PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of ____________________, 1999 (this
"Pledge Agreement" or this "Agreement"), is made by ___________________________,
an individual residing in North Carolina (the "Pledgor"), for the benefit of
Vanguard Cellular Systems, Inc., a North Carolina corporation (the "Company").
WHEREAS, the Company is party to a certain Agreement and Plan of Merger
dated as of October 2, 1998, as amended (the "Merger Agreement"), among AT&T
Corp., Winston, Inc. and the Company, pursuant to which the Company will be
merged with and into Winston, Inc. (the "Merger").
WHEREAS, (i) pursuant to certain employment, severance and termination
arrangements between the Company and certain of its employees, including the
Pledgor, and as contemplated by Section 5.5(c)(i) of the Merger Agreement and
items 6 and 7 of Schedule 4.1(e)(vi) to the Merger Agreement, (ii) pursuant to
certain tax reimbursement agreements between the Company and certain of its
employees, including the Pledgor, and as contemplated by Section 5.5(c)(ii) of,
and the related Schedule 5.5(c)(ii) to, the Merger Agreement and (iii) pursuant
to Section 1.7(b) of the Merger Agreement, the Pledgor may be entitled,
following consummation of the Merger, to certain change in control severance
payments and/or tax reimbursement payments as well as certain cash payments in
respect of the shares of the Company's Common Stock to be purchased with the
proceeds of the Exercise Price Loans referred to below (collectively, the
"Merger Payments") from Winston, Inc., as successor by merger to the Company.
WHEREAS, the Company has this date made, [has previously made,](1) and
may from time to time hereafter make, a loan or loans (each a "Loan", and,
collectively, the "Loans") to the Pledgor, the proceeds of which Loans [were
and] are to be applied either (i) to payment of the exercise price of stock
options of the Company held by the Pledgor (the "Exercise Price Loans") or (ii)
to payment of income tax obligations of the Pledgor in connection with such
stock option exercises (the "Tax Loans"), each such Loan [evidenced by or] to be
evidenced by a Promissory Note of Pledgor payable to the Company (collectively,
the "Notes").
WHEREAS, it is a condition to the Company's making of the Loans that the
Pledgor enter into this Pledge Agreement in favor of the Company: (i) to secure
the Pledgor's obligations to pay principal, interest, and any fees and expenses
or other amounts payable under the Notes (collectively, the "Obligations") by
pledging to the Company all of the Class A Common Stock, par value $0.01 per
share, (the "Common Stock") of the Company acquired by the Pledgor upon the
exercise of any stock options financed in whole or in part as contemplated by
the foregoing recital and (ii) to authorize the Company to apply the Merger
Payments to the prepayment of the Notes.
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(1) Bracketed language in this WHEREAS clause to appear only in Pledge
Agreements for executives who have previously executed Notes for Option
Loans.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed as follows:
1. PLEDGE. As collateral security for the full and timely payment,
performance and observance of the Obligations, whether now or previously
existing or hereafter arising, the Pledgor herewith deposits, pledges with and
hypothecates to the Company, in form transferable for delivery, and grants to
the Company a security interest in, those shares of the outstanding Common Stock
and the certificates or other instruments or documents evidencing such Common
Stock set forth on Exhibit A attached hereto (together with a stock transfer
power duly endorsed in blank with signature guaranteed) and such additional
property as may at any time and from time to time be receivable by the Company
hereunder or otherwise distributed in respect of or in exchange for any or all
of such shares or into which such shares may be converted, including without
limitation any cash and/or securities receivable (or any right to receive such
consideration) in connection with the Merger (herein collectively referred to as
the "Pledged Securities"), together with any and all proceeds and products of
any of the foregoing in whatever form (the Pledged Securities and the proceeds
and products thereof may be referred to collectively as the "Pledged
Collateral").
2. PREPAYMENT FROM MERGER PAYMENTS. The Pledgor authorizes and directs
the Company, and its successor by merger, Winston, Inc., as pledgee, to apply
any and all Merger Payments to the immediate prepayment of the Notes, to the
extent of any Obligations (regardless of whether such Notes or Obligations are
due or payable at such time). Merger Payments shall be applied by the Company to
the Obligations as follows: (a) first, to any fees and expenses accrued and
payable under any Notes evidencing Exercise Price Loans, (b) second, to accrued
and unpaid interest on Exercise Price Loans, (c) third, to outstanding principal
of Exercise Price Loans (in inverse order of maturity of the related Notes), (d)
fourth, to any fees and expenses accrued and payable under any Notes evidencing
Tax Loans, (e) fifth, to accrued and unpaid interest on Tax Loans, (f) sixth, to
outstanding principal of Tax Loans (in inverse order of maturity of the related
Notes) and (g) seventh, to the Pledgor in accordance with Section 12 hereof.
