets, liabilities, capitalization, shareholders' equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of the Company or of TDS or the trading in, or value of, Common Shares, (iv) any material change in United States currency exchange rates or a suspension of, or limitation on, the markets therefor, (v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (vi) any limitation (whether or not mandatory) by any government, domestic, foreign or supranational, or Governmental Authority on, or other event that is reasonably likely to affect the extension of credit by banks or other lending institutions in the United States, (vii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (viii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (e) any required approval, permit, authorization, favorable review or consent of any Governmental Authority shall not have been obtained on terms satisfactory to Purchaser; or 54 (f) (i) it shall have been publicly disclosed or TDS shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more than 15% of the outstanding Common Shares has been acquired by another person, entity or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) or (ii) (x) the Board of Directors of the Company or any committee thereof (including the API Special Committee) shall have withdrawn or modified in a manner adverse to TDS or Purchaser its approval or recommendation of the Offer, the Merger or this Agreement, or approved or recommended any Proposed API Acquisition Transaction (other than this Agreement), (y) the Company shall have entered into any agreement with respect to any Proposed API Acquisition Transaction (other than this Agreement) or (z) the Board of Directors of the Company or any committee (including the Special Committee) thereof shall have resolved to do any of the foregoing; or (g) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as if such representations and warranties were made as of such time; or (h) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under this Agreement; or (i) this Agreement shall have been terminated in accordance with its terms; or (j) Purchaser and the Company (with the approval of the Special Committee) shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment or payment for Common Shares thereon; which, in the judgment of Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by TDS, Purchaser, or any of their affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and TDS and may be asserted by Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Purchaser concerning the events described in this Annex II will be final and binding upon all parties. 13. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Based upon its examination of publicly available information with respect to the Company and the review of certain information furnished by the Company to TDS and discussions of representatives of TDS with representatives of the Company during TDS's investigation of the Company (see "SPECIAL FACTORS-- Background of the Offer and the Merger"), neither Purchaser nor TDS is aware of any license or other regulatory permit that appears to be material to the business of the Company, which might be adversely affected by the acquisition of Common Shares by Purchaser pursuant to the Offer or, except as set forth below, of any approval or other action by any domestic (federal or state) or foreign governmental, administrative or regulatory authority or agency which would be required prior to the acquisition of Common Shares by Purchaser pursuant to the Offer. Should any such approval or other action be required, it is Purchaser's present intention to seek such approval or action. Purchaser does not currently intend, however, to delay the purchase of Common Shares tendered pursuant to the Offer pending the outcome of any such action or the receipt of any such approval (subject to Purchaser's right to decline to purchase Common Shares if any of the conditions in Section 12 shall have occurred). There can be no assurance that any such approval 55 or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, Purchaser or TDS or that certain parts of the businesses of the Company, Purchaser or TDS might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or other action or in the event that such approval was not obtained or such other action was not taken. Purchaser's obligation under the Offer to accept for payment and pay for Common Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this Section 13. See "THE TENDER OFFER--12. Certain Conditions of the Offer". STATE TAKEOVER LAWS. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of Delaware Law prevents an "interested shareholder" (generally a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Delaware corporation for a period of three years following the date such person became an interested shareholder unless, among other things, prior to such date the board of directors of the corporation approved either the business combination or the transaction in which the interested shareholder became an interested shareholder. TDS was the only shareholder when the Company went public and thus is exempt from the three-year limitation on a business combination between the Company and TDS is no longer in effect. Accordingly, Section 203 is inapplicable to the Offer and the Merger. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS CORP V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. The Company conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws are applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approval from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Common Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, Purchaser may not be obligated to accept for payment any Common Shares tendered. See "THE TENDER OFFER--12. Certain Conditions of the Offer". ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the FTC and certain waiting period requirements have been satisfied. The acquisition of Common Shares by Purchaser pursuant to the Offer, however, is not subject to such requirements because Purchaser currently owns in excess of 50% of the outstanding Common Shares. See "THE TENDER OFFER--2. Acceptance for Payment and Payment for Common Shares". The 56 combination by TDS and TSR Paging of their respective paging businesses in accordance with the terms and conditions of the Asset Contribution Agreement is also not subject to these requirements because the FTC is of the view that such combinations that occur in connection with the formation of a limited liability company are not subject to the reporting requirements of the HSR Act. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Common Shares by Purchaser pursuant to the Offer and such as the proposed contributions contemplated by the Asset Contribution Agreement. At any time before or after the purchase of Common Shares pursuant to the Offer by Purchaser or before or after the contributions contemplated by the Asset Contribution Agreement, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Common Shares pursuant to the Offer, seeking the divestiture of Common Shares purchased by Purchaser or the divestiture of substantial assets of TDS, the Company or their respective subsidiaries seeking to enjoin the contributions pursuant to the Asset Contribution Agreement, or seeking the divestiture of substantial assets acquired by TSR Wireless pursuant to the Asset Contribution Agreement. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of information available to TDS relating to the businesses in which TDS, the Company and their respective subsidiaries are engaged, TDS and Purchaser believe that the Offer will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or contribution on antitrust grounds will not be made or, if such a challenge is made, what the result would be. See "THE TENDER OFFER--12. Certain Conditions of the Offer". FCC. Pursuant to the Asset Contribution Agreement, Purchaser is not required to accept for payment or pay for any Common Shares unless, among other things, the Asset Contribution Agreement Condition is satisfied and the Asset Contribution Agreement is in full force and effect and all of the conditions to the closing of the transactions contemplated by the Asset Contribution Agreement shall have been satisfied. It is a condition to the obligations of both TDS and TSR Paging under the Asset Contribution Agreement that all authorizations, consents and permits of the FCC necessary to effect the transfer of the assets of the Company and TSR Paging to TSR Wireless and the performance of the other obligations of the parties under the Asset Contribution Agreement shall have been obtained. The transactions contemplated by the Asset Contribution Agreement, including but not necessarily limited to the assignment of the FCC licenses of TSR Paging to TSR Wireless and the assignment of the FCC licenses of the Company to TSR Wireless, can only be accomplished upon receipt of prior FCC consent. TSR Paging and the Company have filed applications to obtain FCC grant by final FCC order of all required FCC consents to assignment of the FCC licenses of TSR Paging and of the FCC licenses of the Company. Under FCC rules, many of the foregoing applications may not be granted until the statutory thirty day period to permit public comment on these applications expires in early March. Assuming that no public comments are filed, grants of all required FCC consents could be obtained as early as mid-March. Under the terms of the Asset Contribution Agreement, the assignments of FCC licenses of TSR Paging and FCC licenses of the Company are not required to be consummated until these FCC consents are final, non-appealable and no longer subject to administrative or judicial reconsideration, review or appeal. Absent waiver of finality, the closing of the foregoing assignments would not take place until late-April at the earliest. This schedule could also be substantially delayed if grant of any of the required FCC consents is opposed or otherwise challenged at the FCC. 14. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Common Shares pursuant to the Offer. CFSB is acting as Dealer Manager in connection with the Offer and as financial advisor to TDS in connection with the Merger and the TSR Transaction, for which services CSFB will receive an aggregate fee of $1,750,000. TDS also has agreed to reimburse CSFB for its out-of-pocket expenses, including the fees and expenses of legal counsel and other advisors, incurred in connection with its engagement, and to 57 indemnify CSFB and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. CSFB has in the past provided, and is currently providing, investment banking services to TDS unrelated to the proposed TSR Transaction, Offer and Merger, for which services CSFB has received and will receive compensation. PaineWebber is acting as financial advisor to the Special Committee in connection with the Offer and Merger. In accordance with the engagement letter dated January 8, 1998 between the Special Committee and PaineWebber, the Special Committee will pay PaineWebber an aggregate fee of $450,000 for its services and will also reimburse PaineWebber for certain of its out-of-pocket expenses incurred in connection with its engagement. The Special Committee also agreed, under separate agreement, to indemnify PaineWebber and certain related persons against certain liabilities in connection with its engagement, including certain liabilities under the federal securities laws. 15. MISCELLANEOUS. Purchaser is not aware of any jurisdiction in which the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Common Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Common Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER, TDS OR THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, TDS and Purchaser have filed with the Commission the Schedule 14D-1 together with exhibits, furnishing additional information with respect to the Offer. Pursuant to Rule 14d-9 promulgated under the Exchange Act, the Company has filed with the Commission the Schedule 14D-9 with respect to the Offer, and may file amendments thereto. TDS, Purchaser and the Company have filed a statement on Schedule 13E-3 with respect to the Offer and may file amendments to the Schedule 13E-3. Such statements, including exhibits and any amendments thereto, which furnish certain additional information with respect to the Offer, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in "THE TENDER OFFER--7. Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). API MERGER CORP. February 18, 1998 58 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF TDS AND PURCHASER AND THE TRUSTEES OF THE VOTING TRUST DIRECTORS AND EXECUTIVE OFFICERS OF TDS. The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of TDS. Each person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- James Barr III Director of TDS and President of TDS Telecommunications Corporation, a wholly-owned subsidiary of TDS, located at TDS Telecommunications Corporation, 301 South Westfield Road, Madison, Wisconsin 53705-0158. James Barr III has had the principal occupation listed above for more than the past five years. Donald R. Brown Retired December 1997 and can be reached at the business address at 834 Ethan's Glen Drive, Knoxville, Tennessee 37923. Prior to his retirement, Donald R. Brown had been President of the Wholesale Market Groups of TDS Telecommunications Corporation, a subsidiary of TDS which operates local telephone companies, between 1995 and 1997. He was also Senior Vice President of TDS Telecom between 1992 and 1997. TDS Telecom is located at 834 Ethan's Glen Drive, Knoxville, Tennessee 37923. LeRoy T. Carlson Director and Chairman of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. LeRoy T. Carlson has had the principal occupation listed above for more than the past five years. LeRoy T. Carlson, Jr. Director and President (Chief Executive Officer) of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. LeRoy T. Carlson, Jr. has had the principal occupation listed above for more than the past five years. Letitia G.C. Carlson Director of TDS, Medical Doctor and Assistant Professor, George Washington University Medical Center, located at George Washington University, Medical Center, 2150 Pennsylvania Ave. N.W., Washington, D.C. 20037. Letitia G.C. Carlson has had the principal occupation listed above for more than the past five years. Walter C.D. Carlson Director of TDS and Partner in the law firm of Sidley & Austin, located at Sidley & Austin, One First National Plaza, Chicago, Illinois 60603. Walter C.D. Carlson has had the principal occupation listed above for more than the past five years. Michael K. Chesney Vice President--Corporate Development of TDS located at 1014 South Briarcliffe Circle, Maryville, Tennessee 37803. Michael K. Chesney was appointed a Vice President--Corporate Development of TDS in 1994. Prior to that he was Director of Corporate Development of TDS for more than five years.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- George L. Dienes Vice President--Corporate Development of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. George L. Dienes has had the principal occupation listed above for more than the past five years. C. Theodore Herbert Vice President--Human Resources of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. C. Theodore Herbert has had the principal occupation listed above for more than the past five years. Rudolph E. Hornacek Director and Vice President--Engineering of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Rudolph E. Hornacek has had the principal occupation listed above for more than the past five years. Michael G. Hron Secretary of TDS and Partner in the law firm of Sidley & Austin, located at Sidley & Austin, One First National Plaza, Chicago, Illinois 60603. Michael G. Hron has been Secretary of TDS and has had the principal occupation listed above for more than the past five years. Donald C. Nebergall Director and Consultant to TDS and other companies, at 2919 Applewood Place, N.E., Cedar Rapids, Iowa 52402. Donald C. Nebergall has had the principal occupation listed above for more than the past five years. H. Donald Nelson President of United States Cellular Corporation, an over 80%-owned subsidiary of TDS, located at United States Cellular Corporation, 8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631-3415. H. Donald Nelson has had the principal occupation listed above for more than the past five years. George W. Off Director of TDS and President and Chief Executive Officer of Catalina Marketing Corporation, located at Catalina Marketing Corporation, 11300 Ninth Street, North, St. Petersburg, Florida 33716. George W. Off became President and Chief Executive Officer of the Catalina Marketing Corporation in 1994. Prior to that, Mr. Off was its President and Chief Operating Officer between 1992 and 1994. Martin L. Solomon Private Investor, located at 2665 South Bayshore Drive, Suite 906, Coconut Grove, Florida 33133. Martin L. Solomon has had the principal occupation listed above for more than the past five years. Karen M. Stewart Vice President--Investor Relations of TDS, located at Telephone and Data Systems, Inc., 8401 Greenway Boulevard, Middleton, Wisconsin 53562. Karen M. Stewart was appointed Vice President--Investor Relations of TDS in July 1995. Prior to that she was Assistant Controller--External Reporting of TDS between November 1995 and July 1995. Before that, Ms. Stewart was Director--Financial Reporting of TDS between January 1991 and November 1994. Terrence T. Sullivan President of American Paging, Inc., an over 80%-owned subsidiary of TDS, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Terrence T. Sullivan has been a director and President and Chief Executive Officer of the
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- Company since September 1996. Prior to that, Mr. Sullivan was Vice President-Finance (CFO) & Treasurer of the Company from January 1996 to September 1996. Prior to that time, Mr. Sullivan was Vice President of Finance and Administration, CFO and Treasurer of Microelectronics and Computer Technology Corporation, a consortium which conducts research and development, located at 3500 W. Balcones Center Drive, Austin, Texas 98759, from February 1995 to January 1996. Before that, Mr. Sullivan was Vice President of Finance, Administration and Contract Programs of Minnesota Supercomputer Center, Inc., which provides remote supercomputing services and software and is located at 1200 Washington Avenue, Minneapolis, Minnesota 55413, for more than five years. Murray L. Swanson Director and Executive Vice President--Finance of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Murray L. Swanson has had the principal occupation listed above for more than the past five years. Edward W. Towers Vice President--Cellular Development of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Edward W. Towers was appointed Vice President--Corporate Development and Operations of the Company in May 1997. Immediately prior thereto, Mr. Towers was Vice President--Market and Business Development of United States Cellular Corporation, an over 80%-owned subsidiary of TDS located at 8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631-3415. Herbert S. Wander Director of TDS and Partner in the law firm of Katten, Muchin & Zavis, located at Katten, Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60606-3693. Herbert S. Wander has had the principal occupation listed above for more than the past five years. Donald W. Warkentin President of Aerial Communications, Inc., an over 80%-owned subsidiary of TDS, located at Aerial Communications, Inc., 8410 West Bryn Mawr, Suite 1100, Chicago, Illinois 60631-3415. Donald W. Warkentin was appointed President of Aerial Communications, Inc. in 1995. Prior to that time Mr. Warkentin was Vice President of Multimedia Marketing for US West Communications, at P.O. Box 173754, Denver, Colorado 80217-3754, from 1994 to 1995. Before that, Mr. Warkentin was Head of Marketing for U.S. West Communications Mercury One-2-One in the United Kingdom, the world's first major market PCS venture. Byron A. Wertz Vice President--Corporate Development of TDS, located at Telephone and Data Systems, Inc., 8000 West 78th Street, Suite 400, Minneapolis, Minnesota 55439. Byron A. Wertz was appointed a Vice President-- Corporate Development of TDS in 1994. Prior to that he was Director-- Telecommunications Development of TDS for more than the past five years. Gregory J. Wilkinson Vice President and Corporate Controller of TDS, located at TDS Corporate Madison, 8410 Greenway Boulevard, P.O. Box 628010,
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- Madison, Wisconsin 53562-8010. Wilkinson has had the principal occupation listed above for more than five years. Scott H. Williamson Vice President--Acquisitions of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Scott H. Williamson was appointed Vice President--Acquisitions of TDS in November 1995. Prior to that he was Vice President, Corporate Development, of FMC Corporation, a manufacturer of machinery and chemicals located at 200 East Randolph Drive, Chicago, Illinois 60601, between 1993 and 1995. Before that, Mr. Williamson was Vice President of Acquisitions and Development of Anixter International (formerly Itel Corporation), a diversified holding company located at 2 North Riverside Plaza, Chicago, Illinois 60606 for more than five years.
