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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 0-27442
OMNIPOINT CORPORATION
(Exact Name of Registrant as specified in its charter)
DELAWARE 04-2969720
(State or other jurisdiction of (IRS employer
incorporation or organization) identification No.)
2000 NORTH 14TH STREET, SUITE 550 22201
ARLINGTON, VA (Zip Code)
(Address of principal executive office)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 522-7778
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange
Title of Each Class: on which Registered:
-------------------- ---------------------
COMMON STOCK, PAR VALUE NASDAQ NATIONAL MARKET
$0.01 PER SHARE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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Documents incorporated by reference: Specified portions of the Definitive
Proxy Statement to be filed with the Commission pursuant to Regulation 14A in
connection with the 1997 Annual Meeting are incorporated herein by reference
into Part III of this Report. Such proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the
Registrant's fiscal year ended December 31, 1996.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 27, 1997 was approximately $273,105,763.
The number of shares outstanding of the Registrant's Common Stock, as of
March 27, 1997 was 51,331,657 shares of Common Stock.
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OMNIPOINT CORPORATION
FORM 10-K
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C> <C>
PART I
Item 1. Business................................................................... 1
Overview
Strategy
Industry Background
Service Business
Technology Business
Strategic Relationships
Regulatory Environment
Patents and Other Intellectual Property Rights
Employees
Item 2. Properties.................................................................
Item 3. Legal Proceedings..........................................................
Item 4. Submission of Matters to a Vote of Security Holders........................
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters....
Item 6. Selected Financial Data...................................................
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................
Item 8. Financial Statements and Supplementary Data................................
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................................
PART III
Item 10. Directors and Executive Officers of the Registrant........................
Item 11. Executive Compensation.....................................................
Item 12 Security Ownership of Certain Beneficial Owners and Management.............
Item 13. Certain Relationships and Related Transactions.............................
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........
Exhibit Index.............................................................
Signatures................................................................
</TABLE>
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FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT ON FORM 10-K
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. FACTORS THAT MIGHT CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." READERS SHOULD CAREFULLY REVIEW THE RISKS
DESCRIBED IN OTHER DOCUMENTS THE COMPANY FILES FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE QUARTERLY REPORTS ON FORM 10-Q
TO BE FILED BY THE COMPANY IN 1997. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF
THIS ANNUAL REPORT ON FORM 10-K. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE ANY REVISIONS TO THE FORWARD-LOOKING STATEMENTS OR REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS DOCUMENT.
PART I
ITEM 1. BUSINESS.
OVERVIEW
Omnipoint is a leader in commercializing personal communications services
("PCS"). Omnipoint has been awarded PCS licenses for 40.2 million population
equivalents ("POPs", the Paul Kagan Associates 1996 PCS Atlas & Databook
estimate of the 1996 population of a particular Major Trading Area ("MTA") or
Basic Trading Area ("BTA") or the total U.S.) and is the winning bidder on
additional PCS licenses for areas that will increase the Company's total
holdings to approximately 96.5 million non-overlapping POPs. Over 60% of these
POPs are located in a contiguous area in the northeast region of the U.S. from
Maine to Virginia. With the grant of licenses from the recent auction by the
Federal Communications Commission ("FCC") of the D, E and F Block PCS licenses
(the "D, E and F Block auction"), Omnipoint will be the fourth largest PCS
licensee in the U.S.
The Company holds a license for the New York MTA, the largest MTA in the
U.S., with approximately 26.9 million POPs, and Entrepreneurs' Band C Block PCS
licenses for 18 BTAs with approximately 13.3 million POPs, including the
Philadelphia, Atlantic City, Buffalo and Rochester BTAs. In the recently
completed D, E and F Block auction, the Company was the winning bidder on 109
licenses (59 D and E Block licenses and 50 Entrepreneurs' Band F Block
licenses). The winning bids include licenses in Boston, Providence, Washington
D.C., Baltimore, Miami, Detroit, St. Louis, Indianapolis, Norfolk and other
BTAs. The Company will pay an average of $10.75 per POP over periods of five
and ten years for its licenses covering 96.5 million POPs. The Company also
develops technology and equipment for PCS. The Company's proprietary technology
is suitable for a variety of digital wireless applications including wireless
local loop ("WLL"). Omnipoint's technology is being integrated with both
wireless Global System for Mobile Communications ("GSM") networks and local
telephone switching platforms.
Omnipoint has spent several years developing and refining its core
technology, including developments in spread spectrum, since the Company's
incorporation in 1987. From inception to 1992, the Company developed several
working prototypes for various wireless voice, data and digitized compressed
video transmission projects. The Company's success in developing its technology
for the first digital PCS system at 1.9 GHz during 1991 and 1992 was
instrumental in the FCC awarding the Company one of three Pioneer's Preferences
in 1993. As a result of the Pioneer's Preference, the FCC issued to the Company
in December 1994 a 30 MHz license to provide PCS services for the New York MTA
("the New York MTA License").
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Omnipoint's strategy for its service business is to become a leading
provider of wireless services in its markets. The Company commenced operations
of the first commercial PCS services in the New York City area at the end of
1996. The Company will continue to build out the New York MTA network and plans
to build and operate PCS networks in the areas covered by its BTA licenses,
focusing initially on the most densely populated portions of these areas and on
major commuting corridors. The Company believes that existing cellular systems
in the most densely populated areas, particularly within the New York City
metropolitan area, provide inadequate capacity and that service during peak
hours for current cellular users and the anticipated growth in wireless demand
will add to this problem. The Company intends to use a combination of
Omnipoint's proprietary technology system (the "Omnipoint System") and GSM to
provide superior wireless services to its customers. The Company plans to
offer a variety of services to its customers, including voice and data
transmission, call forwarding, call waiting and paging capability.
The Company will pay $347.5 million for the New York MTA License. The
Company is required to pay only interest on the total amount due until April 30,
1998, and to pay the principal balance and remaining interest during the period
April 1998 to March 2001. In September 1996, the FCC granted the Company 18
Entrepreneurs' Band C Block PCS licenses covering approximately 13.3 million
POPs. The total purchase price for these licenses after discount, is
approximately $509.1 million. The Company has made a 10% down payment, or
approximately $51.0 million, to the FCC for these licenses, will pay interest
only until 2002 and will pay the principal balance of approximately $458.2
million and remaining interest in the period 2002 to 2006. See
"Business--Regulatory Environment."
In the recently completed auction by the FCC of the D, E and Entrepreneurs'
F Block PCS licenses for BTAs, each consisting of 10 MHz of spectrum, the
Company was the successful bidder for licenses for 109 10 MHz BTAs with
approximately 93.8 million POPs. Since the Company was successful in
aggregating 10 MHz licenses into 20 MHz in several cities, including Boston,
Miami, and Detroit, the Company won licenses for 76.6 million non-overlapping
POPs in the D, E, and F Block auction. Further, primarily because the Company
expanded its spectrum from 30 MHz to 40 MHz in three cities, particularly the
New York BTA which has 18.4 million of these POPs, the number of incremental
POPs was 56.3 million. Thus, the Company's new combined total will be 96.5
million non-overlapping POPs.
In January 1997, the Company made a 20% down payment on its 59 D and E
Block PCS licenses, or approximately $21.4 million, to the FCC for these
licenses, and will pay the 80% balance, or approximately $85.6 million, within
five business days after the FCC grants the licenses, which are currently
anticipated to be granted before the end of June 1997. As to the Company's
Entrepreneurs' F Block licenses, the Company made a 10% down payment, or
approximately $7.4 million in January 1997, and will make a second 10% down
payment of $7.4 million within five business days after the FCC grants these
licenses, which are also currently anticipated to be granted before the end of
June 1997. The Company will make interest-only payments on the remaining F
Block obligation until 1999 and will pay the principal balance of approximately
$59.4 million and remaining interest over the period from 1999 to 2007.
Omnipoint's strategy for its technology development and equipment business
is to establish the Omnipoint System as a leading standard. The Joint
Technical Committee on Wireless Access (the "JTC") has designated the Omnipoint
System as IS-661. The Omnipoint System is one of the JTC approved common air
interface ("CAI") standards for PCS. The Omnipoint System is designed to provide
enhanced voice quality, higher speed data transmission rates and increased
capacity and service reliability relative to analog systems and other digital
wireless systems. Additionally, the Omnipoint System is designed to have lower
infrastructure costs than traditional cellular and other PCS systems.
The Omnipoint System is particularly well suited for WLL applications.
Initially, the Company plans to focus its domestic activities on providing
wireless access service in the New York MTA and other targeted cities for
businesses in small- and medium-sized business locations, whose capacity
requirements do not justify the expense of alternative bypass technologies, such
as leased line, fiber or
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microwave technologies. In addition, the Company intends to access international
markets through sales of equipment (i) to service providers for WLL applications
as an alternative to expanding fixed wireline services in countries where
telephone services have not been well developed, and (ii) as an upgrade to GSM
networks in more than 98 countries where GSM has been deployed or selected for
deployment.
The Company has established strategic relationships with Northern Telecom,
Inc. ("Northern Telecom"), Ericsson, Inc. ("Ericsson") and Hansol Paper Co.,
Ltd. and its telecom affiliates ("Hansol"). A substantial portion of
Omnipoint's equipment purchases for the buildout of the New York MTA network is
being financed by Northern Telecom under the $382.5 million vendor financing
facility (the "NT Credit Facility") and by Ericsson under the $132.0 million
vendor financing facility ("Ericsson Credit Facility"). The Company and
Northern Telecom are integrating the Omnipoint System with Northern Telecom's
GSM digital switch, with the first integrated system to be deployed in the New
York MTA. The Company and Ericsson have agreements involving (i) the purchase
and sale of Ericsson-manufactured infrastructure equipment and handsets for the
Company's PCS networks, and (ii) a licensing and acquisition arrangement
relating to the Omnipoint System. The Company and Orbitel Mobile Communications
Limited ("Orbitel"), a wholly-owned subsidiary of Ericsson, have entered into a
non-binding memorandum of understanding involving Orbitel's development and
manufacture of single mode IS-661 and dual mode IS-661/PCS 1900 equipment. The
Company has entered into a strategic alliance with Hansol under which it
licensed Hansol to manufacture handsets. The two companies also agreed to
cooperate on promoting the Omnipoint System in the Republic of Korea and other
parts of Asia. In addition, each of Pacific Bell Mobile Services, Inc.
("PacBell"), BellSouth Personal Communication, Inc. ("BellSouth"), Western
Wireless Corporation ("Western Wireless"), Powertel, Inc. ("Powertel"), American
Personal Communications, Inc. ("APC"), Pocket Communications, Inc. ("Pocket")
and Aerial Communications, Inc. ("Aerial") has a separate arrangement with the
Company to provide subscribers with roaming capabilities and in most cases, to
conduct trials using Omnipoint's equipment in the areas where each has PCS
licenses. The Company believes that these arrangements, coupled with the results
of the auctions of the C, D, E and F Block licenses, will bring GSM coverage to
over 90% of the U.S. population. In addition, the Company has signed a number of
roaming agreements with foreign carriers. The Company is in discussions with
other equipment vendors and service providers regarding additional strategic
relationships.
The Company was incorporated in 1987 in the State of Delaware.
STRATEGY
Omnipoint's strategy is to become a leading provider of wireless services
and products by deploying and operating PCS networks, providing Omnipoint
Systems products for wireless access services, establishing the Omnipoint System
as a leading PCS standard and capitalizing on opportunities in developing
international markets for wireless applications.
LEADING SERVICE PROVIDER
The Company plans to be a leading provider of wireless services in its
markets. The licenses held by the Company cover 96.5 million POPs. Over 60% of
these POPs are located in a contiguous area in the northeast region of the U.S.
from Maine to Virginia. The Company currently offers service in the New York
City metropolitan area and intends to expand service throughout the New York
MTA. The Company also plans to build and operate PCS networks in the areas
covered by its licenses focusing initially on the most densely populated
portions of these areas and major commuting corridors. The Company has completed
building its pilot system in Manhattan using the Omnipoint System. The Company
plans to build all of its networks integrating Omnipoint's IS-661 technology
with a GSM system in order to provide mobile and fixed telephone services, to
provide roaming capability with other GSM based networks and to facilitate rapid
market entry. The Company will concentrate its marketing efforts on cellular
users who the Company believes have experienced inadequate service and on the
expanding market of new users.