In furtherance of this Section 2, the Pledgor agrees (i) to vote in
favor of the Merger and refrain from exercising any dissenter's or appraisal
rights and (ii) to cause the Merger Payments (as well as any shares of common
stock of AT&T Corp. received in the Merger with respect to the Pledged
Securities) to be delivered to the Company as pledgee, at 0000 Xxxxxx Xxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, by so completing the box
entitled "Special Delivery Instructions" on the Form of Election and Letter of
Transmittal relating to the Merger and delivering it to the Company prior to the
Merger, which Special Delivery Instructions shall then be irrevocable so long as
any Notes remain outstanding. The Company agrees to forward promptly such Form
of Election and Letter of Transmittal to the Exchange Agent specified therein,
together with certificates evidencing the Pledged Securities hereunder. The
Pledgor hereby grants the Company and, following the Merger, its successor,
Winston, Inc. power of attorney to endorse the Pledgor's name on any check or
other instrument representing
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Merger Payments in order that such Merger Payments may be applied to prepayment
of the Notes in accordance with this Section 2. The Pledgor further agrees that,
should any Merger Payments be paid to the Pledgor in lieu of the Company at any
time when any Note is outstanding, the Pledgor shall hold such payments in trust
for the Company and promptly remit to the Company all such Merger Payments for
application to the prepayment of the Notes.
3. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
that the Pledged Securities are, and will be upon deposit hereunder, duly and
validly issued and duly and validly pledged with the Company in accordance with
the law and agrees to defend the Company's right, title, lien and security
interest in and to the Pledged Collateral against the claims and demands of all
persons whomsoever. The Pledgor also represents and warrants to the Company that
Pledgor has, and will have on deposit hereunder, good title to all of the
Pledged Collateral, free and clear of all options to purchase or similar rights,
claims, mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever, except those granted to the Company herein, and that no
consent or approval of any governmental or regulatory authority, or of any
securities exchange was or is necessary to the validity of this pledge. Upon
delivery to the Company of the stock certificates described on Exhibit A and the
related blank stock transfer power, Pledgor represents and warrants that the
security interest and lien granted hereunder will constitute a first priority
security interest in and lien on the Pledged Collateral.
4. TRANSFER UPON DEFAULT. Upon the occurrence of any default under any of
the Notes (a "Default"), the Company may cause all or any of the Pledged
Securities to be transferred to or registered in its name or the name of its
nominee or nominees.
5. VOTING RIGHTS. So long as no Default shall have occurred, the
Pledgor shall be entitled to exercise the voting power with respect to the
Pledged Securities as the Pledgor shall think fit, but in a manner not
inconsistent with the terms hereof or of the Notes, and for that purpose the
Company shall (if the Pledged Securities shall be registered in the name of the
Company or its nominee) execute or cause to be executed from time to time, at
the expense of the Pledgor, such proxies or other instruments in favor of the
Pledgor, in such form and for such purposes as shall be reasonably required by
the Pledgor and shall be specified in a written request therefor by the Pledgor
to enable the Pledgor to exercise such voting power with respect to the Pledged
Securities.
6. VOTING RIGHTS UPON DEFAULT. Upon the occurrence and during the
continuance of any Default, the Company shall, to the extent permitted by law,
have the sole and absolute right, in addition to any other rights herein
contained, to exercise all voting power with respect to the Pledged Securities,
and in such event the Pledgor hereby appoints the Company as the Pledgor's true
and lawful proxy to vote such shares in any manner that the Company deems
advisable for or against all matters that may be submitted to a vote of such
shareholders.
7. DIVIDENDS. (i) In case upon the dissolution or liquidation (in whole or
in part) of the Company, any sum shall be paid as a liquidating dividend or
otherwise upon or with respect to any of the Pledged Securities, and (ii) in
case after a Default any other
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dividends of any kind shall be paid upon or with respect to any of the Pledged
Securities under any circumstances, such sum shall be paid over to the Company,
to be held by the Company as additional collateral hereunder. In case any stock
dividend shall be declared on any of the Pledged Securities, or any shares of
stock or fractions thereof shall be issued pursuant to any stock split involving
any of the Pledged Securities, or any dividend or distribution of capital shall
be made on any of the Pledged Securities, or any shares, obligations or other
property shall be distributed upon or with respect to the Pledged Securities
pursuant to a recapitalization or reclassification of the capital of the
Borrower, or pursuant to the dissolution, liquidation (in whole or in part),
bankruptcy or reorganization of the Company, or the merger or consolidation of
the Borrower with or into another corporation, then in any such case the stock
dividends, shares of stock or fraction thereof, obligations or other property so
distributed shall be delivered to the Company, to be held by it as additional
collateral hereunder, and all of the same shall constitute Pledged Collateral
for all purposes hereof. Any cash received and retained by the Company as
additional collateral hereunder pursuant to the foregoing provisions shall be
held in an interest-bearing account for the benefit of the Pledgor and may at
any time and from time to time be applied (in whole or in part) by the Company,
at its option, to the payment of the Obligations. Notwithstanding the foregoing,
Merger Payments shall be applied as set forth in Section 2 hereof.