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The sole director and the executive officers of Purchaser are set forth below. The table above for "Directors and Executive Officers of TDS" sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Purchaser. Each person is a citizen on the United States.
NAME POSITION - ------------------------------ ----------------------------------------------------------------------- LeRoy T. Carlson, Jr. Director and President of Purchaser Murray L. Swanson Vice President and Treasurer of Purchaser Scott H. Williamson Vice President of Purchaser Michael G. Hron Secretary of Purchaser
TRUSTEES OF THE VOTING TRUST The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years for each trustee of the Voting Trust. Each person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- LeRoy T. Carlson, Jr. President (Chief Executive Officer) of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. LeRoy T. Carlson, Jr. has had the principal occupation listed above for more than the past five years. Letitia G.C. Carlson Medical Doctor and Assistant Professor, George Washington University Medical Center, located at George Washington University, Medical Center, 2150 Pennsylvania Avenue, N.W., Washington, D.C. 20037. Letitia G.C. Carlson has had the principal occupation listed above for more than the past five years. Walter C.D. Carlson Partner in the law firm of Sidley & Austin, located at Sidley & Austin, One First National Plaza, Chicago, Illinois 60603. Walter C.D. Carlson has had the principal occupation listed above for more than the past five years.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- Melanie J. Heald Homemaker, at 7410 Longmeadow Road, Madison, Wisconsin 53717. Melanie J. Heald has had the principal occupation listed above for more than the past five years. Donald C. Nebergall Consultant to TDS and other companies, located at 2919 Applewood Place, N.E., Cedar Rapids, Iowa 52402. Donald C. Nebergall has had the principal occupation listed above for more than the past five years.
I-5 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of the Company. Each person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- James Barr III Director of the Company and President and Chief Executive Officer of TDS Telecommunications Corporation, a wholly-owned subsidiary of TDS, located at TDS Telecommunications Corporation, 301 South Westfield Road, Madison, Wisconsin 53705-0158. James Barr III has had the principal occupation listed above for more than the past five years. Dennis M. Beste Vice President--Finance, Chief Financial Officer and Treasurer of the Company, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Dennis M. Beste has been the Vice President--Finance, Chief Financial Officer and Treasurer of the Company since January 1997. Prior to that, Mr. Beste was Chief Operating Officer of Jacobs Trading Company, a wholesaler and retailer of excess and returned merchandise located at 1405 Highway 169, Plymouth, Minnesota, from October 1993 to December 1996. Before that, Mr. Beste was a financial and general management consultant to small businesses and served as the Principal and General Manager of Beste's, Inc., a start-up manufacturer of sporting goods equipment located at 3654 Glenhurst, St. Louis Park, Minnesota, from February 1992 to November 1993. LeRoy T. Carlson, Jr. Chairman and Director of the Company and President (Chief Executive Officer) of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. LeRoy T. Carlson, Jr. has had the principal occupation listed above for more than the past five years. Debora M. de Hoyos Director of the Company and Partner in the law firm of Mayer, Brown & Platt, located at Mayer, Brown & Platt, 190 S. LaSalle Street, Chicago, Illinois 60603. Debora M. de Hoyos has had the principal occupation listed above for more than the past five years. Michelle M. Haupt Vice President and Controller of the Company, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Michelle M. Haupt has been Vice President of the Company since January 1998 and Controller of the Company since September 1996. Prior to that, Ms. Haupt was Financial Reporting Manager of the Company from January 1995 to September 1996. Before that, Ms. Haupt was employed by Echo Bay Mines Ltd., a publicly-held gold mining company located at 705 Continental Drive, New Brighton, Minnesota, from May 1989 to June 1993 as Manager, Financial Accounting and Reporting, and from September 1988 to April 1989 as a Senior Internal Auditor. Michael G. Hron Secretary of the Company and Partner in the law firm of Sidley & Austin, located at Sidley & Austin, One First National Plaza, Chicago,
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- Illinois 60603. Michael G. Hron has been secretary of the Company and has had the principal occupation listed above for more than the past five years. Jean Burhardt Keffeler Director of the Company and Business and Management Consultant and President of The Keffeler Company, located at The Keffeler Company, 3424 Zenith Avenue, South, Minneapolis, Minnesota 55416. Jean Burhardt Keffeler has had the principal occupation listed above for more than the past five years. Lawrence J. Larsen Vice President--Human Resources of the Company, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Lawrence J. Larsen has been Vice President-- Human Resources of the Company since September 1997. Prior to that, Mr. Larsen was employed by the Waldorf Corporation, located at 2250 Wabash Avenue, St. Paul, Minnesota, for more than five years, most recently as Vice President of Human Resources. Larry A. Piumbroeck Vice President--Development and Engineering of the Company, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Larry A. Piumbroeck has been Vice President--Development and Engineering of the Company since September 1996. Prior to that, Mr. Piumbroeck was Vice President-- Business Development of the Company from April 1996 to September 1996. Before that, Mr. Piumbroeck was Director of PCS Development and General Manager of the Company's Minnesota operations from January 1994 to April 1996. Prior to that time, Mr. Piumbroeck was Vice President--Regional Manager for United States Cellular Corporation, TDS's subsidiary which provides cellular service, located at Appletree Square, Bloomington, Minnesota, from September 1987 to January 1994. Edwin L. Russell Director of the Company and Chairman, President and Chief Executive Officer of Minnesota Power, located at Minnesota Power, 30 West Superior Street, Duluth, Minnesota 55802. Edwin L. Russell has been President of Minnesota Power since May 1995 and Chairman and Chief Executive Officer of Minnesota Power since May 1996. Prior to that, Mr. Russell was employed by J.M. Huber Corporation, a privately held, broadly diversified manufacturing and natural resources company located at Edison, New Jersey, between 1989 and 1994 in various capacities, including Vice President of Corporate Development and Group Vice President. Terrence T. Sullivan Director, President and Chief Executive Officer of the Company, located at American Paging, Inc., 1300 Godward Street, N.E., Suite 3100, Minneapolis, Minnesota 55413-1767. Terrence T. Sullivan has been a director and President and Chief Executive Officer of the Company since September 1996. Prior to that, Mr. Sullivan was Vice President--Finance (CFO) & Treasurer of the Company from January 1996 to September 1996. Prior to that time, Mr. Sullivan was Vice President of Finance and Administration, CFO and Treasurer of Microelectronics and Computer Technology Corporation, a consortium which conducts research and
II-2
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------ --------------------------------------------------------------------------------- development located at 3500 W. Balcones Center Drive, Austin, Texas 98759, from February 1995 to January 1996. Before that, Mr. Sullivan was Vice President of Finance, Administration and Contract Programs of Minnesota Supercomputer Center, Inc., which provides remote supercomputing services and software and is located at 1200 Washington Avenue, Minneapolis, Minnesota 55413, for more than five years. Murray L. Swanson Director of the Company and Executive Vice President--Finance of TDS, located at Telephone and Data Systems, Inc., 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. Murray L. Swanson has had the principal occupation listed above for more than the past five years.