WIRELESS ACCESS SERVICES
Omnipoint plans to introduce wireless access services to businesses in
small- and medium-sized locations whose capacity requirements do not justify the
expense of alternative bypass technologies, such as leased line, fiber or
microwave technologies. Omnipoint's wireless access services would allow
customers to bypass the local telephone exchange to complete calls with wireline
quality at discounts to prices such customers pay today. The Company's wireless
access services will operate through radio units installed by the Company on
customers' premises which will communicate wirelessly with the Company's base
stations.
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LEADING PCS STANDARD
The Company intends to establish the Omnipoint System as a leading PCS
standard through sales to other PCS service providers. The Company has an
agreement with Northern Telecom for the two companies to market an integrated
Omnipoint/GSM system throughout North America to prospective license holders and
to existing PCS license holders who deploy PCS 1900 systems. The Company has
entered into a non-binding memorandum of understanding with Orbitel for Orbitel
to develop and manufacture single mode IS-661 and dual mode IS-661/PCS 1900
equipment and an agreement with Ericsson to sell Omnipoint base stations for a
variety of applications. The Company intends to enter similar arrangements with
other manufacturers from time to time.
INTERNATIONAL MARKETS
The Company is also developing its equipment for WLL telephone service in
international markets. Many developing countries have a very limited wireline
telephone infrastructure, and the cost and time required to expand or upgrade a
traditional telephone infrastructure is often prohibitive. The Company will
offer the Omnipoint System in such countries on a cost-efficient, easily
deployable basis to provide basic telephone service wirelessly. The Company is
also marketing the Omnipoint System to augment GSM networks.
INDUSTRY BACKGROUND
Since 1983, the demand for wireless telecommunications services has grown
dramatically as cellular, paging and other emerging wireless communications
services have become widely available and increasingly affordable. This growth
in wireless services has been driven by technological advances and changes in
both telecommunications regulations and consumer preferences. Mobile cellular
telephone service has been one of the fastest growing market segments within the
telecommunications industry. According to the Cellular Telecommunications
Industry Association, the number of cellular users in the U.S. grew from
340,000 at the end of 1985 to over 40 million at December 1996. According to
industry estimates, there are now approximately 100 million cellular users
worldwide.
Although analog cellular is the most widely deployed two-way wireless
service available today, it has several limitations, including inconsistent
service quality, lack of privacy, limited capacity and, currently, the inability
to transfer data without a modem. Most current cellular services transmit voice
and data signals over analog-based systems, which use one continuous electronic
signal that varies in amplitude or frequency over a single radio channel.
Digital systems, on the other hand, convert voice or data signals into a stream
of digits and typically use voice compression and other techniques to allow a
single radio channel to carry multiple simultaneous signal transmissions.
Digital technologies are expected to offer new services, improved system
flexibility, greater efficiency and increased capacity.
PCS is a second generation comprehensive wireless communications service
that offers services generally comparable to or exceeding existing digital
cellular services. PCS systems in the U.S. are expected to operate under one
of four principal digital signal transmission technologies, or standards, that
have been proposed by various operators and vendors for use in PCS systems: the
Omnipoint System, GSM (known as PCS 1900 in the U.S.), Code Division Multiple
Access ("CDMA") or Time Division Multiple Access ("TDMA"). See "--Technology
Business" and "--Strategic Relationships." GSM and TDMA are both "time
division-based" standards but are incompatible with each other and with CDMA.
The Omnipoint System is compatible with GSM and is being integrated with GSM.
See "--Technology Business--Competition."
GSM is the leading digital wireless technology in the world, with
approximately 175 networks being built or operating in more than 98 countries,
including all of western Europe. According to industry estimates, GSM networks
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served over 25 million subscribers worldwide as of December 1996, and are adding
over one million subscribers per month. APC introduced the first GSM network in
the U.S. in the Baltimore/Washington D.C. MTA in November 1995. In addition to
New York, GSM systems were also introduced in cities located in various states
including, California, Hawaii, Iowa, New Mexico, North Carolina, Oregon and Utah
in 1996. An important benefit associated with GSM technology is its use of an
open system architecture that will allow operators to purchase network equipment
from a variety of vendors that share standard interfaces for operation. This
open architecture provides significant flexibility by the operator in vendor
cost leveraging, and provisioning of features, products and services.
SERVICE BUSINESS
OVERVIEW
The Company's service business provides mobile and fixed communications
service in its markets. The Company's wireless service provides private, secure
and enhanced voice, high-speed data, paging services and imaging capabilities
for both the office environment and outdoor mobile coverage with enhanced
features including voice mail, call forwarding and call waiting. The Company
has initiated its pilot system in Manhattan comprised of a limited number of
Omnipoint base stations. Additionally, the Company intends to introduce a
wireless access service in the New York City metropolitan area.
Since securing the Pioneer's Preference award, the Company has been
actively designing and planning its network system to be built in the New York
MTA. During the next 24 months, the Company plans to continue to install
equipment and establish additional marketing and distribution channels in its
markets. The Company commenced operation of the first commercial PCS service in
the New York City area at the end of 1996. The Company will continue to build
out the New York MTA network and plans to build and operate PCS networks in the
areas covered by its BTA licenses, focusing initially on the most densely
populated portions of these areas and major commuting corridors.
One of the Company's objectives is to reduce the risk of cell site related
delays during the buildout of its networks. The Company is locating as many
sites as possible for its base stations and antennas where zoning approvals and
other necessary permits are not needed or are likely to be obtained more easily
than for traditional cellular equipment. Where high antenna sites are required,
the Company intends to facilitate the buildout through the use of existing
towers and structures occupied by telecommunications service providers, utility
companies and others. The site selection process will require the continued
successful negotiation of use agreements for or acquisitions of numerous
additional sites and may require the Company to obtain zoning variances or other
governmental or local regulatory approvals. The Company is currently designing
and planning its other networks and intends to use a similar cell site
acquisition approach.
The Company's buildout schedule may be revised as a result of changing
circumstances. The Company's ability to proceed with the buildout of its
networks is subject to continued site acquisitions or leases, the availability
of equipment and financing, the receipt of local governmental approvals where
required and the relocation of incumbent microwave users of the Company's
spectrum.
MARKETING STRATEGY
The Company's marketing objective is to stimulate demand for PCS voice and
data service and attract subscribers by providing superior service and
reliability at attractive prices. Omnipoint intends to generate demand by
introducing a better alternative to existing cellular service. The Company
intends to concentrate its PCS marketing efforts on the following key customer
segments: (i) large, communications-intensive corporate accounts, currently
using or considering cellular or private radio systems, that would value the
improved quality and security and would benefit from the Company's enhanced
products and services; (ii) high-mobility customers using or considering
cellular telephones who would benefit from fewer dropped or blocked calls; and
(iii) low-mobility
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customers attracted to PCS as a more convenient alternative to their landline
telephones, particularly those who have multiple telephone lines to their home
or business and who have a need for high speed data transmission.
In marketing its service, the Company intends to offer competitively priced
service that emphasizes voice clarity, reliability and a low probability of
blocked calls. The Company includes certain enhanced features including call
waiting, call forwarding, voice mail and paging as part of its product
offerings. The Company also promotes the improved call security resulting from
the use of digital technology which should encourage users to make confidential
professional and personal calls that they might otherwise make only on landline
telephones. In addition, the convenience of a single telephone number for
mobile, home and office use available to the customer throughout the Omnipoint
service area and the use of menu-driven subscriber functions should enhance the
convenience and usage of the Company's services.
The Company's strategy is to pursue multiple distribution channels through
which to market its services, generally on a non-exclusive basis, including a
direct sales force, retail stores and third party distributors or agents. In
addition to these traditional distribution channels, the Company is evaluating
and experimenting with other methods of marketing the Company's services such as
telemarketing and direct mail.
THE NEW YORK MTA WIRELESS MARKET
The New York MTA is an attractive wireless market due to its size, density
and demographics. In addition, the New York MTA is the country's largest
telecommunications market and has a disproportionately high share of all voice
and data traffic relative to its population, particularly with respect to
international calls placed to or from the U.S. New York is the largest MTA in
the U.S., with approximately 26.9 million POPs or approximately 10.2% of the
U.S. population, and is comprised of 20 BTAs, including New York, NY (which
includes northern New Jersey), Hartford, CT, Albany, NY, New Haven, CT and
Syracuse, NY. The New York MTA has a high share of households with annual
incomes of over $50,000, with 41.8% versus a nationwide average of 31.0%.
The two cellular systems operating in the New York area are capacity
constrained over the most densely populated traffic areas during peak hours.
Based on direct testing as well as information from a number of sources, the
Company believes that a significant number of the call attempts during peak
hours in certain areas of Manhattan fail to gain access to the cellular networks
due to capacity constraints in the networks. In addition, a large percentage of
calls that initially connect are dropped because of hand-off failures between
base stations due to the same capacity issues. The Company believes that
inherent capacity limits of existing cellular architectures will allow new PCS
entrants in New York to attract a large share of high-end wireless users.
Moreover, due to nationwide churn rates of the existing installed cellular
subscriber base of approximately 25% per year, the Company believes the market
shares of new PCS competitors are likely to rise significantly over time.
The Entrepreneurs' Band C Block auction afforded the Company the
opportunity to expand its planned PCS services to additional markets with
approximately 13.3 million POPs. Fifteen of the Company's 18 Entrepreneurs'
Band Markets are contiguous to the New York MTA which should provide the Company
with operating efficiencies. In addition, the Company believes these markets
have favorable demographics, including the percentage of households with annual
incomes over $50,000. Philadelphia, Atlantic City, Buffalo and Rochester are the
principal BTAs for which the Company successfully bid. Because of the Company's
success in the Entrepreneurs' Band auction at assembling contiguous BTAs, the
Company was able to acquire licenses covering 95.1% of the POPs in the
Philadelphia MTA and 84.8% of the POPs in the Buffalo MTA.
Since the Company successfully bid for 109 licenses in the recently
completed auction of the D, E and F Block licenses, the Company's total licenses
will cover 96.5 million (non-overlapping) POPs.
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COMPETITION IN THE NEW YORK MTA
The success of Omnipoint's PCS service business will depend upon its
ability to compete with the two cellular operators, at least two other PCS
licensees and potential future wireless communications providers. The Bell
Atlantic Corporation ("Bell Atlantic")/NYNEX Corporation ("NYNEX") consortium
and AT&T Wireless, Inc. ("AT&T Wireless") currently provide cellular services in
the New York Metropolitan Statistical Area (MSA) and surrounding areas. Sprint
Spectrum was the winner of the B Block New York MTA PCS license. Sprint Spectrum
has indicated that it seeks to provide service to all of its markets by mid-
1997. NextWave was the successful bidder in the Entrepreneurs' Band auction for
the New York BTA PCS license. NextWave is continuing to build its network and it
is unclear when it will begin providing service. See "Regulatory Environment--
PCS Licensing." No competing operator has announced an intention to use PCS 1900
in the New York BTA. The Company's Entrepreneurs' Band C Block networks will
face similar PCS and cellular competition including competition in certain BTAs
from AT&T Wireless, Sprint Spectrum, Cellular One, COMCAST and Metrophone, among
others. The recently completed D, E and F Block auction will bring the Company
into competition with other providers. Enhanced Specialized Mobile Radio
("ESMR") will also have a competitive impact. However, ESMR operators are
currently primarily targeting certain market niches and have less spectrum in
dense urban areas. In the future, PCS will also compete more directly with
traditional landline telephone service providers and with cable operators who
expand into the offering of traditional communications services over their cable
systems and may face competition from other technologies including mobile
satellite systems.
WIRELESS ACCESS SERVICE
Omnipoint plans to introduce wireless access services to businesses in
small- and medium-sized locations allowing customers to bypass the local
telephone exchange to complete certain calls at lower prices than such customers
currently pay. The wireless access services will operate through radio units
installed by the Company on customers' premises which will communicate
wirelessly with the Company's base stations. The Company plans to initially
target business locations for which alternative bypass facilities are not as
economical.
The Telecommunications Act of 1996 (the "Telecom Act") has created new
opportunities for WLL applications. Historically, regulations have protected the
regulated telephone monopolies from competition in switched local exchange
markets. Recently, many states, including New York and Connecticut, began
permitting local loop competition by operators other than the local exchange
carrier.
On August 1, 1996, the FCC adopted rules requiring incumbent LECs to
provide reasonable reciprocal compensation arrangements for wireless carriers
and not charge wireless carriers for terminating LEC-originated traffic.
Previously, LECs generally charged wireless carriers for calls initiated on the
wireless network and terminated on a LEC's network, while wireless carriers
could not charge the LEC for calls initiated on a LEC's network and transported
to and terminated on the wireless network. The FCC's order will likely result
in significantly reduced termination fees for wireless to LEC calls. Several
companies have initiated federal court challenges to the Commission's rules.