8. REMEDIES. Immediately upon the occurrence of a Default, the Company
shall have all rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of North Carolina and, without
obligation to resort to other security, shall have the right at any time and
from time to time to sell, resell, assign and deliver, in its discretion, all or
any of the Pledged Collateral, in one or more parcels at the same or different
times, and all right, title and interest, claim and demand therein and right of
redemption thereof, on any securities exchange on which the Pledged Securities
or any of them may be listed, or at public or private sale, for cash, upon
credit or for future delivery, and in connection therewith the Company may grant
options, the Pledgor hereby waiving and releasing any and all equity or right of
redemption. If any of the Pledged Collateral is sold by the Company upon credit
or for future delivery, the Company shall not be liable for the failure of the
purchaser to purchase or pay for the same and in the event of any such failure,
the Company may resell such Pledged Collateral. In no event shall the Pledgor be
credited with any part of the proceeds of sale of any Pledged Collateral until
cash payment of such sale has actually been received by the Company.
9. SALE OF PLEDGED COLLATERAL; APPLICATION OF PROCEEDS OF SALE. The
Company shall give the Pledgor at least five (5) days' prior notice of the time
and place of any public sale and of the time after which any private sale or
other disposition is to be made, which notice the Pledgor agrees is reasonable,
all other demand, advertisements and notices being hereby waived. The Company
shall not be obligated to make any sale of Pledged Collateral if it shall
determine not to do so, regardless of the fact that notice of sale may have been
given. The Company may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale; and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. Upon each
private sale of Pledged Collateral of a type customarily sold in a recognized
market and upon each public sale, the Company, or any holder
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of any of the Obligations, may purchase all or any of the Pledged Collateral
being sold, free from any equity or right of redemption, which is hereby waived
and released by the Pledgor, and may make payment therefor (by endorsement
without recourse) in the Obligations in lieu of cash to the amount then due
thereon, which the Pledgor hereby agrees to accept. In the case of all sales of
Pledged Collateral, public or private, after all costs and expenses of every
kind for sale or delivery, including brokers' and reasonable attorneys' fees,
shall be deducted from the proceeds of the sale, the Company shall apply any
residue to the payment of the Obligations in the order provided in Section 2
above. The balance, if any, remaining after payment in full or all of the
Obligations, shall be paid to the Pledgor, subject to any duty of the Company
imposed by law to the holder of any subordinate security interest in the Pledged
Securities known to the Company.
10. PRIVATE SALE. The Pledgor recognizes that the Company may be unable
to effect a public sale of all or a part of the Pledged Securities by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, as now
or hereafter in effect, or in applicable Blue Sky or other state securities
laws, as now or hereafter in effect, but may be compelled to resort to one or
more private sales to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire such Pledged Securities for their own
account, for investment and not with a view to the distribution or resale
thereof. The Pledgor agrees that private sales so made may be at prices and on
other terms less favorable to the seller than if such Pledged Securities were
sold at public sales, and that the Company has no obligation to cause the
registration of such Pledged Securities for public sale under such applicable
securities laws.
11. CARE OF PLEDGED COLLATERAL. The Company shall have no duty as to
the collection or protection of the Pledged Collateral or any income thereof or
as to the preservation of any rights pertaining thereto, beyond the safe custody
of any Pledged Collateral actually in its possession. The Company shall not have
any responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, redemptions, offers, tenders or other
matters relative to any Pledged Collateral, whether or not the Company has or is
deemed to have knowledge of such matters, except delivery of the Pledged
Securities as required by the Form of Election and Letter of Transmittal
relating to the Merger, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
12. TERMINATION. When all Obligations have been paid in full, this
Pledge Agreement shall terminate and any remaining Pledged Collateral shall
revert to the Pledgor and the right, title and interest of the Company therein
shall terminate. Thereupon, the Company shall redeliver any items of Pledged
Collateral then in its possession.
13. FURTHER ASSURANCES. The Pledgor shall take such further actions and
execute such further documents and instruments as the Company may reasonably
request in order to effectuate fully the provisions of this Pledge Agreement,
including without limitation the provisions of Section 2 hereof.
14. INSTRUCTIONS TO EXCHANGE AGENT. Any exchange agent acting in
connection with the Merger may rely on a copy of this Agreement to, and is
hereby authorized and
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directed to take all action necessary to, give full effect to the provisions of
this Agreement with respect to any proceeds that would be due to the Pledgor in
connection with the Merger. The Pledgor agrees to provide any further
documentation required by such exchange agent to effectuate the foregoing.
15. MISCELLANEOUS. This Agreement shall be binding upon, and inure to
the benefit of (i) the parties hereto and their respective heirs, successors and
assigns, including, in the case of the Company, Winston, Inc., provided,
however, that, the Pledgor may not assign his rights or obligations hereunder
without the prior written consent of the Company and (ii) unless that certain
Agreement and Plan of Merger dated as of October 2, 1998, as amended, shall have
been terminated without consummation of the Merger, AT&T Corp., as an intended
third party beneficiary hereof. This Agreement shall be governed by and
construed in accordance with the laws (other than the conflict of laws rules) of
the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as an agreement under seal as of the date first above written.
VANGUARD CELLULAR SYSTEMS, INC.
By_________________________________
A duly authorized signatory
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Name of Pledgor:______________________
[SIGNATURE PAGE TO PLEDGE AGREEMENT]
Exhibit A
PLEDGED SECURITIES
Certificate No. Number of Shares Description of Stock