II-3 SCHEDULE III OPINION OF PAINEWEBBER INCORPORATED Investment Banking Division PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 212 713-2000 [LOGO] February 10, 1998 Special Committee of the Board of Directors American Paging, Inc. 1300 Godward Street North, Suite 3100 Minneapolis, MN 55413-1767 Members: American Paging, Inc. (the "Company"), Telephone and Data Systems, Inc. (the "Acquiring Company") and API Merger Corp., a wholly-owned subsidiary of the Acquiring Company (the "Purchaser"), propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which the Purchaser will commence a tender offer (the "Offer") for all shares of the Company's common stock, par value $1.00 per share (the "Shares") not owned by the Acquiring Company at a price of $2.50 per Share (the "Consideration"). The Offer is expected to commence on or prior to February 18, 1998. The Agreement also provides that, following consummation of the Offer, the Company will be merged with the Purchaser (the "Merger"). In the Merger, each Share will be converted into the right to receive the Consideration. You have asked us whether or not, in our opinion, the Consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger is fair to the shareholders of the Company other than the Purchaser and the Acquiring Company from a financial point of view. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed, among other public information, the Company's Annual Reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 1996 and the Company's Form 10-Q and the related unaudited financial information for the nine months ended September 30, 1997; (2) Reviewed the Company's unaudited financial information for the fiscal year ended December 31, 1997; (3) Reviewed certain information, including a 1998 financial budget, relating to the business, earnings, cash flow, and assets of the Company, furnished to us by the Company; (4) Conducted discussions with members of senior management of the Company concerning its businesses and prospects; (5) Reviewed the historical market prices and trading activity for the Shares and compared them with that of certain publicly traded companies which we deemed to be relevant; (6) Compared the results of operations of the Company with that of certain companies which we deemed to be relevant; (7) Compared the proposed financial terms of the transactions contemplated by the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; III-1 (8) Reviewed the draft of the Agreement dated February 10, 1998; and (9) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed necessary, including our assessment of regulatory, economic, market and monetary conditions. In preparing our opinion, we have relied on the accuracy and completeness of all information, publicly available, supplied or otherwise communicated to us by or on behalf of the Company, and we have not assumed any responsibility to independently verify such information. We have assumed, with your consent, that the 1998 financial budget examined by us was reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company as to the future performance of the Company. We have also relied upon assurances of the management of the Company that they are unaware of any facts that would make the information or 1998 financial budget provided to us incomplete or misleading. We have also assumed, with your consent, that any material liabilities (contingent or otherwise, known or unknown) are as set forth in the financial statements of the Company. We have not been engaged to make, nor have we made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company, nor have we been furnished with any such evaluations or appraisals. Our opinion is based upon regulatory, economic, market and monetary conditions existing on the date hereof. This opinion is directed to the Special Committee of the Board of Directors of the Company (the "Special Committee") and does not constitute a recommendation to any shareholder of the Company as to whether or not such shareholder should tender its Shares in the Offer. This opinion does not address the relative merits of the Offer and any other transactions or business strategies discussed by the Special Committee as alternatives to the Offer or the decision of the Special Committee with respect to the Offer. This opinion has been prepared for the information of the Special Committee in connection with the Offer and shall not be reproduced, summarized, described or referred to or provided to any other person or otherwise made public without the prior written consent of PaineWebber Incorporated ("PaineWebber"); provided, however, that the opinion may be reproduced in full in the Schedule 14D-9 and Offer to Purchase related to the Offer. Paine Webber is currently acting as financial advisor to the Special Committee in connection with the Offer and will receive a fee upon the delivery of this opinion. In the ordinary course of our business, we may trade the securities of the Company for our own account and for the accounts of our customers and, accordingly, may at any time hold long or short positions in such securities. On the basis of, and subject to the foregoing, we are of the opinion that the Consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger is fair to the shareholders of the Company other than the Purchaser and the Acquiring Company from a financial point of view. Very truly yours, PAINEWEBBER INCORPORATED /s/ PAINEWEBBER INCORPORATED -------------------------------------- III-2 SCHEDULE IV SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS AND TEXT OF SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, shareholders will have certain rights under Delaware Law to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Common Shares. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Common Shares, as of the day prior to the date on which the shareholders' vote was taken approving the Merger or similar business combination (excluding any element of value arising from the accomplishment or expectation of the Merger), required to be paid in cash to such dissenting holders for their Common Shares. In addition, such dissenting shareholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Common Shares. In determining the fair value of the Common Shares, the court is required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Common Shares, including, among other things, asset values and earning capacity. In WEINBERGER v. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be the same, more or less than the purchase price per Common Share in the Offer or the Merger Consideration. In addition, several decisions by Delaware courts have held that, in certain circumstances, a controlling shareholder of a company involved in a merger has a fiduciary duty to other shareholders. In determining whether a merger is fair to minority shareholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the shareholders and whether there was a fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER and RABKIN v. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available to minority shareholders in a cash-out merger is the right to appraisal described above. However, a damages remedy or injunctive relief may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. GENERAL CORPORATION LAW OF THE STATE OF DELAWARE 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to Section 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. IV-1 (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to Sections 251 (other than a merger effected pursuant to Section 251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the holders of the surviving corporation as provided in subsection (f) of Section 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (OR DEPOSITORY RECEIPTS IN RESPECT THEREOF) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under Section 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: 1. If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of his shares shall deliver to the corporation, before the taking of the vote on IV-2 the merger or consolidation, a written demand for appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to Section 228 or Section 253 of this title, each constituent corporation, either before the effective date of the merger or consolidation or within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section; provided that, if the notice is given on or after the effective date of the merger or consolidation, such notice shall be given by the surviving or resulting corporation to all such holders of any class or series of stock of a constituent corporation that are entitled to appraisal rights. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within twenty days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given; provided that, if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw his demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which IV-3 demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after his written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted his certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that he is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. IV-4 (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of his demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued share of the surviving or resulting corporation. (Last amended by Ch. 120, L. '97, eff. 7-l-97.) IV-5 SCHEDULE V AUDITED FINANCIAL STATEMENTS FOR THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997 REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS V-1 CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Service Revenue.............................................................. $ 85,937 $ 93,841 $ 93,034 ---------- ---------- ---------- Service Operating Expenses Cost of services........................................................... 27,822 26,712 22,294 Sales and marketing........................................................ 32,767 32,862 20,661 General and administrative................................................. 29,322 37,579 34,403 Depreciation and amortization.............................................. 32,040 33,777 24,692 ---------- ---------- ---------- 121,951 130,930 102,050 ---------- ---------- ---------- Service Operating Loss....................................................... (36,014) (37,089) (9,016) ---------- ---------- ---------- Equipment Sales Revenue.................................................................... 8,476 10,346 14,116 Cost of equipment sold..................................................... 7,769 9,883 14,097 ---------- ---------- ---------- Equipment Sales Income....................................................... 707 463 19 ---------- ---------- ---------- Operating Loss............................................................... (35,307) (36,626) (8,997) ---------- ---------- ---------- Investment and Other Income/(Expense) Investment loss in joint venture........................................... (459) (1,201) (1,151) Interest income............................................................ 128 259 175 Other, net................................................................. 75 33 121 ---------- ---------- ---------- (256) (909) (855) ---------- ---------- ---------- Loss Before Interest and Income Taxes........................................ (35,563) (37,535) (9,852) Interest expense--affiliates................................................. 16,073 7,650 5,533 ---------- ---------- ---------- Loss Before Income Taxes..................................................... (51,636) (45,185) (15,385) Income tax expense........................................................... -- 342 325 ---------- ---------- ---------- Net Loss..................................................................... $ (51,636) $ (45,527) $ (15,710) ---------- ---------- ---------- ---------- ---------- ---------- Weighted Average Common and Series A Common shares (000s) (See Note 2)....... 20,111 20,048 20,017 Net Loss per Common and Series A Common share................................ $ (2.57) $ (2.27) $ (0.78) ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to consolidated financial statements are an integral part of these statements. V-2 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ---------------------- 1997 1996 ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Current Assets Cash and cash equivalents............................................................... $ 3,058 $ 557 Temporary investments................................................................... 61 150 Accounts receivable: Customers, net of reserves of $2,300 and $1,883, respectively......................... 9,051 12,639 Other................................................................................. 224 234 Inventory............................................................................... 6,851 8,548 Prepaid expenses and other.............................................................. 1,076 1,231 ---------- ---------- 20,321 23,359 ---------- ---------- Investments Investment in joint venture............................................................. 185 193 Marketable securities................................................................... 244 286 ---------- ---------- 429 479 ---------- ---------- Property, Plant and Equipment In service and under construction....................................................... 118,275 113,000 Less accumulated depreciation........................................................... 75,045 61,528 ---------- ---------- 43,230 51,472 ---------- ---------- Intangible Assets PCS licenses............................................................................ 60,901 60,901 Other intangibles, net of accumulated amortization of $21,227 and $17,543, respectively.......................................................................... 10,959 14,681 ---------- ---------- 71,860 75,582 ---------- ---------- Net Deferred Tax Asset.................................................................... 313 313 ---------- ---------- Total Assets.............................................................................. $ 136,153 $ 151,205 ---------- ---------- ---------- ---------- LIABILITIES AND COMMON SHAREHOLDERS' EQUITY Current Liabilities Due to affiliates Accounts payable...................................................................... $ 1,483 $ 1,486 Accrued interest...................................................................... 1,527 1,169 Accounts payable........................................................................ 942 3,401 Unearned revenue and deposits........................................................... 6,827 10,527 Accrued taxes........................................................................... 477 357 Accrued compensation.................................................................... 3,551 1,266 Other current liabilities............................................................... 2,521 2,841 ---------- ---------- 17,328 21,047 ---------- ---------- Revolving Credit Agreement--TDS........................................................... 179,990 139,960 ---------- ---------- Common Shareholders' Equity Common shares, par value $1 per share; authorized 50,000,000 shares; issued and outstanding 7,645,446 shares in 1997 and 7,559,633 shares in 1996..................... 7,645 7,560 Series A Common shares, par value $1 per share; authorized 50,000,000 shares; issued and outstanding 12,500,000 shares......................................................... 12,500 12,500 Additional paid-in capital.............................................................. 72,777 72,589 Retained deficit........................................................................ (154,087) (102,451) ---------- ---------- (61,165) (9,802) ---------- ---------- Total Liabilities and Common Shareholders' Equity......................................... $ 136,153 $ 151,205 ---------- ---------- ---------- ----------