ROAMING ARRANGEMENTS
The Company has roaming arrangements with a number of different U.S. GSM-
based PCS providers, including PacBell, BellSouth, Western Wireless, Powertel,
APC, Pocket and Aerial, to provide subscribers with roaming capability in the
markets where these parties will operate PCS services. While roaming across the
companies' GSM-based networks, subscribers will be able to place and receive
calls and maintain their customized profiles and features without specific
customer prior request. In most cases, the Company and these GSM-based PCS
providers will conduct joint tests of the Omnipoint System and have agreed to
work together on PCS infrastructure and handset standards and to establish
complementary marketing programs. The Company believes that these arrangements,
coupled with the results of the auctions for the C, D, E and F Block licenses,
will bring GSM coverage to over 90% of the U.S. population. The Company and
certain other PCS license holders are currently
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exploring alternatives to ensure that the GSM protocol will be available in all
markets. In addition, the Company has signed a number of roaming agreements with
foreign carriers. The Company is in discussions with other GSM-based PCS
providers regarding additional strategic relationships.
TECHNOLOGY BUSINESS
OVERVIEW
Manufacturers of PCS equipment compete in a high-growth, cost-competitive
market in which they must offer compact, cost-effective solutions. Due to
evolving industry standards and the rapid introduction of new services, the
success of PCS equipment manufacturers will also depend on their ability to
bring new products to market quickly.
The Omnipoint System, officially designated as IS-661 by the Joint
Technical Committee on Wireless Access, is a proprietary CAI system using spread
spectrum, a technology originally developed for military applications. The
Omnipoint System is one of the competing CAI standards that have been selected
by PCS license holders. Because of the Omnipoint System's design features,
voice quality, data rates, low cost, small cell size and high capacity, the
Omnipoint System will be particularly well suited for WLL services. The
Omnipoint System will offer the ability to deliver both wireline voice quality
and the enhanced services being sought by customers.
The Company designs and tests its equipment and software at its engineering
facilities in Colorado Springs, Colorado. Manufacturing and assembly will be
subcontracted to third parties whenever possible. Currently, the Company and
Northern Telecom are integrating Omnipoint's RF access system and equipment
which provides communication between terminals and base stations, primarily
radio and digital cards for base stations, with Northern Telecom's switches.
This integrated system will be used in the New York MTA and marketed to other
domestic and international operators.
The Company has operated trial networks during the past three years in
Colorado Springs, New York City and northern New Jersey. Through these trials,
as well as independent system tests, the Company has verified the central
features of the Omnipoint System.
The Company believes that its proprietary technology will provide a number
of advantages over cellular and other PCS technologies, including:
. Lower infrastructure costs resulting in reductions in per minute costs and
facilitating competition with wireline telephone systems for certain market
segments.
. Compatibility with GSM and central office switch infrastructures.
. Wireline quality voice and enhanced data capabilities.
The Company's technology is flexible enough to be deployed in both large,
developed, metropolitan centers and less developed, rural areas, both
domestically and internationally. The Company believes that the technical
characteristics and low cost of the Omnipoint System allow for the widespread
deployment of telecommunications services while avoiding the high cost of wire-
based infrastructure, making the Omnipoint technology particularly well suited
for many countries which are currently upgrading or developing their
telecommunications infrastructure.
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The Omnipoint System is the result of technology developed by the Company,
particularly in the areas of protocol design and spread spectrum. The Company's
research and field testing of the Omnipoint System have provided an
understanding of the technical and business challenges facing PCS providers. As
a result, the Company has designed a system that it believes has several
architectural advantages.
The Omnipoint System has an expected cell radius ranging from seven miles
to a few hundred feet. The Base Station in each cell is connected by microwave,
fiber optic cable or telephone wires to the Base Station Controller ("BSC"). The
BSC in turn connects to the switch which uses adjunct computers to control the
operation of the wireless telephone system for its entire service area.
COMPETITION
Competition in the wireless telecommunications equipment industry is
intense. The industry consists of major domestic and international companies,
including those companies currently providing equipment to cellular providers,
most of which have substantially greater financial, technical, marketing, sales,
manufacturing, distribution and other resources than those of the Company. The
Company will compete with these other companies primarily by selling equipment
that provides enhanced features at a lower cost. Given the rapid advances in the
wireless telecommunications industry, there can be no assurances that new
technologies will not evolve that will compete with the Company's products.
In addition to the Company's technology standard, three competing
technology standards have emerged in the mobile PCS industry.
PCS 1900 is a modified version of the global digital GSM standard at 1800
MHz cellular services. PCS 1900 is a TDMA-based technology supported by
Ericsson, Motorola, Siemens, NOKIA and Northern Telecom. Several U.S.
service operators with licenses covering approximately 200 million POPs have
committed to this technology, and it is widely believed to be a leading
contender for further deployment. Based on the technology preferences indicated
by the A, B and C Block license holders and the successful bidders in the D, E
and F Block auction, GSM will be deployed by license holders with licenses
covering over 90% of the U.S. population. APC introduced the first commercial
PCS system in the U.S. in the Baltimore/Washington, D.C. MTA in November 1995
using PCS 1900 equipment. Because Omnipoint is integrating its system with GSM,
Omnipoint System equipment can be combined with PCS 1900 GSM equipment in a
single network. Accordingly, operators that select PCS 1900 represent additional
potential customers for Omnipoint System equipment.
IS-95 CDMA is the CDMA standard proposed as an upgrade for existing analog
cellular service to digital service. Qualcomm is the primary proponent of IS-95
CDMA for PCS service. IS-95 has also received support from Motorola, Lucent
Technologies, Inc. and Northern Telecom. IS-95's service supporters include
Sprint Spectrum and Bell Atlantic, NYNEX, US West and AirTouch Communications
Inc., through their consortium, PrimeCo Personal Communications, L.P., formerly
known as PCS PrimeCo, L.P., which have begun to deploy a modified version of
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this technology at 1.9 GHz.
IS-54 and IS-136 TDMA are the TDMA standards that several cellular carriers
are implementing as they upgrade to digital service. Primary network suppliers
are Lucent Technologies, Inc., Ericsson and Hughes. IS-54 and IS-136 TDMA face
no major technological hurdles in upbanding to 1.9 GHz PCS. Upbanded IS-54 and
IS-136 TDMA equipments are expected to become generally available in mid to late
1997.
STRATEGIC RELATIONSHIPS
NORTHERN TELECOM RELATIONSHIP
In 1994, the Company entered into a non-exclusive agreement to integrate
its technology with Northern Telecom's established network architectures.
Pursuant to the agreement, the parties will integrate the Omnipoint System with
Northern Telecom's digital GSM system. Omnipoint will deploy the Omnipoint/GSM
integrated system in the New York MTA and has also agreed to jointly market
integrated systems throughout North America.
The system will initially use a GSM interface between Omnipoint's RF access
technology and the digital switches. Use of an available network interface such
as GSM should ensure the timely deployment of PCS systems utilizing Omnipoint's
technology.
Northern Telecom and the Company have signed a series of equipment OEM and
supply agreements, as well as the NT Credit Facility. Northern Telecom will make
varying payments as it purchases core electronics and software from the Company.
Northern Telecom has made an initial $3.0 million license payment (part of up to
$12.0 million in licensing and OEM fees to be paid to the Company under certain
circumstances) and may make additional royalty payments based upon shipments of
Omnipoint products. Northern Telecom will then sell Omnipoint/Northern Telecom
integrated systems to PCS operators, including the Company. A substantial
portion of the Company's purchases to build out the New York network will be
financed by Northern Telecom under the NT Credit Facility. Northern Telecom has
executed a non-binding commitment letter to extend the NT Credit Facility from
$382.5 million to $612.0 million on substantially the same terms. Such extension
is subject to approval by the Board of Directors of Northern Telecom. If a
definitive agreement is reached, the Company expects to use these funds in the
New York MTA or other markets.
The pilot network has been delivered and installed in Manhattan using the
Omnipoint System. Omnipoint and Northern Telecom have announced that their
integrated systems will be introduced commercially for sale to other PCS
operators in 1998.
ERICSSON RELATIONSHIP
On April 16, 1996, Ericsson and the Company and their respective affiliates
entered into a series of definitive agreements including: (i) a licensing and
OEM agreement relating to the Omnipoint System; (ii) a GSM handset supply
agreement; and (iii) a supply agreement for infrastructure equipment to be
deployed as part of the Company's networks. Each of these agreements has a term
of five years commencing on the date on which it was executed. In addition,
Ericsson and the Company have entered into the Ericsson Credit Facility for the
New York MTA network.
Under the non-exclusive licensing and OEM agreement, Ericsson will purchase
from the Company base stations for resale worldwide as part of Ericsson wireless
systems in the 1850-1990 MHz frequency band. For the
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rights granted under the licensing and OEM agreement, Ericsson will pay license
fees and royalties, including an initial $4.5 million license fee.
Under the agreement for the sale of Ericsson infrastructure equipment, the
Company and its affiliates subject to certain conditions, including vendor
financing, have committed to purchasing at least $166 million of a mix of IS-661
and PCS 1900 infrastructure equipment. The Company will also purchase GSM
handsets from Ericsson in accordance with the terms of the GSM handset supply
agreement.
Pursuant to the Ericsson Credit Facility, Ericsson will provide up to
$132.0 million of vendor financing for the New York MTA network to OCI for (i)
amounts owed to Ericsson under the infrastructure supply agreement, and (ii)
amounts owed to Ericsson under the handset agreement, so long as these latter
amounts do not exceed 50% of the amounts owed to Ericsson for infrastructure
equipment.
Also in April 1996, the Company and Orbitel entered into a non-binding
memorandum of understanding regarding the development and manufacture of single
mode IS-661 and dual mode IS-661/PCS 1900 handsets. Under this memorandum of
understanding, Orbitel would develop, manufacture and provide dual mode IS-
661/PCS 1900 equipment in accordance with a mutually-agreed upon timetable
commencing at the time OCI shall agree to a minimum purchase commitment to be
determined after the parties have ascertained the resources necessary for the
development and manufacture of such equipment.
The definitive agreements contemplate other cooperation between the
parties, including assistance on IS-661 integration with the GSM interface and
related systems, cooperation on new applications for the Omnipoint System,
including data services, developmental efforts relating to equipment, technical
trials of IS-661 technology and the establishment of GSM standards.
HANSOL RELATIONSHIP
On December 12, 1995, the Company granted a non-exclusive license to Hansol
to manufacture Omnipoint System subscriber equipment and entered into a
strategic alliance with Hansol for the promotion of the Omnipoint System in the
Republic of Korea and other parts of Asia. The agreement provides that, subject
to certain preconditions such as competitive pricing, quality and availability,
Omnipoint will purchase Hansol manufactured subscriber equipment for sale to
subscribers in areas covered by the Company's Entrepreneurs' C Band markets.
Hansol has the right to designate management representatives and may have
engineers and other personnel working with Omnipoint to develop the Company's
networks.
ROAMING ARRANGEMENTS
The Company has roaming arrangements with GSM-based PCS providers PacBell,
BellSouth, Western Wireless, Powertel, APC, Pocket and Aerial, to provide
subscribers with roaming capability in the markets where these parties will
operate PCS services. The Company and these GSM-based PCS providers will conduct
joint tests of Omnipoint's technology and plan to work together to establish PCS
infrastructure and handset standards and conduct joint marketing efforts. The
Company believes that these arrangements, coupled with the results of the C, D,
E and F Block auction will bring GSM coverage to over 90% of the U.S.
population. The Company and certain other PCS license holders are currently
exploring alternatives to ensure that the GSM protocol will be available in all
U.S. markets. There can be no assurance that the Company or others will be
successful in this endeavor. In addition, the Company has signed a number of
roaming agreements with foreign carriers. The Company is in discussions with
other GSM-based PCS providers regarding additional strategic relationships.
REGULATORY ENVIRONMENT
The FCC regulates the licensing, construction, operation and acquisition of
wireless telecommunications systems in the U.S. pursuant to the Communications
Act of 1934, as amended (the "Communications Act"), and
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the rules, regulations and policies promulgated by the FCC thereunder. Under the
Communications Act, the FCC is authorized, among other things, to allocate,
grant and deny licenses for PCS frequencies, establish regulations governing the
interconnection of PCS systems with wireline and other wireless carriers, grant,
rescind or deny license renewals and applications for transfer of control or
assignment of PCS licenses, establish other regulations governing the operations
of PCS and other telecommunications carriers and impose fines and forfeitures
for any violations of the Communications Act or FCC regulations.
