AGREEMENT RE NETTING OF PAYMENTS
This AGREEMENT RE NETTING OF PAYMENTS (this "Agreement") is made this
__ day of December __, 1998 between Vanguard Cellular Systems, Inc. (the
"Company") and __________________ (the "Executive").
WHEREAS, the Company has this date, and may from time to time
hereafter, extend one or more loans (the "Loans") to the Executive, evidenced by
one or more promissory notes of the Executive in favor of the Company (the
"Notes"), the proceeds of which loans are to be applied either (i) to the
payment of the exercise price of stock options of the Company held by the
Executive (the "Exercise Price Loans") or (ii) to the payment by the Company of
income tax obligations of the Executive in connection with the exercise of such
options (the "Tax Loans").
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
Executive, 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 Executive, 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 Executive 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 (collectively, the "Merger
Payments") from Winston, Inc., as successor by merger to the Company.
WHEREAS, it is a condition of the Company's agreement to make the Loans
that the Notes be prepaid by the Merger Payments and that the Company be
entitled to set off against the amount of any Merger Payments to which the
Executive would be entitled any and all amounts accrued and outstanding under
the Notes, including without limitation, principal, interest, and any fees or
expenses owing thereunder, until such Notes are paid in full.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree that:
1. NETTING OF PAYMENTS. Notwithstanding anything to the
contrary in the Merger Agreement, at any time when any Note shall remain
outstanding, the Company shall be
entitled to set off against, and shall set off against, the amount of any Merger
Payment to which the Executive would be entitled an amount equal to (i) the full
amount of such Merger Payment if the amount of such Merger Payment is less than
the aggregate outstanding amount of principal, interest, fees and expenses
outstanding under any Note or Notes or (ii) the aggregate outstanding amount of
principal, interest, fees and expenses outstanding under any and all Notes, if
the amount of such Merger Payment is greater than such aggregate outstandings
(in each case, regardless of whether such Note or Notes is or are due or payable
at such time). All such Merger Payment amounts netted pursuant to this Section
shall be treated as having been paid pursuant to the applicable provisions of
the agreements referred to in the third WHEREAS clause above and then repaid as
mandatory prepayments of the Notes and shall be applied 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
Executive. Upon payment in full of any Note or Notes, the Company shall return
such Note or Notes to the Executive marked "Paid in Full".
2. 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 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 Executive in connection with the Merger. The Executive agrees to
provide any further documentation required by such exchange agent to effectuate
the foregoing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
3. 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 Executive may not assign his rights or obligations hereunder
without the prior written consent of the Company and (ii) unless the Merger
Agreement 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. Nothing herein shall be construed
as entitling the Executive to Merger Payments.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
an agreement under seal as of the date first above written.
VANGUARD CELLULAR SYSTEMS, INC.
By_________________________________
A duly authorized signatory
------------------------------------
Name of Executive:____________________
[SIGNATURE PAGE TO NETTING AGREEMENT]
3