The accompanying notes to consolidated financial statements are an integral part of these statements. V-3 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Cash Flows from Operating Activities Net loss.................................................................... $ (51,636) $ (45,527) $ (15,710) Add (deduct) adjustments to reconcile net loss to net cash (required) provided by operating activities: Depreciation and amortization............................................... 32,040 33,777 24,692 Deferred income taxes, net.................................................. -- (6) 263 Investment loss............................................................. 459 1,201 1,151 Other noncash expense....................................................... 352 4,473 4,030 Change in accounts receivable............................................... 3,598 (975) (998) Change in accounts payable.................................................. (2,461) (2,269) 167 Change in unearned revenue.................................................. (3,700) (302) 788 Change in accrued taxes..................................................... 121 262 (281) Change in accrued interest.................................................. 359 (1,222) 1,887 Change in employee benefit obligations...................................... -- -- (2,096) Change in other assets and liabilities...................................... 2,116 (186) (104) ---------- ---------- ---------- (18,752) (10,774) 13,789 ---------- ---------- ---------- Cash Flows from Financing Activities Change in Revolving Credit Agreement--TDS................................... 40,030 45,437 67,548 Common shares issued........................................................ 273 149 268 ---------- ---------- ---------- 40,303 45,586 67,816 ---------- ---------- ---------- Cash Flows from Investing Activities Additions to property, plant and equipment, net............................. (18,624) (32,517) (26,527) Acquisitions, excluding cash acquired....................................... -- -- (5,539) Investment in PCS licenses.................................................. -- (4,285) (45,412) Other investments........................................................... (558) (1,297) (2,131) Change in temporary investments and marketable securities................... 132 (436) -- ---------- ---------- ---------- (19,050) (38,535) (79,609) ---------- ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents.......................... 2,501 (3,723) 1,996 Cash and Cash Equivalents Beginning of period......................................................... 557 4,280 2,284 ---------- ---------- ---------- End of period............................................................... $ 3,058 $ 557 $ 4,280 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to consolidated financial statements are an integral part of these statements. V-4 CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, ------------------------------------- 1997 1996 1995 ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Common shares Balance at beginning of period........................................... $ 7,560 $ 7,537 $ 7,500 Add Employee stock ownership plans....................................... 85 23 37 ----------- ----------- ----------- Balance at end of period................................................. $ 7,645 $ 7,560 $ 7,537 ----------- ----------- ----------- ----------- ----------- ----------- Series A Common shares Balance at beginning of period........................................... $ 12,500 $ 12,500 $ 12,500 Issued during the year................................................... -- -- -- ----------- ----------- ----------- Balance at end of period................................................. $ 12,500 $ 12,500 $ 12,500 ----------- ----------- ----------- ----------- ----------- ----------- Additional Paid-in Capital Balance at beginning of period........................................... $ 72,589 $ 72,463 $ 72,232 Add Employee stock ownership plans....................................... 188 126 231 ----------- ----------- ----------- Balance at end of period................................................. $ 72,777 $ 72,589 $ 72,463 ----------- ----------- ----------- ----------- ----------- ----------- Retained Deficit Balance at beginning of period........................................... $ (102,451) $ (56,924) $ (41,214) Add Net loss............................................................. (51,636) (45,527) (15,710) ----------- ----------- ----------- Balance at end of period................................................. $ (154,087) $ (102,451) $ (56,924) ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes to consolidated financial statements are an integral part of these statements. V-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. PROPOSED COMMON STOCK BUYBACK AND MERGER On December 23, 1997, American Paging,Inc. ("the Company") announced that its parent company, Telephone and Data Systems, Inc. ("TDS") had made an offer to the Company to negotiate and enter into a merger agreement pursuant to which TDS would acquire all of the issued and outstanding Common shares of the Company held by persons other than TDS (the "Minority Shareholders") for cash in an amount equal to $2.25 per Common share. The offer by TDS was made in connection with a definitive asset contribution agreement which TDS has entered into with TRS Paging, Inc. ("TSR"). In accordance with the terms of such asset contribution agreement, subject to consummation of the proposed merger, TDS and TSR will combine their respective paging businesses. TDS will contribute substantially all of the assets and certain liabilities of the Company and its subsidiaries, and TSR will contribute all of its assets and liabilities, to a limited liability company called TSR Wireless, LLC ("TSR Wireless"). TSR Wireless will not assume the approximately $180 million of debt owed by the Company to TDS. The asset contribution agreement provides that, subject to adjustment, TDS will have a 30% interest and TSR will have a 70% interest in the new company. TDS's offer was considered by a special committee of the Board of Directors of the Company, which consists of two independent directors of the Company. Following review of the offer by the special committee and negotiations between TDS and the special committee, TDS increased its offer to $2.50 per Common share. On February 10, 1998, the special committee approved the revised offer and recommended that the full Board of Directors of the Company approve the revised offer. As a result, on February 10, 1998, the Board of Directors of each of the Company and TDS approved a merger agreement providing for the acquisition by TDS (through a wholly-owned subsidiary ("TDS Sub")) of all of the issued and outstanding Common shares held by the Minority Shareholders for cash in an amount equal to $2.50 per Common share. Pursuant to the merger agreement, on February 18, 1998, TDS Sub commenced a tender offer for each of the Common shares held by the Minority Shareholders in exchange for $2.50 in cash. If, after the consummation of such tender offer, TDS is not the owner of at least 90% of the Common shares, TDS will convert some of its Series A Common shares of the Company into Common shares such that TDS will own at least 90% of the Common shares of the Company. In such event, the Board of Directors of TDS Sub will approve a merger of the Company with a subsidiary of TDS pursuant to the short-form merger procedures permitted under Delaware law. Approval of the merger by shareholders of the Company would not be required in such event. In the event TDS does not for any reason own at least 90% of the Common shares following such tender offer, TDS will cause the Company to call a special meeting of the shareholders to approve the merger agreement. In such event, the Company will prepare and distribute a proxy statement to shareholders. However, since TDS controls over 98% of the voting power of the Company, TDS has sufficient voting power in the Company to assure approval of the merger if a special meeting of shareholders is required for any reason. In either event, in such merger, all Minority Shareholders will receive $2.50 in cash for each Common share. Upon the effectiveness of such merger, the Common shares will be delisted from the American Stock Exchange and American Paging will become an indirect, wholly-owned subsidiary of TDS and cease to be a reporting company under the Securities and Exchanges Act of 1934. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES American Paging, Inc. is currently an 81.9%-owned subsidiary of Telephone and Data Systems, Inc. The Company provides local, statewide, regional and nationwide advanced, one-way digital wireless messaging communications services in 21 states and the District of Columbia. The Company offers local V-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) and regional paging coverage throughout the Midwest, the Mid-Atlantic, and in the states of Florida, Oklahoma, Texas, Arizona and Utah. Nationwide one-way and two-way paging services are offered through the Company's alliances with non-affiliated service providers. As of December 31, 1997, the Company had 811,100 units in service through 35 sales and service offices. PRINCIPLES OF CONSOLIDATION The accounting policies of the Company conform to generally accepted accounting principles. The consolidated financial statements include the accounts of American Paging, Inc. and its subsidiaries. All material intercompany accounts and transactions have been eliminated. Certain amounts reported in prior years have been reclassified to conform to current period presentation. USE OF ESTIMATES The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. SERVICE REVENUE AND EQUIPMENT SALES Service revenue includes all regular monthly charges to customers for subscriber device rental and dispatch services. Rental and dispatch revenues are recognized in the month in which service is provided. Equipment sales revenue includes all charges for subscriber devices sold to customers. UNEARNED REVENUE AND DEPOSITS Unearned revenue and deposits primarily represent monthly charges to customers for subscriber device rental and dispatch services billed in advance. Such revenue is recognized in the following months when service is provided and deposits are applied against the customer's final bill. NET LOSS PER COMMON AND SERIES A COMMON SHARE The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," effective December 31, 1997. The implementation of SFAS No. 128 had no effect on reported Loss per Common and Series A Common share due to the current Net Loss. In 1997, 1996 and 1995, respectively, approximately 287,000, 189,000, and 280,000 stock options were not included in computing diluted Net loss per Common and Series A Common share because their effects were antidilutive. Net loss per Common and Series A Common share is computed by dividing Net loss by the weighted average number of Common and Series A Common shares outstanding during the periods. CASH AND CASH EQUIVALENTS, TEMPORARY INVESTMENTS AND MARKETABLE SECURITIES Cash and cash equivalents include cash and those short term, highly-liquid investments with original maturities of three months or less. Those investments with original maturities of more than three months and less than 12 months are classified as temporary investments and are stated at cost, which approximates V-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) market. Those investments with original maturities of more than 12 months are classified as marketable securities and are stated at amortized cost. INVENTORY Inventory consists of subscriber devices on hand. Subscriber device cost is determined by the average cost method. INVESTMENT IN JOINT VENTURE The Company has invested in a joint venture, American Messaging Services, LLC ("AMS"), with Nexus Telecommunications Systems, Ltd. of Israel ("Nexus"). AMS, a development stage entity, was formed to develop a patented communications network that provides two-way paging, location and telemetry service. The Company's 50% share of the net losses of the joint venture has been stated as Investment loss in joint venture in the Consolidated Statement of Operations. The Company stopped funding AMS as of June 30, 1997. As a result, the Company's interest in AMS will become diluted as Nexus contributes additional capital to the joint venture. (See Note 8--Legal Proceedings) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at original cost. Depreciation is provided based on the straight-line method over the estimated useful lives of the assets, which range from two to five years. Property, plant and equipment is composed of the following:
DECEMBER 31, ---------------------- 1997 1996 ---------- ---------- (DOLLARS IN THOUSANDS) Subscriber devices.................................................... $ 41,059 $ 39,714 Terminals and transmitters............................................ 48,181 44,251 Computer equipment.................................................... 16,402 16,595 Furniture and fixtures................................................ 10,515 10,314 Other................................................................. 2,118 2,126 ---------- ---------- Subtotal............................................................ 118,275 113,000 Less accumulated depreciation......................................... 75,045 61,528 ---------- ---------- Total............................................................... $ 43,230 $ 51,472 ---------- ---------- ---------- ----------
See Note 6--Commitments for a discussion of property leased by the Company. INTANGIBLE ASSETS The Company has capitalized certain start-up costs in connection with the development and acquisition of paging systems. Costs of developing new paging systems are deferred pending the outcome of license applications which grant authority to provide paging services in a particular area. Upon acceptance of the application the Company amortizes these deferred start-up costs over a period of ten years commencing with the date of commercial operation. If the application is not granted, all costs incurred are charged to expense in the current period. In the case of trades for or acquisitions of operating paging systems, certain costs are included in other intangible assets. Covenants not to compete are amortized over the term of the agreements. Goodwill is amortized over a period of 25 years. Customer lists are amortized over a period of five years. V-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Other intangible assets are composed of the following:
DECEMBER 31, -------------------- 1997 1996 --------- --------- (DOLLARS IN THOUSANDS) Customer lists......................................................... $ 15,406 $ 15,411 Deferred start-up costs................................................ 5,755 5,748 Goodwill............................................................... 6,559 6,599 Covenants not to compete............................................... 2,409 2,409 Other.................................................................. 2,057 2,057 --------- --------- Subtotal............................................................. 32,186 32,224 Less accumulated amortization.......................................... 21,227 17,543 --------- --------- Total................................................................ $ 10,959 $ 14,681 --------- --------- --------- ---------
In November 1994, the Company was the successful bidder for five regional narrowband Personal Communications Services ("PCS") licenses, providing coverage equivalent to that of a nationwide license, at auction by the Federal Communications Commission ("FCC"). The FCC granted the licenses in May 1995. The Company's cost of the licenses aggregated $53.6 million. The Company also capitalized $1.7 million of start-up costs in connection with the development of the narrowband PCS licenses. Pursuant to SFAS No. 34, American Paging capitalized interest on the borrowings for the purchase of these licenses while it undertook development activities. Interest capitalized for the year ended December 31, 1995 was $1.4 million. Interest capitalized for the nine months ended September 30, 1996 was $4.2 million. Effective October 1, 1996, the Company stopped capitalizing interest as the Company suspended the development of its narrowband PCS licenses pending commercial availability of the supporting infrastructure and related subscriber device equipment. OTHER CURRENT LIABILITIES Other current liabilities at December 31, 1997 and 1996 includes primarily accrued invoices for subscriber device orders as well as various accrued expenses. Other current liabilities at December 31, 1996 also includes accrued restructuring expenses of $1.3 million. RESTRUCTURING American Paging began restructuring its sales and operating areas during the third quarter of 1995 which continued throughout 1996. During 1995, the Company recorded restructuring-related expense totaling $2.9 million, primarily for employee severance payments, lease costs and consulting fees of $2.1 million included in general and administrative expense. In addition, approximately $800,000 in depreciation expense was recorded during 1995 for the reduction in the useful lives of fixed assets which were no longer required upon completion of the restructuring. During 1996, the Company recorded restructuring-related expense totaling $9.3 million, primarily for additional depreciation related to obsolete inventory of $2.8 million and the write-off of the customer management and billing system of $2.2 million. Also recorded were accruals for other restructuring costs included in general and administrative expense of $4.0 million. V-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SUPPLEMENTAL CASH FLOW DISCLOSURES The Company acquired three paging companies in 1995. In conjunction with these acquisitions, the following assets were acquired and liabilities assumed:
YEAR ENDED DECEMBER 31, 1995 ----------------- (DOLLARS IN THOUSANDS) Goodwill................................................................... $ 2,193 Customer lists............................................................. 2,022 Licenses................................................................... 775 Covenants not to compete................................................... 500 Property, plant and equipment.............................................. 216 Accounts receivable........................................................ 181 Inventory.................................................................. 103 Advance billings and customer deposits..................................... (123) Unearned revenue........................................................... (330) Other assets and liabilities, excluding cash acquired...................... 2 ------ Decrease in cash due to acquisitions....................................... $ 5,539 ------ ------
The following table summarizes interest and income taxes paid.