PCS LICENSING
The FCC established PCS service areas in the U.S. of 51 MTAs comprised of
493 smaller BTAs largely based upon Rand McNally's market definition . In June
1994, the FCC finalized the allocations of the 1.85 to 1.99 GHz bands for
broadband PCS services. The Commission distinguished the licenses along four
dimensions, including (i) the amount of RF spectrum-30 MHz versus 10 MHz, (ii)
the size of geographic area-MTA versus BTA, (iii) the eligibility to hold the
license and participate in the specific auction for each type of license, and
(iv) the timing of the auctions regarding each of the above categories.
The FCC decided that two 30 MHz licenses, designated as Blocks A and B,
would be allocated geographically by MTAs (these include the Block A licenses
granted to the Pioneers in their respective MTAs). The 30 MHz MTA auction ended
in March 1995, and the FCC granted those licenses in June 1995. Four licenses
designated as Blocks C, D, E and F are allocated by BTAs. The C and F Block
licenses are allocated 30 MHz and 10 MHz of spectrum, respectively, and reserved
for "Entrepreneurs." Eligibility to bid for and hold licenses in the C and F
Blocks is limited to entities that, together with their affiliates and certain
investors, have gross revenues of less than $125 million in each of the last two
years and total assets of less than $500 million. Successful bidders in the
Entrepreneurs' Band are given certain bidding credits and favorable installment
payment terms. The most favorable bidding credits and installment payment
options are available only to C Block applicants that qualify as small
businesses, and to F Block applicants that qualify as very small businesses.
Generally, a small business is an entity that has average annual gross revenues
of not more than $40 million for the preceding three relevant years while a very
small business is an entity that has average annual gross revenues of not more
than $15 million for the preceding three relevant years.
In determining whether a C or F Block applicant meets the financial caps
for qualification as an Entrepreneur, a small business or a very small business,
the FCC examines, individually and cumulatively, the assets and revenues of the
applicant, its affiliates, investors with more than 25% or 49.9% (depending on
which of the two control group equity structures is used) of the applicant's
fully-diluted equity or voting stock and its control group members. Applicants
seeking to qualify as an Entrepreneur, a small business or a very small
business, must be controlled by a control group made up principally of
individuals or entities who meet the financial qualifications applicable to
Entrepreneurs. Only certain non-qualifying investors may be in the control
group, such as members of the entity's management team or qualifying
institutional investors. The control group must hold at least 25% or 50.1%
(depending on which control group equity structure is used) of the applicant's
total equity during the first three years and 50.1% of the applicant's voting
stock for the initial term of the license.
Over time, C and F Block licensees (as well as their affiliates and
investors) may exceed the gross revenue caps through equity investment by non-
attributable investors, debt financing, revenue from operations, business
development and expanded service. Furthermore, after three years from the date
of the license grant, the control group will be required to hold only 10% or 20%
of the total equity (depending on which control group equity structure is used).
The control group must retain at least 50.1% of the ownership of voting stock,
however, for the duration of the initial license term, and the control group
must exercise de facto as well as de jure control over the licensee. The FCC has
stated that it will conduct audits to ensure compliance with Entrepreneurs' Band
regulations.
The Entrepreneurs' Band auction for the C Block licenses ended in May 1996.
The D, E and F Block auctions ended in January 1997. The remaining 20 MHz of the
140 MHz of PCS spectrum available was allocated for unlicensed PCS applications
such as wireless PBX adjuncts, LANs and home cordless phones. All PCS licenses
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will be granted for a 10-year period, at the end of which they may be renewed.
Licenses may be revoked at any time for cause.
The Company's networks will operate in the spectrum now partially occupied
by private and common carrier fixed microwave users. Many of these microwave
incumbents provide services that may interfere with or receive interference from
the operation of PCS networks and, as a result, will have to be negotiated with
or relocated. In an effort to balance the competing interests of existing
microwave users and newly authorized PCS licensees, the FCC has adopted a
transition plan to relocate such microwave operators to other spectrum blocks.
In the event the Company displaces a microwave incumbent, the Company must pay
at least the microwave incumbent's relocation expenses, and may be required to
take actions necessary to put the microwave incumbent's new facility into
operation. The Company may also be required to reimburse other entities for the
relocation by such entities of microwave incumbents that the Company would have
displaced. The Company expects to implement a frequency plan that will minimize
to the extent possible the number of existing microwave users that need to be
relocated.
PIONEER'S PREFERENCE PROGRAM
Omnipoint is one of only three recipients of a broadband PCS Pioneer's
Preference license. Under the terms of the FCC's Pioneer's Preference program
and pursuant to an FCC order, Omnipoint was awarded a preference to apply for a
license not subject to competing applications to provide service in the New York
MTA. The Company received the New York MTA License consisting of 30 MHz of PCS
spectrum (1850 to 1865 MHz and 1930 to 1945 MHz) in December 1994. The final
terms of the Pioneer's Preference awards are contained in the GATT legislation.
All of the litigation related to the GATT legislation has been dismissed and all
appeal rights have expired.
Pursuant to the terms of the GATT legislation, the Company will pay $347.5
million or $12.88 per POP for the New York MTA License on the following terms:
(i) a five-year payment period with interest accruing at 7.75% from the order
adoption date with the first payments due on April 8 and April 30, 1996 and
subsequent quarterly payments due on April 30, July 31, October 31 and January
31, (ii) interest only payments for the first two years, and (iii) principal and
interest payments for the remaining three years. The GATT legislation prohibits
the FCC from reconsidering its December 1993 Report and Order granting final
preference awards to the three Pioneers. The legislation also mandates that the
decision is not subject to further administrative or judicial review. GATT also
provides that the FCC establish by order the interest rate and the timing of
principal and interest payments. On March 8, 1996, the FCC adopted such an
order, the terms and conditions of which are as follows:
CONDITIONS ON LICENSES
The FCC has placed certain conditions on the Company's New York MTA
License. The conditions include the requirement that the Company construct
network facilities that offer coverage to at least one-third of the population
in the particular MTA or BTA service area within five years of the grant of the
license (the "Five-Year Buildout Requirement") and to at least two-thirds of
the population within 10 years (the "10-Year Buildout Requirement"),
assignment and change of control restrictions and substantial use requirements.
Violations of any of these conditions could result in license revocations,
forfeitures or fines.
The Company's licenses are subject to the Five-Year Buildout Requirement
and the 10-Year Buildout Requirement. In the case of the New York MTA License,
the Five-Year Buildout Requirement must be met by December 1999 and the 10-year
Buildout Requirement by December 2004. The Company believes it can achieve these
requirements as well as the buildout
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requirements that apply to its other licenses. Licensees that fail to meet their
respective coverage requirements may be subject to forfeiture of the license.
The Pioneer's Preference PCS licenses contain a provision prohibiting an
assignment of the license or a transfer of control of the licensee until the
earlier of three years after the license grant (i.e., not before December 1997)
or the date on which the Company has provided coverage for one-third of the
license area's population. In addition, the Communications Act requires the
FCC's prior approval of the assignment or transfer of control of a PCS license.
Furthermore, the FCC has established transfer disclosure requirements that
require licensees who transfer control of or assign a PCS license within the
first three years to file associated contracts for sale, option agreements,
management agreements or other documents disclosing the total consideration that
the applicant would receive in return for the transfer or assignment of its
license. Non-controlling interests in an entity that holds a PCS license or PCS
system generally may be bought or sold without prior FCC approval.
The Entrepreneurs' Band licensees are prohibited from voluntarily assigning
or transferring control of their licenses for five years after grant date except
to assignees or transferees that satisfy the financial criteria established for
the Entrepreneurs' Band. Any transfers or assignments during the 10-year initial
license term are subject to unjust enrichment penalties including the forfeiture
of any bidding credits and the acceleration of any installment payment plans if
the assignee or transferee does not qualify for the same benefits. In addition,
licensees must maintain their Entrepreneurs' Band eligibility for five years
from the date of initial license grant. In that regard, however, increased gross
revenues or total assets from non-attributable equity investments, debt
financing, and revenue from operations, business development or expanded service
are not considered by the FCC. The FCC has announced that it may conduct audits
to ensure compliance with all license conditions.
The New York MTA License contains a condition that requires the Company to
construct a PCS system that "substantially uses" the design and technology
upon which the Pioneer's Preference award was based. The condition expires upon
the system providing coverage for one-third of the population of the MTA. The
FCC has never specifically defined the phrase "substantial use." Although
there can be no assurance as to whether or how the FCC will in the future
construe the phrase "substantial use", the Company believes, on the basis of
prior FCC pronouncements, that its present plan to use the Omnipoint/GSM System
to build out the New York MTA network will satisfy the "substantial use"
condition. The Company's other licenses do not contain a similar condition.
In addition, to maintain all of the benefits of its Designated Entity
Status, the Company's control group and qualifying investors must retain certain
minimum stock ownership and voting stock of the Company and meet certain other
criteria.
CITIZENSHIP REQUIREMENTS
Under existing law, no more than 20% of any subsidiary of the Company that
holds an FCC license may be owned directly by non-U.S. citizens or their
representatives. Foreign ownership of up to 25% is permitted in the Company and
its subsidiaries that have a direct or indirect ownership interest in an FCC
licensee; however, upon request, the FCC has the discretion to allow a licensee
to exceed the 25% benchmark if so doing is in the public interest. If an FCC
licensee exceeds the benchmark without express permission, the FCC may deny or
revoke the license if such a denial or revocation would be in the public
interest. The restrictions on foreign ownership could also adversely affect the
ability of the Company to attract additional equity financing from entities that
are, or are owned, by non-U.S. persons.
Failure to comply with these requirements may result in the FCC issuing an
order to the entity requiring divestiture of alien ownership to bring the entity
into compliance with the Communications Act. In addition, fines, a denial of
renewal or revocation of the license are possible. The Company has no knowledge
of any present foreign ownership in violation of the Communications Act.
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TELECOMMUNICATIONS ACT OF 1996
The Telecom Act is the first comprehensive legislation changing federal
telecommunications regulation in over 60 years. In general, its goal is to
remove the statutory, regulatory and court-ordered barriers that historically
prohibited new entrants into many segments of the telecommunications industry.
The Telecom Act enables LECs, long distance carriers, cable companies,
broadcasters and others to compete directly. The Telecom Act attempts to create
opportunities for competition within the local loop, while allowing BOCs
eventually to enter the long distance market. It requires the BOCs and other
incumbent LECs to permit competitors to interconnect with their local loop
networks through unbundled network elements, resale and collocation. The passage
of the Telecom Act will affect the business of the Company because of the likely
creation of more opportunities to compete in both the local exchange and long
distance markets for the same or similar types of services that the Company
plans to offer as well as the specific treatment of commercial mobile radio
service operators such as the Company. However, the Company cannot predict the
exact nature and extent of this competition. On August 1, 1996, the FCC adopted
rules implementing the interconnection provisions of the Telecom Act that
provide for unbundled network elements at the incumbent LEC's long run
incremental costs plus a reasonable share of forward-looking joint and common
costs ("total element long run incremental cost") and for resale of incumbent
LEC retail services at substantial discounts off of retail rates (with a default
range of 17-25%). In October 1996, the U.S. Court of Appeals for the Eighth
Circuit issued a stay of FCC's interconnection and resale pricing rules pending
final determination of the challenges brought against FCC's August 1
interconnection Order. In November 1996, the stay was partially lifted with
respect to rules governing interconnection between incumbent LECs and wireless
companies. In addition, the FCC has adopted rules regarding telephone number
portability pursuant to which subscribers will be able to migrate their landline
and cellular telephone numbers to a PCS carrier, and from a PCS carrier to
another service provider. The FCC is also conducting or planning to conduct a
number of rulemaking proceedings, including proceedings anticipated to establish
rules expected to result in an overhaul of the access charges paid by long-
distance carriers to LECs and the funding mechanisms for universal service which
may require PCS licensees such as the Company to pay charges to support
universal service.
PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
As of December 31, 1996, Omnipoint has received 15 patents on its
technology, has 13 patent applications which have been allowed, and has 53 U.S.
and 84 foreign patent applications pending. The issued patents will expire
between 2008 and 2015. The Company will continue to file patent applications as
engineering developments occur. The policy of the Company is to apply for
patents or other appropriate or statutory protection when it develops valuable
new or improved technology. The Company believes, however, that the successful
development of its technology generally depends more upon the experience,
technical know-how and creative ability of its personnel rather than on
ownership of patents.