YEAR ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- (DOLLARS IN THOUSANDS) Interest paid to affiliates................................... $ 15,715 $ 13,039 $ 3,645 Income taxes paid............................................. $ -- $ 96 $ 205 --------- --------- ---------
Other noncash expenses included in the statements of cash flows consist primarily of lost pager expense of $350,000, $2.9 million and $2.4 million for the years ended December 31, 1997, 1996 and 1995, respectively, and restructuring expense of $1.5 million and $1.7 million for the years ended December 31, 1996 and 1995, respectively. 3. INCOME TAXES The Company is included in a consolidated federal income tax return with other members of the TDS consolidated group. TDS and American Paging entered into a Tax Allocation Agreement (the "Agreement") which provides that American Paging and its subsidiaries be included in a consolidated federal income tax return and in state income or franchise tax returns in certain situations with the TDS affiliated group. American Paging and its subsidiaries calculate their losses and credits as if they comprised a separate affiliated group. Under the Agreement, American Paging is able to carry forward its losses and credits and use them to offset any future income tax liabilities to TDS. The amount of federal net operating loss carry forward available to offset future taxable income aggregated $106.1 million at December 31, 1997 and expires between 2010 and 2012. The amount of state net operating loss carry forward available to offset future taxable income aggregated $111.1 million at December 31, 1997 and expires between 1998 and 2012. V-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INCOME TAXES (CONTINUED) Income tax expense is summarized as follows:
YEAR ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- (DOLLARS IN THOUSANDS) Federal income taxes: Current.......................................................... $ -- $ -- $ (39) Deferred......................................................... -- -- 60 State income taxes: Current.......................................................... -- 348 101 Deferred......................................................... -- (6) 203 --------- --------- --------- Income tax expense................................................. $ -- $ 342 $ 325 --------- --------- --------- --------- --------- ---------
The components of the Company's noncurrent deferred tax assets and liabilities are summarized as follows:
DECEMBER 31, -------------------- 1997 1996 --------- --------- (DOLLARS IN THOUSANDS) Deferred tax asset: Net operating loss carryforwards..................................... $ 45,248 $ 24,797 Property, plant and equipment........................................ 4,549 831 Deferred charges..................................................... 4,399 3,295 Unearned revenue..................................................... 1,448 2,482 AMT credit carryforward.............................................. 313 313 Other................................................................ 202 417 --------- --------- 56,159 32,135 Less: valuation allowance............................................ (49,090) (26,683) --------- --------- Total deferred tax asset........................................... 7,069 5,452 --------- --------- Deferred tax liability: Licenses............................................................. 6,756 5,139 --------- --------- Net deferred tax asset............................................. $ 313 $ 313 --------- --------- --------- ---------
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The Company has established a valuation allowance primarily for the federal and state net operating loss carryforwards that may expire before they are utilized. The valuation allowance increased by $22.4 million and $17.3 million in 1997 and 1996, respectively. At December 31, 1997, the Company had $313,000 of federal alternative minimum tax ("AMT") credit carryforwards available to offset regular income tax payable in future years. V-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INCOME TAXES (CONTINUED) The statutory federal income tax rate is reconciled to the Company's effective income tax rate from net loss before the cumulative effect of a change in accounting principle below:
YEAR ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- Statutory federal income tax rate..................................... 35.0% 35.0% 35.0% State income taxes, net of federal benefit............................ -- (0.8) (2.0) Federal deferred tax asset adjustment................................. (35.7) (36.6) (36.0) Other, net............................................................ 0.7 1.6 0.9 --------- --------- --------- Effective tax rate.................................................... 0.0% (0.8)% (2.1)% --------- --------- --------- --------- --------- ---------
4. REVOLVING CREDIT AGREEMENT The Company has unsecured notes payable to TDS and Telecommunications Technologies Fund, Inc., a wholly owned subsidiary of TDS, pursuant to a Revolving Credit Agreement. The Company entered into the Revolving Credit Agreement with TDS effective January 1, 1994, at which date all of the outstanding obligations of the Company to TDS were incorporated thereunder. Pursuant to the Revolving Credit Agreement, as amended effective January 13, 1998, the Company may borrow up to an aggregate of $185 million from TDS, at an interest rate equal to 1 1/2% above the prime rate announced from time to time by the LaSalle National Bank of Chicago (for a rate of 10.0% at December 31, 1997) on the unpaid principal amount. Interest is payable on demand on any overdue principal or overdue installment of interest at a rate equal to 3 1/2% above such prime rate. Interest on the balance due under the Revolving Credit Agreement is payable quarterly and no principal is payable until the earlier of January 1, 1999, or six months after such time as TDS's ownership of the Company falls below 70%, subject to acceleration under certain circumstances, at which time the entire principal balance due under the Revolving Credit Agreement then outstanding is scheduled to become due and payable. During 1996, the Company determined that it was in violation of a covenant under the Revolving Credit Agreement with TDS relating to maintaining a certain ratio of equity to liabilities. The Company obtained a waiver of the covenant from TDS through January 1, 1999. In absence of such waiver, the entire amount outstanding under the Revolving Credit Agreement would have become immediately due and payable at the discretion of TDS. Subject to provisions of the asset contribution agreement between TDS and TSR, TDS agreed to fund the Company's construction and operating resource needs through the closing of the agreement which is expected to occur in the first half of 1998. 5. RELATED PARTY TRANSACTIONS The Company is billed for all services it receives from TDS and its affiliates, consisting primarily of information processing and general management services. Such billings are based on expenses specifically identified to the Company and on allocations of common expenses. Such allocations are based on the relationship of the Company's assets, employees, investment in plant and expenses to the total assets, employees, investment in plant and expenses of TDS. Management believes the method used to allocate common expenses is reasonable. V-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. RELATED PARTY TRANSACTIONS (CONTINUED) TDS and certain of its affiliates provided the Company with centralized management, accounting, engineering, billing and data processing services aggregating $6.1 million, $5.9 million and $5.8 million in 1997, 1996 and 1995, respectively. The Company has a Cash Management Agreement with TDS under which the Company may from time to time deposit its excess cash with TDS for investment under TDS's Cash Management program. Deposits made under the agreement are generally available to the Company on demand and bear interest each month equal to the daily weighted average rate earned on all securities held on behalf of the participants in the program. For financial reporting purposes, the Company reports its proportionate amount of cash, temporary investments and marketable securities invested in the program. 6. COMMITMENTS According to provisions of the asset contribution agreement between TDS and TSR, TDS agreed to fund capital expenditures of the Company up to $20.5 million for 1998. The capital expenditures are for purchases of subscriber devices, enhancements to existing systems and construction of new systems. Upon completion of the merger between TDS and TSR, which is expected to occur in the first half of 1998, TSR may, at its discretion, reduce the level of capital expenditures. The Company and its subsidiaries lease office and transmitter sites at various locations in the United States under operating leases. Future minimum rental payments required under operating leases that have noncancelable lease terms in excess of one year, as of December 31, 1997, are as follows:
MINIMUM FUTURE RENTAL PAYMENTS --------------------- (DOLLARS IN THOUSANDS) 1998.................................................................... $ 2,836 1999.................................................................... 2,403 2000.................................................................... 1,705 2001.................................................................... 1,148 2002.................................................................... 768 Thereafter.............................................................. 1,759
Rent expense totaled $7.0 million, $6.7 million and $5.7 million in 1997, 1996 and 1995, respectively. 7. COMMON STOCK EMPLOYEE BENEFIT PLANS The following table summarizes Common shares issued for the year ended December 31, 1997, 1996 and 1995 for the employee benefit plans described below:
YEAR ENDED DECEMBER 31 ------------------------------- 1997 1996 1995 --------- --------- --------- Common shares: Tax deferred savings plan........................................ 72,698 18,970 31,453 Employee stock purchase plan..................................... 13,115 3,732 5,478 --------- --------- --------- 85,813 22,702 36,931 --------- --------- --------- --------- --------- ---------
V-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. COMMON STOCK (CONTINUED) TAX-DEFERRED SAVINGS PLAN The Company has reserved 150,000 Common shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit-sharing plan pursuant to Sections 401(a) and 401(k) of the Internal Revenue Code. Participating employees have the option of investing their contributions in American Paging Common shares, TDS Common shares, United States Cellular Corporation (an 81.1%-owned subsidiary of TDS) Common shares, Aerial Communications, Inc. (an 82.5%-owned subsidiary of TDS) Common shares or five non-affiliated funds. During 1997, 1996 and 1995, the Company issued 72,698, 18,970 and 31,453 Common shares under this plan, respectively. EMPLOYEE STOCK PURCHASE PLAN During 1996 and 1995, the Company issued 3,732 and 5,478 Common shares, respectively, to employees under the 1994 Employee Stock Purchase Plan ("1994 ESPP"). The termination date of this plan was December 31, 1996. During 1996, the 1997 Employee Stock Purchase Plan ("1997 ESPP") was approved which became effective January 1, 1997. The Company reserved 100,000 Common shares for sale to employees of American Paging and its subsidiaries under the 1997 ESPP. During 1997, the Company issued 13,115 Common shares under the 1997 ESPP. EMPLOYEE STOCK OPTION PLAN The Company has reserved 700,000 Common shares for sale to officers and employees through stock options in connection with the 1994 Long-Term Incentive Plan (the "1994 Plan"), as amended and restated as of April 1, 1996. As of December 31, 1997, no shares had been issued under the 1994 Plan. The options are exercisable over a specified period not in excess of ten years. The options expire from 2000 to 2006, or the date of the employee's termination of employment, if earlier. The Company accounts for stock options and employee stock purchase plans under Accounting Principles Board Opinion No. 25. No compensation costs have been recognized for these plans. Had compensation cost for all plans been determined consistent with SFAS No. 123 "Accounting for Stock-Based Compensation," the Company's Net loss and Net loss per Common and Series A Common share would have been the following pro forma amounts:
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net loss............................... As reported $ (51,636) $ (45,527) $ (15,710) Pro forma (51,767) (45,639) (15,746) Net loss per Common and Series A Common share..... As reported $ (2.57) $ (2.27) $ (0.78) Pro forma (2.57) (2.28) (0.79) ---------- ---------- ----------
Because the method of accounting prescribed by SFAS No. 123 has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. V-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. COMMON STOCK (CONTINUED) A summary of the status of the Company's stock option plan as of December 31, 1997, 1996 and 1995, and changes during the years then ended is presented in the following table:
WEIGHTED WEIGHTED NUMBER OF AVERAGE AVERAGE SHARES OPTION PRICES FAIR VALUES ----------- ------------- ----------- STOCK OPTIONS: Outstanding--January 1, 1995 .......................... 282,500 $ 14.00 (no shares exercisable) Granted............................................ 85,500 $ 7.58 $ 4.02 Cancelled.......................................... (88,500) $ 14.00 Outstanding--December 31, 1995 ........................ 279,500 $ 12.04 (42,000 shares exercisable) Granted............................................ 33,000 $ 6.73 $ 3.43 Cancelled.......................................... (123,875) $ 11.43 Outstanding--December 31, 1996 ........................ 188,625 $ 11.49 (88,400 shares exercisable) Granted............................................ 226,022 $ 5.06 $ 1.87 Cancelled.......................................... (127,575) $ 8.83 Outstanding--December 31, 1997 ........................ 287,072 $ 7.35 (104,322 shares exercisable)
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1997, 1996 and 1995, respectively: risk-free interest rates of 6.1%, 5.6% and 7.6%; expected dividend yield of 0.0% for all three years; expected lives of 3.6 years, 7.4 years and 5.5 years; and expected volatility of 39.2%, 38.6% and 38.6%. In accordance with provisions of the 1994 ESPP, shares issued in 1996 and 1995 under the 1994 ESPP were issued at 100% of the fair market value as this was below the offering price as of the grant date on October 1, 1994. In accordance with provisions of the 1997 ESPP, shares issued in 1997 under the 1997 ESPP were issued at 100% of the fair market value as this was below the offering price of the grant date on January 1, 1997. As a result, there is no compensation cost to be recognized under SFAS No. 123 for these shares. SERIES A COMMON SHARES The holders of Common shares are entitled to one vote per share. The holders of Series A Common shares are entitled to fifteen votes per share. Series A Common shares are convertible on a share-for-share basis into Common shares. As of December 31, 1997, all of the Company's Series A Common shares were held by TDS. 8. LEGAL PROCEEDINGS On February 3, 1998, Nexus Telecommunications Systems, Ltd. ("Nexus") filed a claim for arbitration with the American Arbitration Association in New York, New York. The statement of claim alleges that the Company has damaged Nexus' business and has breached fiduciary duties to Nexus related to American Messaging Services, LLC joint venture agreement between Nexus and the Company. The statement of claim seeks (i) an award declaring that the joint venture agreement has been terminated; (ii) an award in the amount of at least $41,850,000 in gross profit on lost equipment sales and $50,872,500 V-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. LEGAL PROCEEDINGS (CONTINUED) in usage fees (prior to discounting to present value); (iii) an award reimbursing Nexus for one-half of an unspecified amount of royalties claimed to have been paid by Nexus; (iv) an award for unspecified amount of joint venture costs from December 31, 1996 through June 30, 1997; (v) punitive damages in amount to be determined by the arbitration panel; (vi) interest, costs and attorneys' fees; and (vii) such other relief as the arbitration panel may deem to be warranted. The Company intends to vigorously defend against this claim. V-16 SELECTED CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED OR AT DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER UNIT AND PER EMPLOYEE AMOUNTS) Operating Data Service revenue.................................... $ 85,937 $ 93,841 $ 93,034 $ 77,520 $ 64,384 Equipment sales revenue............................ 8,476 10,346 14,116 14,545 10,979 Operating loss..................................... (35,307) (36,626) (8,997) (169) (721) Net loss before cumulative effect of a change in accounting principle............................. (51,636) (45,527) (15,710) (1,332) (3,058) Cumulative effect of a change in accounting principle........................................ -- -- -- -- (178) Net loss........................................... $ (51,636) $ (45,527) $ (15,710) $ (1,332) $ (3,236) Weighted average Common and Series A Common shares (000s)(1)........................................ 20,111 20,048 20,017 19,621 16,500 Loss per Common and Series A Common share: Before cumulative effect of a change in accounting principle........................... $ (2.57) $ (2.27) $ (0.78) $ (0.07) $ (0.19) Cumulative effect of a change in accounting principle...................................... -- -- -- -- (0.01) Net loss......................................... $ (2.57) $ (2.27) $ (0.78) $ (0.07) $ (0.20) Effective tax rate................................. 0.0% (0.8)% (2.1)% 37.0% 31.8% Other Data Operating cash flow (Earnings before interest, taxes, depreciation and amortization) (2)........ $ (3,267) $ (2,849) $ 15,695 $ 17,009 $ 12,671 Operating cash flow margin (2)..................... (3.8)% (3.0)% 16.9% 21.9% 19.7% Balance Sheet Data Working capital (3)................................ $ 2,993 $ 2,312 $ (3,949) $ (42,008) $ (41,811) Property, plant and equipment, net................. 43,230 51,472 59,452 53,661 43,083 Intangible assets, net............................. 71,860 75,582 76,220 71,258 9,862 Total assets....................................... 136,153 151,205 159,149 147,056 75,225 Revolving Credit Agreement--TDS.................... 179,990 139,960 94,523 28,113 -- Common shareholders' equity........................ $ (61,165) $ (9,802) $ 35,576 $ 51,018 $ 7,769 Other Company Statistics Customer units in service.......................... 811,100 777,400 784,500 652,800 460,900 Average monthly service revenue per unit ("ARPU")......................................... $ 9.17 $ 9.88 $ 10.57 $ 11.92 $ 13.65 Average monthly operating cost per unit............ $ 6.09 $ 6.77 $ 6.44 $ 7.27 $ 8.61 Subscriber devices in service per employee......... 1,305 893 1,007 853 685 Average monthly service revenue per employee....... $ 11,166 $ 8,980 $ 12,457 $ 10,171 $ 9,388 Transmitters in service............................ 1,049 1,048 1,018 943 685 Capital expenditures............................... $ 18,624 $ 28,940 $ 35,107 $ 27,403 $ 24,813 Average monthly disconnect rate ("churn").......... 2.6% 3.1% 2.5% 2.6% 2.9% Current ratio...................................... 1.2 1.2 0.9 0.3 0.3