The status of patents involves complex legal and factual questions and the
breadth of claims allowed is uncertain. Accordingly, there can be no assurance
that patent applications filed by the Company will result in patents being
issued or that its patents, and any patents that may be issued to it in the
future, will afford protection against competitors with similar technology; nor
can there be any assurance that patents issued to the Company will not be
infringed upon or designed around by others or that others will not obtain
patents that the Company would need to license or design around. If existing or
future patents containing broad claims are upheld by the courts, the holders of
such patents might be in a position to require companies to obtain licenses.
There can be no assurances that licenses that might be required for the
Company's products would be available on reasonable terms, if at all. To the
extent that licenses are unavailable, or are not available on acceptable terms,
no assurance can be made that the failure to obtain a license would not
adversely impact the Company.
In addition to seeking patent protection, the Company relies on trade
secrets to protect its proprietary rights. The Company attempts to protect its
trade secrets and other proprietary information through agreements with
customers and suppliers, non-disclosure and non-competition agreements with
employees and consultants and other security measures. Although the Company
intends to protect its rights vigorously, there can be no assurance that these
measures will be successful.
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EMPLOYEES
As of March 27, 1997, the Company had a total of 856 employees,
including 583 employees of Omnipoint Communications Services, Inc. ("OCS") and
247 employees of Omnipoint Technology ("OT"). OCS has 212 employees in
engineering, 157 in sales, marketing and product management, and 214 in
customer support, administration and finance. OT has 171 employees in
engineering, 13 in sales, marketing and product management, and 63 in
manufacturing, administration, finance and other activities. The Company's
future success will depend in significant part on the continued service of its
key technical, sales and senior management personnel. Competition for such
personnel is intense and there can be no assurance that the Company can retain
its key managerial, sales and technical employees, or that it can attract,
assimilate or retain other highly qualified technical, sales and managerial
personnel in the future. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be good.
ITEM 2. PROPERTIES.
Beginning April 1, 1997, the Company's principal administrative offices
will be located in leased space in Bethesda, Maryland. OT has its sales,
marketing, support, research and development personnel occupy two facilities in
Colorado Springs, Colorado, and one facility in Fort Worth, Texas. The largest
facility is located in approximately 68,512 square feet of subleased space in
Colorado Springs. The other facility there is located in approximately 54,850
square feet of leased space. The Virginia lease and the Colorado sublease and
lease are pursuant to agreements which expire in February 1998, August 2000 and
September 2000, respectively. OT also occupies 20,000 square feet of leased
space in Fort Worth pursuant to a lease which expires March 31, 1999.
In January 1997, the Company leased a 32,000 square foot facility in Cedar
Knolls, New Jersey, to house the corporate office of OCS. The Company acquired
a building with approximately 24,000 square feet in Wayne, Jew Jersey in 1995 to
house its network control center. In addition, OCS houses a customer
care/administrative support center in an approximately 24,000 square feet of
leased space in Bethlehem, Pennsylvania, with an additional 24,000 square feet
of leased space for additional administrative purposes.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently aware of any pending or threatened litigation
that could have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock of Omnipoint is traded on the Nasdaq National Market under
the symbol "OMPT." Prior to January 26, 1996, there was no established public
trading market for any of the Company's securities.
The following table sets forth, for the periods indicated, the range of
high and low closing sales price for the Common Stock as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
Fiscal 1996 High Low
------ --------
<S> <C> <C>
First Quarter (from January 26, 1996) 28 19-1/2
Second Quarter 32-3/4 25-15/32
Third Quarter 30-1/2 22
Fourth Quarter 35-1/2 18-7/8
</TABLE>
On March 27, 1997, the last reported sale price of the Common Stock was
$11.875 per share. As of March 27, 1997, the Company had approximately 411
shareholders of record.
In April 1996, the Company issued to a sophisticated institutional investor
312,500 shares of Common Stock upon exercise of a warrant, for an aggregate
purchase price of $1,250.
In December 1996, in reliance upon the provisions of Regulation S under the
Act, relating to sales by the Company to a non-U.S. person, the Company issued
to a sophisticated institutional investor 250,000 shares of Common Stock upon
exercise of a warrant, for an aggregate purchase price of $1,000.
The Company has never paid or declared any cash dividends on its Common
Stock and does not expect to pay cash dividends in the foreseeable future.
Further, the Company's Indenture in connection with 11 5/8% Senior Notes due
2006, dated August 27, 1996, and the Indenture in connection with 11 5/8%
Series A Senior Notes due 2006, dated December 2, 1996, both restrict the
Company's ability to declare or pay dividends. The NT Credit Facility
contains a restriction on OCI's ability to declare and pay dividends.
17
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Form 10-K. The selected
consolidated financial data as of December 31, 1995 and 1996, and for each of
the three years in the period ended December 31, 1996, have been derived from
the Company's consolidated financial statements included elsewhere in this Form
10-K which have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon is also included in this Form 10-K. The
selected consolidated financial data as of December 31, 1992, 1993 and 1994 and
for each of the years ended December 31, 1992 and 1993 have been derived from
audited financial statements of the Company not included in this Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Revenue............................ $ 3,399 $ 1,618 $ 3,000 $ -- $ 531
Operating expenses:
Research and development........ 3,700 4,593 7,018 14,345 38,205
Sales, general and
administrative................. 2,475 2,974 6,290 12,619 47,140
Depreciation and amortization.. 101 246 1,125 11,038 15,587
------- ------- -------- -------- ----------
Total operating expenses. 6,276 7,813 14,433 38,002 100,932
------- ------- -------- -------- ----------
Loss from operations............... (2,877) (6,195) (11,433) (38,002) (100,401)
Interest income (expense), net..... 82 (32) (1,156) 232 (26,529)
Miscellaneous income............... -- -- 65 -- --
Gain on sale of subsidiary stock... -- -- 3,194 -- --
------- ------- -------- -------- ----------
Net loss........................... $(2,795) $(6,227) $ (9,330) $(37,770) $ (126,930)
======= ======= ======== ======== ==========
As of December 31,
-----------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- ----------
(in thousands)
BALANCE SHEET DATA:
Working capital (deficit)........... $ 1,340 $ 9,055 $ 3,095 $ (1,410) $ 246,315
Total assets........................ 2,540 14,465 360,946 474,990 1,419,472
FCC license obligations............. -- -- 347,518 347,518 709,853
Other long-term debt................ -- -- 1,688 48,349 477,503
Preferred stock..................... 1,500 15,902 15,902 44,127 --
Total stockholders' equity (deficit) 101 (6,031) (7,416) (30,548) 133,774
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this 10-K contain forward looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from the results discussed in forward looking statements.
OVERVIEW
The Company was incorporated in Delaware in June 1987 to design, develop,
manufacture and market wireless digital communications products. From inception
to 1991, the Company focused primarily on developing its core technology. The
Company used its core technology to generate revenues from the production of
prototype equipment pursuant to agreements with companies in the communications
industry. In 1992, the principal focus of the Company shifted from performing
such activities to the development of its PCS business.
Since 1992, the Company has generated limited revenues primarily from
license fees, research and development services and prototype equipment sales
related to its proprietary technology. As the principal focus of the Company has
been the development of its PCS business, there has been minimal contract and
license fee activity. The Company believes that period-to-period revenue
comparisons are not necessarily meaningful as an indication of future
performance. The Company expects to derive revenues from the sale of its
equipment and the provision of PCS service in the Company's recently launched
New York market.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenues for 1996 were $531,000, all of which was associated with the
launch of the New York networks, compared to no revenues in 1995.
Research and development expenses increased by 167.1%, or approximately
$23.9 million, to $38.2 million for the year ended December 31, 1996 compared to
$14.3 million for the year ended December 31, 1995. The increase was due
primarily to an increase of $5.8 million for project management and other costs
associated with the buildout of the IS-661 pilot system and New York MTA PCS
1900 infrastructure, an increase of $1.7 million for equipment leases and
rentals, and an increase of $10.3 million in payroll and related taxes, employee
benefits and employee recruiting costs associated with the Company's continued
growth and its development of the IS-661 technology.
Sales, general and administrative expenses increased by 273.8%, or
approximately $34.5 million, to $47.1 million for the year ended December 31,
1996 compared to $12.6 million for the year ended December 31, 1995. Of this
increase, $7.6 million was due to payroll related expenses associated with
increases in headcount resulting from the expansion of the Company's operations.
The remaining increase consists primarily of $4.0 million in marketing expense,
$10.1 million of inventory write-downs to reflect net replacement cost and $3.5
million in rent, utilities and other building expenses. The Company expects that
such expenses will continue to increase significantly in 1997, as the company
continues to expand its operations.
Depreciation and amortization increased by 40.9% or approximately $4.5
million to $15.6 million for the year ended December 31, 1996 compared to $11.0
million for the year ended December 31, 1995. The increase in the 1996 period
was due to a general increase in depreciation related to the Company's network
infrastructure equipment as a result of activation of the PCS networks.
Interest and other income increased approximately $10.0 million to $10.7
million for the year ended December 31, 1996 compared to $0.7 million for the
year ended December 31, 1995. The increase was due to the increase in interest
earned on interest bearing cash and cash equivalents and short-term investments.
The increase in cash and cash equivalents and short-term investments resulted
from the issuance of $25.0 million in senior notes in November 1995, $25.0
million in convertible notes in November and December 1995, the proceeds of
$118.4 million received from the
19
<PAGE>
Company's IPO in January 1996, $110.7 million from a follow-on offering in July
1996 and $352.4 million from sales of two tranches of 11-5/8% Senior Notes due
2006 (the "1996 Senior Notes") in August and December of 1996.
Interest expense increased approximately $36.7 million, to $37.2 million
for the year ended December 31, 1996 as compared to $0.5 million for the year
ended December 31, 1995. The increase was due to $20.2 million of interest
expense for the New York MTA Pioneer Preference license, $11.0 million for the
1996 Senior Notes, $4.1 million for the five-year term Senior Notes in an
aggregate principal amount of $25.0 million (the "1995 Senior Notes") in an
amount of $0.4 million related to the amortization of bond issuance costs, and
$0.9 million associated with the NT Credit Facility.
Net loss increased approximately $89.1 million to $126.9 million for the
year ended December 31, 1996 compared to $37.8 million for the year ended
December 31, 1995. This increase was due primarily to a general increase in
operating expenses, as well as an increase of approximately $26.7 million in net
interest expense.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
There were no revenues during the year ended December 31, 1995 as compared
to $3.0 million for the year ended December 31, 1994, consisting of a license
fee from Northern Telecom.
Research and development expenses increased by 104.3%, or approximately
$7.3 million, to $14.3 million for the year ended December 31, 1995 compared to
$7.0 million for the year ended December 31, 1994. The increase was due
primarily to an increase of $3.1 million in the purchase of research and
development components and an increase of $3.3 million in payroll and related
payroll taxes and employee benefits associated with the Company's continued
growth and its development of the IS-661 technology.
Sales, general and administrative expenses increased by 100.0%, or
approximately $6.3 million, to $12.6 million for the year ended December 31,
1995 compared to $6.3 million for the year ended December 31, 1994. Of this
increase, $2.5 million was due to increases in management headcount resulting
from the expansion of the Company's operations. The remaining increase consists
primarily of increases of $1.1 million in legal fees, $300,000 in accounting
fees, $402,000 in rent expense and utilities, $664,000 in consulting service
fees and $530,000 in travel expenses.
Depreciation and amortization increased approximately $9.9 million to $11.0
million for the year ended December 31, 1995 compared to $1.1 million for the
year ended December 31, 1994. The increase in the 1995 period was due primarily
to 12 months of the amortization of the New York MTA License, which is being
amortized using the straight-line method over a period of 40 years.
Net interest income was $232,000 for the year ended December 31, 1995
compared to $1.2 million of net interest expense for the year ended December 31,
1994. The net interest expense for the year ended December 31, 1994 included
$1.5 million of interest expense related to the New York MTA License.
Net loss increased approximately $28.5 million to $37.8 million for the
year ended December 31, 1995 compared to $9.3 million for the year ended
December 31, 1994. This increase was due primarily to an increase of $8.7
million in amortization associated with the New York MTA License and a general
increase in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Since its formation through December 31, 1996, the Company has financed its
operations and met its capital requirements primarily through the IPO, a follow-
on public offering, three Preferred Stock offerings, sale of the 1995 Senior
Notes, two private placements of the 1996 Senior Notes and vendor financing.
20
<PAGE>
Operating activities used net cash of $7.9 million in 1994, $19.7 million
in 1995 and $64.5 million in 1996. These increases resulted from the Company's
increased activity and corresponding growth to support product development and
to commence the buildout of the New York MTA network. Investing activities
provided net cash of $720,000 in 1994, used net cash of $44.0 million in 1995,
and used net cash of $290.4 million in 1996, which consisted of capital
expenditures for equipment used in engineering and manufacturing, the purchase
of New York MTA infrastructure related products, license payments and short and
long-term investments.
During 1996, the Company has financed its operations and met its capital
requirements primarily through its initial public offering and follow-on public
offering, vendor financing and the two private placements of the 1996 Senior
Notes. These financing activities provided net cash of $512.0 million in 1996
compared to $116.0 million in 1995. Operating activities used net cash of $64.5
million in 1996 compared to $19.7 million in 1995. The increase resulted from
the Company's additional activity relating to supporting product development and
commencement of the New York MTA network buildout. Investing activities, network
assets, licenses, and lab equipment used net cash of $290.4 million in 1996
compared to $44.0 million in 1995. The increase consists of $173.8 million for
purchases of New York MTA infrastructure related items and lab equipment used in
engineering and manufacturing, and $50.9 million for the down payment on the
Entrepreneurs' Band licenses, $20.0 million in additional FCC deposits and $48.6
million for short and long term investments.
As of December 31, 1996, the Company had working capital of approximately
$246.3 million. In January 1996, working capital increased by $135.4 million
from a deficit of $1.4 million at December 31, 1995 to $134.0 million,
reflecting the receipt of $118.4 million of proceeds, net of expenses, from the
issuance of 8,050,000 shares of Common Stock in the IPO, the reduction of
current liabilities of $36.5 million and $16.3 million related to the repayment
of debt outstanding pursuant to a certain credit agreement, and the conversion
of $25.0 million of Convertible Subordinated Notes upon the IPO, respectively.
This increase in working capital was partially offset by the cash used to repay
a short-term credit agreement debt. In July 1996, the Company received
approximately $110.6 million of proceeds, net of expenses, from the issuance of
4,500,000 shares of Common Stock. In August and December of 1996, the Company
sold an aggregate of $450.0 million of the 1996 Senior Notes, yielding the
Company $352.4 million after deducting expenses and $90.7 million in escrowed
funds. Items reducing working capital include an additional $20.0 million in
FCC deposits, $50.9 million for down payment on Entrepreneurs' Band licenses,
and a $75.2 million repayment of vendor financing debt.
In 1993, the Company, through its subsidiary, OCI, was awarded a final
Pioneer's Preference for the New York MTA License that required no license fee.
Subsequent legislation mandated a methodology for charging for such License and
required that the FCC adopt an order setting forth the terms of the principal
and interest payments for such License. In accordance with terms defined in
that legislation, the Company is obligated to pay a license fee of $347.5
million to the FCC for the New York MTA License. On March 8, 1996, the FCC
adopted such an order, the terms and conditions of which are as follows: (i) a
five-year payment period with interest accruing at 7.75% from the order adoption
date with the first payment due on the 30th day following such date and
subsequent quarterly payments due on April 30, July 31, October 31 and January
31, (ii) interest only payments for the first two years and (iii) principal and
interest payments for the remaining three years. In 1996, the Company made
interest payments totaling $20.1 million.
The Company has an agreement to purchase $250.0 million of equipment and
services over the next five years from Northern Telecom. The Company has
purchased approximately $61.0 million of equipment and services under such
agreement. The Company has a $382.5 million credit facility with Northern
Telecom to finance purchases and installations of telecommunications equipment,
engineering services, certain related construction costs, third-party equipment
and other expenses. The Company also has an OEM agreement to sell certain
equipment, hardware and software to Northern Telecom at its normal selling
prices, which will result in licensing fees and revenues.
21
<PAGE>
The NT Credit Facility is secured by a pledge of all capital stock of OCI
owned by a wholly-owned subsidiary of the Company (which constitutes a 95.58%
ownership interest) and substantially all of OCI's assets. Under the terms of
the NT Credit Facility, OCI is subject to certain financial and operational
covenants including restrictions on OCI's ability to pay dividends, restrictions
on indebtedness and certain financial maintenance requirements. Additionally,
the NT Credit Facility provides that, among other events, the failure of OCI to
pay when due amounts owing the FCC shall constitute an event of default.
Interest on the NT Credit Facility is payable quarterly.
The principal amount of the non-working capital portions of the NT Credit
Facility is payable in installments beginning in 2000, with the final payment
due on December 31, 2004. As of December 31, 1996, OCI paid all outstanding
balances (principal and accrued interest) of approximately $58.9 million
outstanding under the non-working capital portions of the facility.
A portion of the NT Credit Facility, which may be used for working capital
purposes including interest payments on the principal of such facility, matures
on June 30, 1997. Borrowings for working capital purposes which are repaid may
be subsequently borrowed for the other purposes allowed under the NT Credit
Facility. As of December 31, 1996, the Company repaid the entire outstanding
balance of approximately $14.9 million of the working capital portion of the NT
Credit Facility.
Northern Telecom has executed a non-binding commitment letter to extend the
NT Credit Facility from $382.5 million to $612.0 million on substantially the
same terms. Such extension is subject to approval by the Board of Directors of
Northern Telecom. If a definitive agreement is reached, the Company expects to
use these funds in the New York MTA or other markets which the Company acquired
in the Entrepreneurs' Band auction.
The Company entered into a credit facility with Ericsson, dated as of
August 7, 1996, to provide financing to the Company for up to $132.0 million for
the purposes of financing the purchase of equipment and services from Ericsson
for the New York MTA market. A portion of the Ericsson Credit Facility, which
may be used for interest payments accruing under such facility, and a portion
which may be used to purchase handsets, mature on June 30, 1998. The principal
amount on other portions of the facility is payable in installments beginning in
2000, with the final payment due on December 31, 2004. Amounts borrowed and
repaid are not available for reborrowing except for the $2.1 million repaid by
the Company during the third quarter of 1996. Interest on the Ericsson Credit
Facility is payable quarterly.
Under the terms of the Ericsson Credit Facility, OCI is subject to certain
financial and operational covenants including restrictions on OCI's ability to
pay dividends, restrictions on indebtedness and certain financial maintenance
requirements. Additionally, the Ericsson Credit Facility provides that, among
other events, the failure of OCI to pay when due amounts owing the FCC shall
constitute an event of default. The Ericsson Credit Facility is secured by
substantially all of the assets of OCI, including a pledge of all capital stock
of OCI owned by a wholly-owned subsidiary of the Company (which constitutes a
95.58% ownership interest). All collateral is held by a collateral agent and is
shared on a pari passu basis with Northern Telecom pursuant to an inter-creditor
arrangement.
The Company, through its subsidiary, Omnipoint Communications, Inc.
("OCI"), signed a five year agreement with Ericsson to purchase $85.0 million of
infrastructure equipment, software and engineering, installation and testing
services. In addition, since the Company acquired C Block licenses covering 13.3
million people, beyond those in the New York MTA, the Company is obligated to
purchase $81.3 million in additional equipment and services.
The Company paid all outstanding balances, approximately $2.1 million, to
Ericsson on September 30, 1996.
Subsequent to September 30, 1996, the Company has not initiated any
additional draws on the NT or Ericsson Credit Facilities.
On November 22, 1995, the Company sold variable interest rate 1995 Senior
Notes, in the aggregate amount of $25.0 million, together with warrants to
purchase 625,000 shares of Common Stock at an exercise price of $.004 per share.
The 1995 Senior Notes mature in five years and may be prepaid at any time. The
note purchase agreement contains certain covenants and restrictions on the
Company, including a restriction on the payment of cash dividends and the
requirement that any indebtedness of the Company be pari passu or subordinate to
the 1995 Senior Notes.
On November 29, 1995, the Company sold Convertible Subordinated Notes in
the aggregate amount of $15.0 million, together with warrants to purchase
375,000 shares of Common Stock at an exercise price of $.004 per share. On
December 18, 1995, the Company sold Convertible Subordinated Notes in the
aggregate amount of $10.0 million to Hansol, together with warrants to purchase
250,000 shares of Common Stock at an exercise price of $.004 per share. The
Convertible Subordinated Notes were converted upon the closing of the IPO into
1,562,500 shares of Common Stock.
On January 31, 1996, the Company completed its IPO of 8,050,000 shares of
Common Stock resulting in proceeds, net of related expenses, of approximately
$118.4 million. In connection with the IPO, the Preferred Stock was converted
into 10,605,591 shares of Common Stock and the Convertible Subordinated Notes
were converted into 1,562,500 shares of Common Stock. The Company used a
portion of the net proceeds to pay down the outstanding balance of $36.5 million
due pursuant to a credit agreement.
On July 3, 1996, the Company completed a public offering of 4,500,000
primary shares of Common Stock resulting in proceeds, net of related expenses,
of approximately $110.7 million.
22
<PAGE>
On September 17, 1996, the Company was awarded 18 Entrepreneurs' Band BTA C
Block licenses for an aggregate price of $509.1 million. The Company made its
down payment of 10%, of $51.0 million in two equal installments, on May 14, 1996
and September 24, 1996. The remaining 90% of the license payments, or $458.2
million, will be due in quarterly installments beginning in the year 2003 and
continuing until 2006 and will bear interest until paid at 7%. The Company has
filed with the FCC a formal request that the interest rate be set at 6.5%. On
December 31, 1996, the Company made an initial interest-only payment for the
Block C license of approximately $9.2 million. The Entrepreneurs' Band BTA
licenses are accounted for in accordance with the recently SEC mandated industry
practices. Accordingly, the licenses were recorded at a net present value of
$411.0 million. Interest incurred for such licenses will be capitalized during
the buildout phase and amortization of such license costs will begin with the
commencement of service to customers. Based on the Company's estimate of
borrowing costs for debt with terms similar to the U.S. government financing,
the Company used an 11% discount rate.
In the recently completed auction by the FCC of the D, E and F Block
licenses for BTAs, the Company won 109 licenses for an aggregate of $181.4
million (net of the 25% small business discount). In January 1997, the Company
made a down payment of approximately $28.8 million to the FCC and is expected to
pay an additional $93.1 million shortly after the licenses are issued. The
remaining $59.4 million for the F Block licenses is payable over the next ten
years.
The Company believes that access to capital and financial flexibility are
necessary to successfully implement its strategy. The Company believes the
proceeds from the sale of the 1996 Senior Notes, in combination with the NT
Credit Facility and Ericsson Credit Facility, will be sufficient to fund
operating losses, capital expenditures and working capital necessary for the
initial buildout of the Company's PCS networks. To the extent that the buildout
of these networks is faster than expected, the costs are greater than
anticipated or the Company takes advantage of other opportunities, including
those that may arise through current and future FCC auctions, the Company may
require additional funding to implement its business strategy.
The Company's future capital requirements will depend upon many factors,
including the successful development of new products, the extent and timing of
acceptance of the Company's equipment in the market, requirements to maintain
adequate manufacturing facilities, the progress of the Company's research and
development efforts, expansion of the Company's marketing and sales efforts, the
Company's results of operations
23
<PAGE>
and the status of competitive products. The Company believes that cash and cash
equivalents on hand, including proceeds from the two private placements of the
1996 Senior Notes, anticipated revenues, vendor financing and additional
strategic partnerships will be adequate to fund its operations and its network
buildout through 1997. There can be no assurance, however, that the Company will
not require additional financing during such period to fund its operations. The
Company believes that it will require substantial amounts of additional capital
over the next several years and anticipates that this capital will be derived
from a mix of public offerings and private placements of debt or equity
securities or both.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company believes that its future operating results over both the short
and long term will be subject to annual and quarterly fluctuations due to
several factors, some of which are outside the control of the Company. These
factors include the cost of buildout of the networks (including any
unanticipated costs associated therewith), fluctuating market demand for the
Company's equipment and services, establishment of a market for PCS, pricing,
competitive services, the timing of significant orders for its equipment, delays
in the introduction of the Company's equipment, competitive equipment
introductions, changes in the regulatory environment, the cost and availability
of equipment components and general economic conditions.
The Company's success in the implementation and operation of its networks
is subject to certain factors beyond the Company's control. These factors
include, without limitation, changes in the general and local economic
conditions, availability of equipment, changes in communication service rates
charged by others, changes in the supply and demand for PCS and the commercial
viability of PCS systems as a result of competition from wireline and wireless
operators in the same geographic region, changes in the federal and state
regulatory schemes affecting the operation of PCS systems (including the
enactment of new statutes and the promulgation of changes in the interpretation
or enforcement of existing or new rules and regulations) and changes in
technology that have the potential of rendering obsolete the Omnipoint/GSM
system planned for deployment. In addition, the extent of the potential demand
for PCS in the Company's markets cannot be estimated with any degree of
certainty. There can be no assurance that one or more of these factors will not
have an adverse effect on the Company's financial conditions and results of
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 of Part II is included herein
as to the Consolidated Financial Statements filed with this report; see
Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which is effective for fiscal year 1997. SFAS No. 128 is designed to
improve the EPS information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure requirements and
increasing the comparability of EPS data on an international basis. The Company
is evaluating the impact of this pronouncement; however, the adoption of this
pronouncement is not expected to have a material impact on the Company's
financial statements.