- ------------------------ (1) Weighted average Common and Series A Common shares outstanding give retroactive effect to the recapitalization in conjunction with the Company's 1994 initial public offering, as if this transaction had occurred at January 1, 1993. V-17 (2) Although operating cash flow and operating cash flow margin are commonly used as measures of performance in the paging industry and by financial analysts and others who follow the industry, they should not be considered in isolation or used as performance and liquidity measures pursuant to generally accepted accounting principles. (3) Working capital includes Due to FCC--PCS licenses of $42.9 million at December 31, 1994. Working capital includes Notes payable--affiliates of $44.4 million at December 31, 1993. V-18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of American Paging, Inc.: We have audited the accompanying consolidated balance sheets of American Paging, Inc. (a Delaware corporation) and its subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in common shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Paging, Inc. and its subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Chicago, Illinois January 28, 1998 (except with respect to the matters discussed in paragraphs three, four and five of Note 1; and in Note 8, as to which the date is February 18, 1998) V-19 CONSOLIDATED QUARTERLY INCOME INFORMATION (UNAUDITED)
QUARTER ENDED ---------------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 Service revenue................................................. $ 22,310 $ 21,684 $ 21,118 $ 20,825 Operating loss.................................................. (8,411) (7,129) (9,305) (10,462) Net loss........................................................ $ (12,129) $ (11,260) $ (13,395) $ (14,852) Weighted average Common and Series A Common shares (000s)....... 20,080 20,100 20,119 20,139 Loss per Common and Series A Common share....................... $ (0.60) $ (0.56) $ (0.67) $ (0.74) 1996 Service revenue................................................. $ 23,708 $ 23,493 $ 23,766 $ 22,784 Restructuring charges........................................... 778 1,465 7,087 -- Operating loss.................................................. (4,086) (6,567) (16,694) (9,279) Net loss........................................................ $ (5,344) $ (8,340) $ (18,636) $ (13,207) Weighted average Common and Series A Common shares (000s)....... 20,041 20,047 20,050 20,053 Loss per Common and Series A Common share....................... $ (0.27) $ (0.42) $ (0.93) $ (0.66)
SHAREHOLDER'S INFORMATION AMERICAN PAGING STOCK AND DIVIDEND INFORMATION The Company's Common shares are listed on the American Stock Exchange under the symbol "APP" and in the newspapers as "AmPaging." As of February 11, 1998, the Company's Common shares were held by 111 record owners. All of the Series A Common shares were held by TDS. No public trading market exists for the Series A Common shares, but the Series A Common shares are convertible on a share-for- share basis into Common shares. The high and low sales prices of the Common shares as reported by the American Stock Exchange were as follows:
COMMON SHARES -------------------- CALENDAR PERIOD HIGH LOW - -------------------------------------------------------------------------------------------- --------- --------- 1997 First Quarter............................................................................... $ 5.125 $ 3.438 Second Quarter.............................................................................. 4.000 1.313 Third Quarter............................................................................... 3.125 1.500 Fourth Quarter.............................................................................. 2.875 1.875 1996 First Quarter............................................................................... $ 7.375 $ 6.250 Second Quarter.............................................................................. 10.000 6.500 Third Quarter............................................................................... 7.563 5.500 Fourth Quarter.............................................................................. 6.125 4.625
The Company has never paid any cash dividends and currently intends to retain any future earnings for use in the Company's business. In addition, the Revolving Credit Agreement with TDS prohibits the payment of dividends on the Company's Common shares and Series A Common shares, except to the extent of one-half of the cumulative consolidated net income, if any, of the Company for the period after December 31, 1993. V-20 Facsimiles of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates evidencing Common Shares and any other required documents should be sent or delivered by each shareholder or such shareholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: HARRIS TRUST AND SAVINGS BANK BY MAIL: BY FACSIMILE BY HAND/BY OVERNIGHT c/o Harris Trust TRANSMISSION: DELIVERY: Company (212) 701-7636 c/o Harris Trust Company of New York CONFIRM BY TELEPHONE: of New York Wall Street Station (212) 701-7624 Receive Window P.O. Box 1023 Wall Street Plaza New York, NY 10268-1023 88 Pine Street, 19th Floor New York, NY 10005
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or the Dealer Manager. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO] 156 Fifth Avenue New York, NY 10010 Banks and Brokers Call Collect: (212) 929-5500 All Others Call Toll Free: (800) 322-2885 The Dealer Manager for the Offer is: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, NY 10010-3629 Call Toll Free (800) 881-8320 EX-99.(D)(2) 23 FORM OF LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL To Tender Common Shares of American Paging, Inc. Pursuant to the Offer to Purchase Dated February 18, 1998 of API Merger Corp. a direct wholly owned subsidiary of Telephone and Data Systems, Inc. --------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST AND SAVINGS BANK BY MAIL: BY HAND/BY OVERNIGHT DELIVERY: c/o Harris Trust Company of New York c/o Harris Trust Company of New York Wall Street Station Receive Window P.O. Box 1023 Wall Street Plaza New York, New York 10268-1023 88 Pine Street, 19th Floor New York, New York 10005
BY FACSIMILE TRANSMISSION: (212) 701-7636 (for Eligible Institutions Only) CONFIRM BY TELEPHONE: (212) 701-7624 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders either if certificates evidencing Common Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined below) is utilized, if delivery of Common Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. Delivery of Documents to a Book-Entry Transfer Facility Does Not Constitute Delivery to the Depositary. Shareholders whose certificates evidencing Common Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined under "THE TENDER OFFER--1. Terms of the Offer; Expiration Date" in the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Common Shares must do so pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. See Instruction 2. / / CHECK HERE IF COMMON SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Check Box of Applicable Book-Entry Transfer Facility: (CHECK ONE) / / DTC / / PDTC Account Number _____________________________________________________________ Transaction Code Number ____________________________________________________ / / CHECK HERE IF COMMON SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ____________________________________________ Window Ticket No. (if any) _________________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution which Guaranteed Delivery ______________________________
---------------------------------------------------------------------------------------------------- DESCRIPTION OF COMMON SHARES TENDERED - ------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES)OF REGISTERED OWNER(S) PLEASE FILL IN, BLANK, EXACTLY AS NAME(S) COMMON SHARES TENDERED APPEAR(S) ON CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY) TOTAL NUMBER OF COMMON SHARES NUMBER OF CERTIFICATE REPRESENTED BY COMMON SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - ------------------------------------------------------------------------------------------------------ ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- Total Common Shares - ------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Common Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Common Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. The names and addresses of the registered holders should be printed, if not already printed above, exactly as they appear on the certificates representing Common Shares tendered hereby. The certificates and the number of Common Shares that the undersigned wishes to tender should be indicated in the appropriate boxes. / / CHECK HERE IF TENDER IS BEING MADE PURSUANT TO LOST OR MUTILATED SECURITIES. SEE INSTRUCTION 10. 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to API Merger Corp., a Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation, the above-described Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company"), pursuant to Purchaser's offer to purchase all Common Shares, at $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 18, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Common Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Common Shares tendered herewith, in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Common Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Common Shares) and rights declared, paid or distributed in respect of such Common Shares on or after February 11, 1998, 1998 (collectively, "Distributions") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Common Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Common Shares and all Distributions, or transfer ownership of such Common Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Common Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Common Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints LeRoy T. Carlson, Jr., Murray L. Swanson and Scott H. Williamson and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his/her sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Common Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Common Shares and other securities issued in Distributions in respect of such Common Shares, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Common Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Common Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Common Shares (and all Common Shares and other securities issued in Distributions in respect of such Common Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Common Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Common Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Common Shares, including, without limitation, voting at any meeting of the Company's shareholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Common Shares tendered hereby and all Distributions, that when such Common Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Common Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Common Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Common Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Common Shares tendered hereby, or deduct from such purchase price the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. 3 The undersigned understands that tenders of Common Shares pursuant to any one of the procedures described in the Offer to Purchase under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance of such Common Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the purchase price of all Common Shares purchased, and return all Share Certificates evidencing Common Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Common Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the purchase price of all Common Shares purchased and all Share Certificates evidencing Common Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Common Shares Tendered". In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Common Shares purchased and return all Share Certificates evidencing Common Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions". The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Common Shares from the name of the registered holders thereof if Purchaser does not purchase any of the Common Shares tendered hereby. -------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Common Shares or Share Certificates evidencing Common Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue / / check / / Share Certificate(s) to: Name _____________________________________________________________________ (PLEASE PRINT) Address __________________________________________________________________ __________________________________________________________________________ Zip Code _________________________________________________________________ __________________________________________________________________________ RECIPIENT'S TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER -------------------------------------------------- -------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6, AND 7) To be completed ONLY if the check for the purchase price of Common Shares purchased or Share Certificates evidencing Common Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or the undersigned at an address other than that shown under "Description of Common Shares Tendered". Mail / / check / / Share Certificate(s) to: Name _____________________________________________________________________ (PLEASE PRINT) Address __________________________________________________________________ __________________________________________________________________________ Zip Code _________________________________________________________________ ------------------------------------------------ 4 -------------------------------------------------------------------------- IMPORTANT SHAREHOLDERS: SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE) __________________________________________________________________________ __________________________________________________________________________ (SIGNATURE(S) OF HOLDER(S)) Dated: ____________, 199__ (Must be signed by registered holder(s) exactly as name(s) appear(s) on Common Share Certificates or on a security position listing or by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): _________________________________________________________________ (PLEASE PRINT) Capacity (full title) ____________________________________________________ Address: __________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No.: _________________________________________________ Tax Identification or Social Security No.: ___________________________________ (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ________________________________________________________ Name: ________________________________________________________________________ (PLEASE TYPE OR PRINT) Title: _______________________________________________________________________ Name of Firm: ________________________________________________________________ Address: _____________________________________________________________________ FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW. ------------------------------------------------------------------------------ 5 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Common Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Common Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Common Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Common Shares are to be delivered by book-entry transfer pursuant to the procedure set forth under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. Share Certificates evidencing all physically tendered Common Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Common Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined under "THE TENDER OFFER--1. Terms of the Offer; Expiration Date" in the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Common Shares pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Common Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Common Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase)), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as described under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Common Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering shareholders waive any right to receive any notice of the acceptance of their Common Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Common Shares Tendered" is inadequate, the Share Certificate numbers, the number of Common Shares evidenced by such Share Certificates and the number of Common Shares tendered should be listed on a separate schedule and attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Common Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Common Shares which are to be tendered in the box entitled "Number of Common Shares Tendered". In such cases, new Share Certificate(s) evidencing the remainder of the Common Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Common Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Common Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Common Shares without alteration, enlargement or any other change whatsoever. Do not sign the back of the Share Certificates. If any Common Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Common Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Common Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Common Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Common Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Common Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Common Shares tendered hereby, the Share Certificate(s) evidencing the Common Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Common Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Common Shares purchased is to be made to, or Share Certificate(s) evidencing Common Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Common Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Common Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Common Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Common Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Common Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. 8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be obtained from the Information Agent or the Dealer Manager, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent and the Dealer Manager) for soliciting tenders of Common Shares pursuant to the Offer. 9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of the purchase price of all Common Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificates have been lost, destroyed or stolen, the shareholder should promptly notify the Depositary. The shareholder will then be instructed by the Depositary as to the steps that must be taken in order to replace the Share Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedure for replacing lost, destroyed or stolen Share Certificates has been followed. 11. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in whole or in part, by Purchaser, in its sole discretion, at any time and from time to time, in the case of any Common Shares tendered. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Common Shares are accepted for payment is required by law to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such shareholder with respect to Common Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. In addition, if a shareholder makes a false statement that results in no imposition of backup withholding, and there was no reasonable basis for such a statement, a $500 penalty may also be imposed by the Internal Revenue Service. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to such individuals exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. A shareholder should consult his or her tax advisor as to such shareholder's qualification for an exemption from backup withholding and the procedure for obtaining such exemption. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Common Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying that (a) the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN) and (b) that (i) such shareholder has not been notified by the Internal Revenue Service that such shareholder is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Common Shares tendered hereby. If the Common Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. PAYER'S NAME: HARRIS TRUST AND SAVINGS BANK - --------------------------------------------------------------------------------------------------- PART I--Taxpayer Identification Number--For all accounts, enter SUBSTITUTE taxpayer identification number in the box at right. (For most FORM W-9 individuals, this is your social security number. If you do not have a number see Obtaining a Number in the enclosed GUIDELINES.) Certify by signing and dating below. Note: If the account is in more than one name, see the chart in the enclosed GUIDELINES to determine which number to give the payer. - --------------------------------------------------------------------------------------------------- PAYER'S REQUEST FOR TAXPAYER PART II--For Payees Exempt From Social Security Number IDENTIFICATION NUMBER (TIN) Backup Withholding, see the OR ------------------------- enclosed GUIDELINES and Taxpayer Identification Number complete as instructed therein. (If awaiting TIN write "Applied For") - --------------------------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.) SIGNATURE ------------------------------------------------- DATE-------------,1998 - ---------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. Facsimiles of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal certificates evidencing Common Shares and any other required documents should be sent or delivered by each shareholder or such shareholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent or the Dealer Manager, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent and the Dealer Manager) for soliciting tenders of Common Shares pursuant to the Offer. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO] 156 Fifth Avenue New York, NY 10010 Banks and Brokers Call Collect: (212) 929-5500 All Others Call Toll Free: (800) 322-2885 The Dealer Manager for the Offer is: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, NY 10010-3629 Call Toll Free (800) 881-8320 February 18, 1998 EX-99.(D)(3) 24 FORM OF LETTER FROM 1ST BOSTON CORP. TO BROKERS [LOGO] [LOGO] OFFER TO PURCHASE FOR CASH ALL OUTSTANDING COMMON SHARES OF AMERICAN PAGING, INC. AT $2.50 NET PER COMMON SHARE BY API MERGER CORP. A DIRECT WHOLLY OWNED SUBSIDIARY OF TELEPHONE AND DATA SYSTEMS, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. February 18, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by API Merger Corp., a Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), to act as Dealer Manager in connection with Purchaser's offer to purchase all outstanding Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company"), at a price of $2.50 per Common Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated February 18, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Common Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE NUMBER OF COMMON SHARES THAT WHEN ADDED TO THE COMMON SHARES OWNED BY TDS AND PURCHASER SHALL CONSTITUTE 90% OF THE COMMON SHARES THEN OUTSTANDING (THE "MINIMUM CONDITION") AND (II) THAT THE ASSET CONTRIBUTION AGREEMENT, DATED AS OF DECEMBER 22, 1997 (THE "ASSET CONTRIBUTION AGREEMENT"), AMONG TDS, TSR PAGING, INC., A DELAWARE CORPORATION, AND TSR WIRELESS LLC, A DELAWARE LIMITED LIABILITY COMPANY, BE IN FULL FORCE AND EFFECT AND NOT TERMINATED IN ACCORDANCE WITH THE TERMS THEREOF AND ALL OF THE CONDITIONS SET FORTH IN ARTICLES XI AND XII THEREOF SHALL HAVE BEEN SATISFIED OR WAIVED. PURCHASER HAS AGREED TO WAIVE THE MINIMUM CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED IN THE OFFER TO PURCHASE. Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated February 18, 1998; 2. Letter of Transmittal for your use and for the information of your clients; facsimile copies of the Letter of Transmittal may be used to tender Common Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Common Shares and all other required documents are not immediately available or cannot be delivered to Harris Trust and Savings Bank (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A letter to shareholders of the Company from Terrence T. Sullivan, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A printed form of letter which may be sent to your clients for whose accounts you hold Common Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. YOUR PROMPT ATTENTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Common Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates evidencing such Common Shares (or a confirmation of a book-entry transfer of such Common Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or facsimile thereof) properly completed and duly executed and any other required documents. If holders of Common Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents, or, if applicable, comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender of Common Shares may be effected by following the guaranteed delivery procedure described under "THE TENDER OFFER -- 3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Common Shares pursuant to the Offer. However, Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Common Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to the undersigned or MacKenzie Partners, Inc. (the "Information Agent") at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. VERY TRULY YOURS, Credit Suisse First Boston Corporation 2 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU, OR ANY OTHER PERSON, THE AGENT OF TDS, PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(D)(4) 25 FORM OF LETTER FROM BROKERS,DEALERS,BANKS ETC. TO OFFER TO PURCHASE FOR CASH ALL OUTSTANDING COMMON SHARES OF AMERICAN PAGING, INC. AT $2.50 NET PER COMMON SHARE BY API MERGER CORP. A DIRECT WHOLLY OWNED SUBSIDIARY OF TELEPHONE AND DATA SYSTEMS, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. February 18, 1998 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated February 18, 1998 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by API Merger Corp., a Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), to purchase all outstanding Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company"), at a price of $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). We are (or our nominee is) the holder of record of Common Shares held by us for your account. A TENDER OF SUCH COMMON SHARES CAN BE MADE ONLY BY US OR OUR NOMINEE AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER COMMON SHARES HELD BY US FOR YOUR ACCOUNT. We request instruction as to whether you wish to have us tender on your behalf any or all of the Common Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer is being made for all outstanding Common Shares. 3. The Board of Directors of the Company has unanimously determined that each of the Offer and the Merger (as defined in the Offer to Purchase) is fair to the shareholders of the Company, and recommends that shareholders accept the Offer and tender their Common Shares pursuant to the Offer. The unanimous vote of the Board of Directors of the Company is based upon, among other things, the unanimous recommendation of the Offer by a Special Committee of the Board of Directors of the Company consisting of the independent directors of the Company who are not directors, officers or employees of TDS or Purchaser or otherwise affiliated with TDS or Purchaser nor officers or employees of the Company. 4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Tuesday, March 17, 1998, unless the Offer is extended. 5. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer at least the number of Common Shares that when added to the Common Shares owned by TDS and Purchaser shall constitute 90% of the Common Shares then outstanding (the "Minimum Condition") and (ii) that the Asset Contribution Agreement, dated as of December 22, 1998, among TDS, TSR Paging, Inc., a Delaware corporation, and TSR Wireless, LLC, a Delaware limited liability company, be in full force and effect and not terminated in accordance with the terms thereof and all of the conditions set forth in Articles XI and XII thereof shall have been satisfied or waived (the "Asset Contribution Agreement Condition"). Purchaser has agreed to waive the Minimum Condition under certain circumstances described in the Offer to Purchase. 6. Except as otherwise provided in Instruction 6 of the Letter of Transmittal, tendering shareholders will not be obligated to pay brokerage fees, commissions or stock transfer taxes with respect to the purchase of Common Shares by Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided (see Instruction 9 to the Letter of Transmittal). 7. In all cases, payment for Common Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for, or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to, such Common Shares and a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with all required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and all other documents required by the Letter of Transmittal. See "THE TENDER OFFER--Procedures for Accepting the Offer and Tendering Common Shares" of the Offer to Purchase. If you wish to have us tender any or all of your Common Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Common Shares, all such Common Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Common Shares and is not being made to, nor will tenders be accepted from or on behalf of, shareholders in any jurisdiction where the making of the Offer or acceptance thereof is not in compliance with the laws of such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Credit Suisse First Boston Corporation or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING COMMON SHARES OF AMERICAN PAGING, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated February 18, 1998, and the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer") in connection with the Offer by API Merger Corp., a Delaware corporation and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation, to purchase all outstanding Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation, at a price of $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase. This will instruct you to tender the number of Common Shares indicated below (or, if no number is indicated below, all Common Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase. SIGN HERE Number of Common Shares ---------------------------------------- To be Tendered: ---------------------------------------- ------------* (SIGNATURE(S)) Please type or print name: ---------------------------------------- Dated: , 1998 ---------------------------------------- Please type or print address: ---------------------------------------- ---------------------------------------- Area Code and Telephone no: ---------------------------------------- Taxpayer identification or social security no.: ----------------------------------------
- ------------------------ *Unless otherwise indicated, it will be assumed that all Common Shares held by us for your account are to be tendered. 3 EX-99.(D)(5) 26 FORM OF NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF COMMON SHARES OF AMERICAN PAGING, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing Common Shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation, are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to Harris Trust and Savings Bank, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary. See "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares" in the Offer to Purchase. The Depositary for the Offer Is: HARRIS TRUST AND SAVINGS BANK BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND/BY OVERNIGHT DELIVERY: c/o Harris Trust Company (For Eligible Institutions c/o Harris Trust Company of New York Only) of New York Wall Street Station (212) 701-7636 Receive Window P.O. Box 1023 Wall Street Plaza New York, New York 10268-1023 88 Pine Street, 19th Floor New York, New York 10005 CONFIRM BY TELEPHONE: (212) 701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. THE GUARANTEE INCLUDED HEREIN MUST BE COMPLETED Ladies and Gentlemen: The undersigned hereby tenders to API Merger Corp., a Delaware corporation and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 18, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Common Shares specified below pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER--3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Name(s) of Holders: -------------------------------------------- Please Type or Print Number of Common Shares: -------------------------------------------- - ------------------------ Address(es) Certificate Nos. (if available): -------------------------------------------- - ------------------------ Zip Code Please check one box if Common Shares will be -------------------------------------------- delivered by book-entry transfer: Area Code and Telephone No. / / The Depository Trust Company -------------------------------------------- / / Philadelphia Depository Trust Company Signature(s) of Holder(s) Account No. Dated: ----------------, 1998 - ------------------------
2 THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees to deliver to the Depositary, at one of its addresses set forth above, Share Certificates evidencing the Common Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company , in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, and any other required documents, all within three trading days of the date hereof. - -------------------------------------------- -------------------------------------------- Name of Firm Authorized Signature - -------------------------------------------- -------------------------------------------- Address Title - -------------------------------------------- Name ------------------------------------ Zip Code (Please Type or Print) Area Code and Tel. No. --------------------- Dated ---------------------------------