24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information required by Item 10 is hereby incorporated by reference
from the Proxy Statement of Omnipoint Corporation.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is hereby incorporated by reference
from the Proxy Statement of Omnipoint Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is hereby incorporated by reference
from the Proxy Statement of Omnipoint Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is hereby incorporated by reference
from the Proxy Statement of Omnipoint Corporation.
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
(a) Documents filed as part of the report:
<S> <C> <C>
(1) Report of Independent Accountants F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 1994, 1995 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 F-6
Notes to Consolidated Financial Statements F-7
(2) Financial Statement Schedule S-1
(3) Exhibits
</TABLE>
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- --------------------------------------------------------------------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2@@@ Amended and Restated Bylaws of the Registrant.
4.2 See Exhibit 3.1.
10.1@ Registrant's Amended and Restated 1990 Stock Option Plan.
10.2@ Form of Incentive Stock Option Agreement under Registrant's 1990 Stock
Option Plan.
10.3@ Form of Stock Option Agreement under Registrant's 1990 Stock Option
Plan for non-qualified options.
10.4@ Form of Stock Option Agreement outside scope of Registrant's 1990 Stock
Option Plan for non-qualified options.
10.5@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.6@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.7@ Letter agreement, dated June 29, 1995, by and between the Registrant
and Allen & Company Incorporated (relating to Exhibit 10.6).
10.8 [Intentionally left blank.]
10.9@ Common Stock Purchase Warrant issued March 10, 1995, granted to Madison
Dearborn Capital Partners, L.P.
10.10@ Common Stock Purchase Warrant issued March 10, 1995, granted to Madison
Dearborn Capital Partners, L.P.
10.11@ Employment Agreement, effective October 1, 1995, by and between the
Registrant, Omnipoint Communications Inc. and George F. Schmitt.
10.12@ Promissory Note, dated October 1, 1995, by George F. Schmitt.
10.13@ Stock Restriction Agreement, dated October 1, 1995, by and between the
Registrant and George F. Schmitt.
</TABLE>
26
<PAGE>
10.14@ Employment Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.15@ Promissory Note, dated April 17, 1995, by Bradley E. Sparks.
10.16@ Stock Restriction Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.17 Employment Agreement, dated November 3, 1996, by and between the
Registrant and Kjell S. Andersson.
10.18 Promissory Note, dated February 24, 1997, by Kjell S. Andersson.
10.19 Stock Restriction Agreement, dated February 24, 1997, by and between
the Registrant and Kjell S. Andersson.
10.20@ Series B Convertible Preferred Stock Purchase Agreement, dated August
9, 1993, by and among the Registrant and Madison Dearborn Capital
Partners, L.P.
10.21@ Amendment No. 1 to Series B Convertible Preferred Stock Purchase
Agreement, dated June 29, 1995, by and between the Registrant and
Madison Dearborn Capital Partners, L.P.
10.22@ Series C Convertible Preferred Stock Purchase Agreement, dated June 29,
1995, by and among the Registrant and the other parties named therein.
10.23@ Amended and Restated Registration Rights Agreement, dated June 29,
1995, by and among the Registrant and the parties named therein.
10.24@ First Amended and Restated Voting Agreement, dated June 29, 1995, by
and among the Registrant and the other parties named therein.
10.25@ OEM Supply Agreement for Omnipoint PCS (Personal Communication
Systems) Products, dated September 22, 1994, by and between the
Registrant and Northern Telecom Inc.
10.26@ Manufacturing License and Escrow Agreement for Personal Communication
Service Products, dated February 28, 1995, by and between the
Registrant and Northern Telecom Inc.
10.27@ Collaborative Development Agreement, dated March 1, 1995, by and
between the Registrant and Northern Telecom Inc.
10.28@ Reciprocal OEM Agreement Memorandum of Understanding, dated March 30,
1995, by and between the Registrant and Northern Telecom Inc.
10.29@ Supply Agreement, dated September 22, 1994, by and between Omnipoint
Communications Inc. and Northern Telecom Inc.
10.30@ Amendment No. 1 to Supply Agreement, dated July 21, 1995, by and
between Omnipoint Communications Inc. and Northern Telecom Inc.
10.31 [Intentionally left blank].
10.32+++ Amended and Restated Loan Agreement, dated August 7, 1996,
by and between Omnipoint Communications Inc. and Northern Telecom Inc.
10.33+++ Loan Agreement, dated August 7, 1996, by and between Omnipoint
Communications Inc. and Ericsson Inc., as amended.
10.34@ Memorandum of Understanding, dated April 21, 1995, by and between the
Registrant and Pacific Bell Mobile Services.
10.35@ Note and Warrant Purchase Agreement dated November 22, 1995, between
the Registrant and the purchasers named therein.
10.36@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
10.37@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
27
<PAGE>
10.38@+ Memorandum of Understanding, dated November 22, 1995, by and between
the Registrant and Ericsson Inc.
10.39@ Letter Agreement, dated January 24, 1996, by and between the
Registrant and between Ericsson Inc.
10.40@ Letter of Intent, dated October 26, 1995, by and between the
Registrant and BellSouth Personal Communications, Inc.
10.41@ Contract for Sale of Real Estate, dated August 30, 1995, by and
between F&R Bari Realty, Ltd., Inc. and Omnipoint Communications Inc.
Ameritech Development Corporation.
10.42@ Lease Agreement, dated October 15, 1995, by and between the
Registrant and Baetis Properties, Inc.
10.43**++ Acquisition Agreement for Ericsson CMS 40 Personal Communications
Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996,
by and between Ericsson Inc. and Omnipoint Communications.
10.44**++ Acquisition Supply and License Agreement for Omnipoint Personal
Communications Systems (PCS) Infrastructure Equipment, dated as of
April 16, 1996, by and between Ericsson Inc. and the Registrant.
10.45**++ Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal
Units, dated as of April 16, 1996, by and between Ericsson, Inc. and
Omnipoint Communications, Inc.
10.46**++ Memorandum of Understanding, dated April 2, 1996, by and between
Orbitel Mobile Communications Inc. and the Registrant
10.47@@ Letter of Intent, dated November 20, 1995, by and between the
Registrant and Western Wireless Corporation
10.48@@ Letter of Intent, dated February 26, 1996, by and between Omnipoint
Communications Inc. and American Portable Telecom, Inc.
10.49@@ Letter of Intent, dated March 22, 1996, by and between Omnipoint
Communications Inc. and American Personal Communications.
10.50@@ Letter of Intent, dated May 13, 1996, by and between the Registrant
and InterCel, Inc.
10.51@@ License Agreement, dated March 22, 1996, by and between the
Registrant and Bender & Company, Inc.
10.52@@ Second License Agreement, dated April 17, 1996, by and between
Registrant and Bender & Company, Inc.
10.53@@ Lease Agreement, dated March 1, 1996, by and between Omniset
Corporation and Roots Stone Limited Partnership.
10.54 Agreement dated as of February 24, 1997, between the Registrant and
Kjell S. Andersson, amending Employment Agreement dated November 3,
1996.
11.1 Statement of computation of loss per share.
21.1@ Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included in signature pages).
27 Financial Data Schedule.
___________________________________________________________
@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 33-98360.
28
<PAGE>
@@ Incorporated herein by reference to the Company's Registration Statement
on Form S-1, No. 33-03739.
@@@ Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-19895.
* Incorporated herein by reference to Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
** Incorporated by reference to the Company's Current Report on Form 8-K,
filed May 3, 1996.
+ Portions of this Exhibit were omitted and have been filed separately
with the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 of the Act,
which application was granted by the Commission.
++ Portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 24b-2 under the Exchange
Act of 1934, filed May 3,1996.
+++ Portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 24b-2 under the Exchange
Act of 1934, filed March 31,1997.
___________________________
(b) REPORTS ON FORM 8-K
On May 3, 1996, a Form 8-K, Item 5, was filed disclosing the fact that
(i) the Company entered into definitive agreements with Ericsson Inc. governing
the licensing and OEM arrangement relating to the Company's proprietary IS-661
technology and (ii) the Company entered into a non-binding memorandum of
understanding with Orbital Mobile Communications Ltd. involving the development
of IS-661 and dual mode IS-661/PCS 1900 handsets.
On September 10, 1996, a Form 8-K, Item 5, was filed disclosing the
consummation of the private placement of $250 million of the Company's 11-5/8%
Senior Notes due 2006. On January 16, 1997, a Form 8-K, Item 5, was filed
disclosing the consummation of the private placement of $200 million of the
Company's 11-5/8% Series A Senior Notes due 2006.
(c) EXHIBITS
The exhibits required by this Item are listed under Item 14(a)(3).
(d) FINANCIAL STATEMENT SCHEDULE
The consolidated financial statement schedule required by this Item
are listed under Item 14(a)(2).
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Arlington, Commonwealth of Virginia, on the 30th of March, 1997.
OMNIPOINT CORPORATION
By:/s/ Douglas G. Smith
--------------------
Douglas G. Smith
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Company in the capacities and on the date indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Douglas G. Smith and Edwin M. Martin, Jr., and each of
them acting alone, his true and lawful attorney-in-fact, with full power of
substitution, for him in any and all capacities, to execute and cause to be
filed with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this Report, with exhibits thereto and other
documents in connection therewith, and hereby ratifies and confirms all that
said attorney-in-fact or his substitute or substitutes may do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------------- ------------------------------ --------------
<S> <C> <C> <C>
/s/ Douglas G. Smith President, Chief Executive March 30, 1997
- ------------------------ Officer, Chairman of the
Douglas G. Smith Board and Director (Principal
Executive Officer)
/s/ George F. Schmitt Executive Vice President and March 30, 1997
- ------------------------ Director; President of
George F. Schmitt Omnipoint Communications Inc.
</TABLE>
/s/ Bradley E. Sparks Chief Financial Officer March 30, 1997
- ---------------------- (Principal Financial and
Bradley E. Sparks Accounting Officer)
/s/ James J. Ross Director and Vice Chairman March 30, 1997
- ------------------ of the Board
James J. Ross
/s/ Evelyn Goldfine Director March 30, 1997
- --------------------
Evelyn Goldfine
30
<PAGE>
/s/ Richard L. Fields Director March 30, 1997
- ----------------------
Richard L. Fields
/s/ Paul J. Finnegan Director March 30, 1997
- ---------------------
Paul J. Finnegan
/s/ James N. Perry, Jr. Director March 30, 1997
- ------------------------
James N. Perry, Jr.