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(D)(6) 27 FORM OF GUIDELINES FOR CERT OF TAXPAYER ID NUM. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF-- --------------------------------------------------- ------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor (Uniform Gift to The minor(2) Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or committee for a The ward, minor, or incompetent person(3) designated ward, minor, or incompetent person 7. a. The usual revocable savings trust account The grantor-trustee(1) (grantor is also trustee) b. So-called trust account that is not a legal or The actual owner(1) valid trust under State law 8. Sole proprietorship The owner(4) 9. A valid trust, estate, or pension trust Legal entity (Do not furnish the number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) 10. Corporate account The corporation 11. Religious, charitable or educational organization The organization account 12. Partnership account held in the name of the The partnership business 13. Association, club or other tax-exempt organization The organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of Agriculture in the The public entity name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments
- ------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. OBTAINING A NUMBER If you don't have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a) of the Code. - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1) of the Code. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441 of the Code. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: A Payee may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and such payee has not provided its correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852) of the Code. - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451 of the Code. - Payments made by certain foreign organizations. Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A of the Code. PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to include any portion of an includable payment for interest, dividends or patronage dividends in gross income and such failure is due to negligence, a penalty of 20% is imposed on any portion of an underpayment attributable to that failure. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(D)(7) 28 SUMMARY ADVER. AS PUB. IN WALL ST. JOURNAL This announcement is neither an offer to purchase nor a solicitation of an offer to sell Common Shares. The Offer is made solely by the Offer to Purchase dated February 18, 1998 and the related Letter of Transmittal, and any amendments and supplements thereto, and is being made to all holders of Common Shares. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Common Shares in any jurisdiction where the making of the Offer or acceptance thereof is not in compliance with the laws of such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Credit Suisse First Boston Corporation ("Credit Suisse First Boston"), or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING COMMON SHARES OF AMERICAN PAGING, INC. AT $2.50 NET PER COMMON SHARE BY API MERGER CORP. A DIRECT WHOLLY OWNED SUBSIDIARY OF TELEPHONE AND DATA SYSTEMS, INC. API Merger Corp., a Delaware corporation ("Purchaser"), and a direct wholly owned subsidiary of Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), is offering to purchase all outstanding common shares, par value $1.00 per share (the "Common Shares"), of American Paging, Inc., a Delaware corporation (the "Company"), at a price of $2.50 per Common Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 18, 1998(the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Tendering shareholders who have Common Shares registered in their name and who tender directly will not be charged brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Common Shares pursuant to the Offer. Following the Offer, Purchaser intends to effect the Merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 17, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) AT LEAST THE NUMBER OF COMMON SHARES THAT WHEN ADDED TO THE COMMON SHARES OWNED BY TDS AND PURCHASER SHALL CONSTITUTE 90% OF THE COMMON SHARES THEN OUTSTANDING (THE "MINIMUM CONDITION") AND (II) THAT THE ASSET CONTRIBUTION AGREEMENT, DATED AS OF DECEMBER 22, 1997 (THE "ASSET CONTRIBUTION AGREEMENT"), AMONG TDS, TSR PAGING, INC., A DELAWARE CORPORATION ("TSR PAGING"), AND TSR WIRELESS LLC, A DELAWARE LIMITED LIABILITY COMPANY ("TSR WIRELESS"), BE IN FULL FORCE AND EFFECT AND NOT TERMINATED IN ACCORDANCE WITH THE TERMS THEREOF AND ALL OF THE CONDITIONS SET FORTH IN ARTICLES XI AND XII THEREOF SHALL HAVE BEEN SATISFIED OR WAIVED (THE "ASSET CONTRIBUTION AGREEMENT CONDITION"). PURCHASER HAS AGREED TO WAIVE THE MINIMUM CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED BELOW. SEE SECTION 12 UNDER "THE TENDER OFFER" IN THE OFFER TO PURCHASE. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of February 11, 1998 (the "Merger Agreement"), by and among TDS, Purchaser and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Common Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware ("Delaware Law"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become a direct wholly owned subsidiary of TDS. At the effective time of the Merger (the "Effective Time"), each Common Share issued and outstanding immediately prior to the Effective Time (other than Common Shares held in the treasury of the Company or owned by Purchaser, TDS or any direct or indirect wholly owned subsidiary of TDS or the Company, and other than Common Shares held by shareholders who shall have properly demanded and perfected appraisal rights under Section 262 of Delaware Law) will be canceled and converted automatically into the right to receive $2.50 in cash, or any higher or lower price that may be paid per Common Share pursuant to the Offer, without interest. Upon consummation of the Merger, TDS and TSR Wireless, in accordance with the terms and conditions of the Asset Contribution Agreement, will combine their respective paging businesses, and TDS will cause the Company to contribute substantially all of the assets and certain limited liabilities of the Company, and TSR Paging will contribute all of its assets and liabilities into TSR Wireless. TSR Wireless would not assume debt owed by the Company to TDS pursuant to the Revolving Credit Agreement between the Company and TDS (approximately $185 million at January 31, 1998). The Company, which would then be a wholly owned subsidiary of TDS, would have a 30% interest and TSR Paging will have a 70% interest in TSR Wireless, subject to adjustment pursuant to the terms of the Asset Contribution Agreement. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF THE SPECIAL COMMITTEE OF THE COMPANY CONSISTING OF THE INDEPENDENT DIRECTORS OF THE COMPANY WHO ARE NOT DIRECTORS, OFFICERS OR EMPLOYEES OF TDS OR PURCHASER OR OTHERWISE AFFILIATED WITH TDS OR PURCHASER NOR OFFICERS OR EMPLOYEES OF THE COMPANY (THE "SPECIAL COMMITTEE"), HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY (OTHER THAN TDS AND PURCHASER), AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON SHARES PURSUANT TO THE OFFER. As of February 10, 1998, TDS owned 12,500,000 Series A Common Shares, par value $1.00 per share (the "Series A Common Shares"), which have fifteen votes per share on all matters and are convertible on a share-per-share basis into Common Shares, and 4,000,000 Common Shares, constituting 100% of the currently outstanding Series A Common Shares and approximately 52.3% of the outstanding Common Shares for a combined total of approximately 81.9% of the Company's outstanding classes of capital stock and approximately 98.1% of their combined voting power. If required to achieve ownership of 90% of the Common Shares then outstanding, Purchaser currently intends to convert its existing 12,500,000 Series A Common Shares into an equivalent number of Common Shares in accordance with the Company's Restated Certificate of Incorporation. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Common Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to Harris Trust and Savings Bank (the "Depositary") of Purchaser's acceptance for payment of such Common Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Common Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders whose Common Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Common Shares be paid, regardless of any delay in making such payment. In all cases, payment for Common Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates evidencing such Common Shares (the "Share Certificates") or timely confirmation of a book-entry transfer of such Common Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in Section 2 under "THE TENDER OFFER" in the Offer to Purchase) pursuant to the procedure set forth in Section 3 under the "THE TENDER OFFER" in the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in Section 3 under "THE TENDER OFFER" in the Offer to Purchase) and (iii) any other documents required under the Letter of Transmittal. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any condition specified in Section 12 under "THE TENDER OFFER" in the Offer to Purchase, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement thereof, such announcement to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Common Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Common Shares. Pursuant to the Merger Agreement, in the event all conditions set forth in the Merger Agreement shall have been satisfied other than the Minimum Condition, Purchaser may extend the Offer for a period or periods aggregating not more than 20 business days after the later of (i) the Expiration Date and (ii) the date on which all other conditions set forth in the Merger Agreement shall have been satisfied, after which time Purchaser shall waive the Minimum Condition. The term "Expiration Date" means 12:00 Midnight, New York City time, on March 17, 1998, unless and until Purchaser shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Tender of Common Shares made pursuant to the Offer are irrevocable, provided that Common Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 Midnight, New York City time, on Tuesday, March 17, 1998 (or the latest time and date at which the Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after April 18, 1998. For the withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Common Shares to be withdrawn, the number of Common Shares to be withdrawn and the name of the registered holder of such Common Shares, if different from that of the person who tendered such Common Shares. If Share Certificates evidencing Common Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 under "THE TENDER OFFER" in the Offer to Purchase), unless such Common Shares have been tendered for the account of an Eligible Institution. If Common Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 under "THE TENDER OFFER" in the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Common Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Any Common Shares properly withdrawn will be deemed not to be validly tendered for purposes of the Offer. Withdrawn Common Shares may, however, be returned by repeating one of the procedures in Section 3 of the Offer to Purchase at any time before the Expiration Date. All questions as to the form and validity (including the time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, TDS, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Common Shares. The Offer to Purchase and the related Letter of Transmittal and other related materials will be mailed to record holders of Common Shares whose names appear on the Company's shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Common Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent or the Dealer Manager, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent and the Dealer Manager) for soliciting tenders of Common Shares pursuant to the Offer. THE INFORMATION AGENT FOR THE OFFER IS: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 Call Collect: or Call Toll Free: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: CREDIT SUISSE FIRST BOSTON Eleven Madison Avenue New York, New York 10010-3629 Call Toll Free (800) 881-8320 February 18, 1998 EX-99.(D)(8) 29 FORM OF JOINT PRESS RELEASE 2/18/98 Contacts: Murray L. Swanson Karen M. Stewart Executive Vice President-Finance Vice President-Investor Relations (312) 630-1900 (608) 828-8316 Madison e-mail: murray.swanson@teldta.com e-mail: karen.stewart@teldta.com FOR RELEASE: IMMEDIATE TDS BEGINS TENDER OFFER TO PURCHASE AMERICAN PAGING SHARES FEBRUARY 18, 1998, CHICAGO, ILLINOIS - Telephone and Data Systems, Inc. [AMEX:TDS] announced that pursuant to its previously reported definitive Merger Agreement with American Paging, Inc. [AMEX:APP], API Merger Corp., a wholly owned subsidiary of TDS ("API Merger"), today began a tender offer to purchase for cash all outstanding Common Shares of APP not already owned by TDS at a price of $2.50 per Common Share. The tender offer is being made in connection with a previously reported definitive Asset Contribution Agreement with TSR Paging, Inc. which, subject to acquisition by TDS of all Common Shares of APP not already owned by TDS and to certain other conditions, will combine its paging operations with that of APP. The offer and withdrawal rights will expire at 12:00 midnight EST on March 17, 1998, unless extended. The offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn at least the number of shares that, when added to the Common Shares of APP already owned by TDS, shall equal 90% of the Common Shares of APP outstanding and (2) the Asset Contribution Agreement with TSR Paging shall be in full force and effect and not terminated in accordance with its terms and certain closing conditions contained therein shall have been satisfied or waived. All APP Common Shares not purchased in the tender offer will be converted into the right to receive $2.50 per Common Share in a second-step merger to be consummated as soon as practicable after the offer. Credit Suisse First Boston Corporation is the Dealer Manager for the offer. TDS is a Chicago-based telecommunications company with established cellular telephone, local telephone and radio paging operations and developing PCS operations. TDS strives to build value for its shareholders by providing excellent communications services in attractive, closely related segments of the telecommunications industry. TDS Internet Home Page: http://www.teldta.com EX-99.(D)(9) 30 LETTER TO COMPANY SHAREHOLDERS 2/18/98 [API LOGO] February 18, 1998 Dear Shareholders: I am pleased to inform you that on February 11, 1998, the Company entered into an Agreement and Plan of Merger with Telephone and Data Systems, Inc. ("TDS") and API Merger Corp. ("API Merger"), a direct wholly-owned subsidiary of TDS, pursuant to which API Merger is commencing a cash tender offer (the "Offer") to purchase all outstanding Common Shares of the Company it does not already own at $2.50 net per share. The Offer is conditioned upon, among other things, satisfaction of the conditions that (1) there be validly tendered and not withdrawn at least the number of shares that when added to the shares owned by TDS and API Merger shall constitute 90% of the outstanding Common Shares of the Company and (2) the Asset Contribution Agreement with TSR Paging shall be in full force and effect and not terminated in accordance with its terms and certain closing conditions contained therein shall have been satisfied or waived. Following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement, API Merger will be merged into the Company (the "Merger"), and each Common Share of the Company not purchased in the Offer (other than those shares held in the Company's treasury or owned by TDS, its affiliates, or by any dissenting shareholders) will be converted into the right to receive $2.50 net per share in cash, without interest. Upon consummation of these transactions, TDS will own the entire equity interest in the Company. THE BOARD OF DIRECTORS, BASED IN PART ON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE (COMPRISED OF DIRECTORS WHO ARE NOT OFFICERS OR EMPLOYEES OF THE COMPANY NOR OFFICERS OR DIRECTORS OF TDS OR ITS AFFILIATES), HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, DETERMINED THAT EACH OF THE OFFER AND MERGER IS FAIR TO THE COMPANY'S PUBLIC SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In arriving at their decisions, the Special Committee and the Board of Directors gave careful consideration to a number of factors described in the attached Schedule 14D-9 that is being filed today with the Securities and Exchange Commission. Among other things, the Special Committee and the Board of Directors considered the opinion of PaineWebber, the financial advisor to the Special Committee, that the consideration to be offered to the public shareholders of the Company in the Offer and the Merger is fair, from a financial point of view, to the holders of Common Shares (other than TDS and its affiliates). Accompanying this letter, in addition to the attached Schedule 14D-9 relating to the Offer, is the Offer to Purchase, dated February 18, 1998, of API Merger, together with related materials including a Letter of Transmittal to be used for tendering your shares. These documents set forth the terms and conditions of the Offer and the Merger, provide detailed information about these transactions and include instructions as to how to tender your shares. I urge you to read the enclosed materials carefully. Very truly yours, [SIGNATURE] Terrence T. Sullivan President -----END PRIVACY-ENHANCED MESSAGE-----