/s/ Arjun Gupta Director March 30, 1997
- ----------------
Arjun Gupta
31
<PAGE>
OMNIPOINT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 F-3
Consolidated Statements of Operations for the years ended December 31, 1994,
1995 and 1996 F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1994, 1995 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Omnipoint Corporation:
We have audited the accompanying consolidated balance sheets of Omnipoint
Corporation as of December 31, 1995 and 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1996. These 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Omnipoint Corporation as of December 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 31, 1997
F-2
<PAGE>
OMNIPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
ASSETS -------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 57,784 $ 215,029
Short term investments - 46,827
Escrow deposit (Note 8) - 43,516
Prepaid expenses and other current assets (Note 3) 5,040 1,795
Inventory (Note 4) 1,310 37,490
-------- ----------
Total current assets 64,134 344,657
Fixed assets, net (Notes 5 and 13) 18,957 186,851
FCC Licensing costs, net of accumulated amortization of $9,116 and $17,804
as of December 31, 1995 and 1996, respectively (Note 9) 338,402 752,189
FCC deposit (Note 12) 40,000 60,000
Escrow deposit (Note 8) - 48,466
Deferred financing costs and other intangible assets, net of accumulated amortization
of $543 and $2,089 as of December 31, 1995 and 1996, respectively 12,618 27,047
Other long-term assets 879 262
-------- ----------
Total assets $474,990 $1,419,472
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable 3,331 73,878
Accrued expenses (Note 6) 4,593 12,333
Accrued interest payable (Note 8) 388 12,072
Capital lease obligations - current portion (Note 13) 182 59
Credit agreement (Note 8) 36,500 -
Convertible Subordinated Notes (Note 8) 16,250 -
Deferred revenue 4,300 -
-------- ----------
Total current liabilities 65,544 98,342
Capital lease obligations - long term portion (Note 13) 106 -
Loan payable under financing agreement (Note 8) 31,758 -
Senior notes (Note 8) 16,485 18,617
11 5/8% Senior and Series A Senior Notes due 2006 (Note 8) - 458,886
FCC license obligations (Note 9) 347,518 709,853
Commitments and contingencies (Notes 8 through 13)
Redeemable convertible preferred stock, $.01 par value, 5,750,000 shares authorized at
December 31, 1995 (Notes 7 and 8):
Series A; 666,667 shares issued and outstanding at December 31, 1995 1,500 -
Series B; cumulative preferred stock; 1,651,714 shares issued and outstanding at
December 31, 1995, net of issuance costs 15,919 -
Series C; cumulative preferred stock; 1,866,338 shares issued and outstanding at
December 31, 1995, net of issuance costs 26,708 -
Stockholders' equity (deficit) (Notes 7, 8 and 14):
Common stock, par value $.01 per share; authorized 75,000,000 shares, issued and
outstanding 24,658,618 shares at December 31, 1995, and 50,969,300 shares at
December 31, 1996 247 510
Additional paid-in capital 29,860 329,772
Accumulated deficit (59,498) (186,428)
Unearned compensation (23) (8,883)
Notes receivable (Note 2) (1,134) (1,197)
-------- ----------
Total stockholders' equity (deficit) (30,548) 133,774
-------- ----------
Total liabilities and stockholders' equity (deficit) $474,990 $1,419,472
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
Revenues:
License fees (Note 10) $ 3,000 $ - $ -
Revenues (Note 1) - - 531
-------- -------- ---------
Total revenues 3,000 - 531
Operating expenses:
Research and development 7,018 14,345 38,205
Sales, general and administrative 6,290 12,619 47,140
Depreciation and amortization 1,125 11,038 15,587
-------- -------- ---------
Total operating expenses 14,433 38,002 100,932
-------- -------- ---------
Loss from operations (11,433) (38,002) (100,401)
-------- -------- ---------
Other income (expense):
Interest income 363 749 10,697
Interest expense (Notes 8 and 9) (1,519) (517) (37,226)
Miscellaneous income 65 - -
Gain on sale of subsidiary stock (Note 14) 3,194 - -
-------- -------- ---------
Net loss $ (9,330) $(37,770) $(126,930)
======== ======== =========
Net loss per share $ (2.71)
=========
Weighted average common shares outstanding 46,818
========
Pro forma net loss per common share (unaudited) (Note 1) $ (0.96)
========
Pro forma weighted average common shares outstanding
(unaudited) (Note 1) 39,529
========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
for the years ended December 31, 1994, 1995, and 1996
</TABLE>
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
------------------ PAID-IN ACCUMULATED UNEARNED NOTES EQUITY
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION RECEIVABLE (DEFICIT)
---------- ------ ----------- ------------ ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 22,835,786 $228 $ 6,340 $ (12,398) $ (43) $ (158) $ (6,031)
---------- ---- -------- ----------- ------------ ------- ---------
Issuance of common stock in exchange
for convertible
subordinated note 382,308 4 3,213 - - - 3,217
Issuance of common stock in exchange
for an option held by
third party to purchase shares of
subsidiary 1,125,000 11 4,489 - - - 4,500
Issuance of restricted stock to employee 2,500 - 25 - - - 25
Issuance of common stock 270 - - - - -
Exercise of stock options 57,560 1 17 - - - 18
Issuance of restricted stock in
exchange for employee note
receivable 25,000 - 250 - - (250) -
Amortization of unearned compensation - - - - 23 - 23
Interest on employee notes receivable - - - - - (2) (2)
Forgiveness of employee notes receivable - - - - - 164 164
Net loss - - - (9,330) - - (9,330)
---------- ---- -------- ----------- ------------ ------- ---------
Balance, December 31, 1994 24,428,424 244 14,334 (21,728) (20) (246) (7,416)
---------- ---- -------- ----------- ------------ ------- ---------
Issuance of 151,714 shares of Series B
preferred stock in
payment of Series B dividend - - (1,517) - - - (1,517)
Dividends accrued on Series B and
Series C preferred stock - - (1,839) - - - (1,839)
Issuance of warrants - - 17,797 - - - 17,797
Issuance of common stock in exchange
for services 8,700 - 58 - - - 58
Exercise of stock options 83,994 1 91 - - - 92
Issuance of options as form of advanced
compensation - - 112 - (112) -
Amortization of unearned compensation - - - - 109 - 109
Issuance of restricted stock in
exchange for employee notes
receivable 137,500 2 824 - - (826) -
Issuance of employee note receivable - - - - - (87) (87)
Interest on employee notes receivable - - - - - (29) (29)
Forgiveness of employee notes receivable - - - - - 54 54
Net loss - - - (37,770) - - (37,770)
---------- ---- -------- ----------- ------------ ------- ---------
Balance, December 31, 1995 24,658,618 247 29,860 (59,498) (23) (1,134) (30,548)
---------- ---- -------- ----------- ------------ ------- ---------
Dividends accrued on Series B and
Series C preferred stock - - (273) - - - (273)
Shares issued in connection with
initial public offering, net of
expenses 8,050,000 80 118,357 - - - 118,437
Shares issued at secondary public
offering, net of expenses 4,500,000 45 110,643 - - - 110,688
Conversion of subordinated debt 1,562,500 16 16,234 - - - 16,250
Conversion of preferred stock 10,605,591 106 44,597 - - - 44,703
Exercise of stock options 995,592 10 729 - - - 739
Exercise of stock warrants 596,999 6 (3) - - - 3
Issuance of options at below fair
market value - - 9,628 - (9,628) - -
Amortization of unearned compensation - - - - 768 - 768
Interest on employee notes receivable - - - - - (138) (138)
Forgiveness of employee note receivable - - - - - 75 75
Net loss - - - (126,930) - - (126,930)
---------- ---- -------- ----------- ------------ ------- ---------
Balance, December 31, 1996 50,969,300 $510 $329,772 $(186,428) $(8,883) $(1,197) $ 133,774
========== ==== ======== =========== ============ ======= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss $(9,330) $(37,770) $(126,930)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation 1,125 11,038 15,587
Inventory write down to replacement cost - - 10,114
Compensation expense from stock grants 23 109 768
Delivery of pilot system equipment funded by the financing agreement - 1,053 540
Gain on sale of subsidiary stock (3,194) - -
Increase in employee notes receivable and related accrued interest (2) (116) (138)
Forgiveness of employee notes receivable 164 54 75
Accrued interest 217 - 11,684
Interest income associated with restricted cash - - (1,401)
Payment in kind interest on financing agreement - 553 -
Accrued interest on New York MTA License obligation and reversal based on FCC order 1,457 (1,457) -
Interest expense associated with warrants - 533 -
Interest expense associated with amortization of discount, premium and issuance costs - - 4,557
Issuance of common stock in exchange for services - 58 -
Purchase of trading securities - - (12,200)
Changes in assets and liabilities:
(Increase) decrease in operating assets:
Accounts receivable 110 - -
Prepaid expenses, other current assets and other assets (149) 1 (997)
Inventory (143) (1,584) (46,294)
Increase in operating liabilities:
Accounts payable and accrued expenses 1,827 3,481 80,127
Deferred revenue - 4,300 -
------- -------- ---------
Net cash used in operating activities (7,895) (19,747) (64,508)
------- -------- ---------
Cash flows used in investing activities:
Purchase of fixed assets (2,474) (3,991) (173,831)
Deposit for FCC auctions - (40,000) (60,000)
Purchase of held to maturity investments - - (48,627)
Proceeds from sale of held to maturity investments - - 14,000
Down payment for FCC licenses - - (50,913)
Capitalized interest on C Block Licenses - - (11,119)
Refund of FCC deposit - - 40,000
Proceeds from sale of subsidiary stock 3,194 - -
------- -------- ---------
Net cash provided by (used in) investing activities 720 (43,991) (290,490)
------- -------- ---------
Cash flows from financing activities:
Proceeds from initial public offering, net of expenses - - 118,437
Preferred Dividends accrued and paid - - (1,536)
Proceeds from secondary public offering, net of expenses - - 110,687
Proceeds from bank credit agreement - 40,000 60,000
Payments on bank credit agreement - (3,500) (96,500)
Proceeds from offering of Senior Notes, net of offering costs - - 187,784
Proceeds from vendor financing agreements - 4,500 43,270
Payments on vendor financing agreements - - (75,178)
Proceeds from offering of Series A Senior Notes, net of offering costs - - 164,766
Proceeds from issuance of common stock associated with warrants and options 43 92 742
Payments of obligations under capital leases (19) (284) (229)
Payment of deferred financing costs - (1,527) -
Payments of short-term debt and notes payable (150) (10) -
Proceeds from convertible subordinated and senior notes - 50,000 -
Proceeds from line of credit loan agreement - 10,000 -
Proceeds from issuance of preferred stock, net of issuance costs - 16,708 -
------- -------- ---------
Net cash provided by (used in) financing activities (126) 115,979 512,243
------- -------- ---------
Net increase (decrease) in cash and cash equivalents (7,301) 52,241 157,245
Cash and cash equivalents at beginning of year 12,844 5,543 57,784
------- -------- ---------
Cash and cash equivalents at end of year $ 5,543 $ 57,784 $ 215,209
======= ======== =========
</TABLE>
See Note 17 for supplemental cash flow information.
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
GENERAL
Omnipoint Corporation ("Omnipoint" or the "Company"), was incorporated
in Delaware on June 18, 1987 to design, develop, and market proprietary
digital wireless products based on spread spectrum. Substantially all of
the Company's revenues have been derived from licensing its IS661
technology and the sale of wireless digital communication products and
services. The Company's success in developing its technology for the
first digital personal communication service ("PCS") system in 1991 and
1992 was instrumental in the Federal Communications Commission ("FCC")
awarding Omnipoint Communications, Inc. ("OCI"), a subsidiary of the
Company, a Pioneer's Preference in 1993. As a result of the Pioneer's
Preference, the FCC issued to OCI in December 1994 a 30 MHz license to
provide PCS services for the New York MTA (the "New York MTA License").
Additionally the Company, through its subsidiary Omnipoint PCS
Entrepreneurs, Inc., bid successfully for 18 Entrepreneurs' Band C Block
PCS Licenses (the "C Block Licenses") and was granted these licenses on
September 17, 1996. During 1994, an unrelated party acquired a 4.42%
minority interest in OCI.
On January 31, 1996, the Company completed an initial public offering in
which 8,050,000 shares of common stock were issued which provided the
Company with proceeds of approximately $118.4 million, net of expenses.
On July 3, 1996, the Company completed a secondary offering in which
4,500,000 shares of common stock were issued, which provided the Company
with proceeds of approximately $110.7 million net of expenses. On August
27, 1996, the Company completed the sale of $250.0 million senior
unsecured term notes, which provided the Company with proceeds of
approximately $187.4 million net of expenses and cash deposited in escrow
to pay interest through August 12, 1998. On December 2, 1996, the Company
completed the sale of $200.0 million Series A Senior unsecured notes,
which provided the Company with proceeds of approximately $164.7 million
net of expenses and cash deposited in escrow to pay two years' interest
(see Note 8).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Omnipoint
Corporation, OCI and Omnipoint Corporation's wholly-owned subsidiaries.
Losses in consolidated corporations attributable to minority interest
holders in excess of their respective share of the subsidiary's net equity
are not eliminated in consolidation. All significant intercompany
accounts and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
The Company commenced operation of PCS service in the New York MTA in
November 1996. During the next 24 months, the Company plans to continue
to install equipment and establish additional mobility and distribution
channels in its markets. In addition to the continuation of the New York
MTA buildout, the Company plans to build and operate PCS networks in the
areas covered by the C Block Licenses, focusing initially on the most
densely populated sections of these areas and major commuting corridors.
To date, the Company has sold PCS equipment only for trials, and the
Company does not expect to have significant PCS services or equipment
revenue before 1998.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of 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 at the date of the
financial statements and the reported amounts of revenues and expense
during the reporting period. Actual results could differ from those
estimates.
Continued
F-7
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Company substantially relies upon its relationship with Northern
Telecom Inc. ("Northern Telecom") and Ericsson, Inc. ("Ericsson"). The
Company has entered into a series of OEM and equipment supply agreements,
a collaborative development agreement, and a vendor financing agreement
with Northern Telecom and Ericsson. (see Notes 8, 10 and 11).
Until the Company commenced operations of its PCS network in November
1996, the Company had limited revenues and was dependent on a limited
number of customers for its revenues. In 1994, the Company received all
of its revenue, $3.0 million from Northern Telecom, representing a non-
refundable license fee received upon entering into a non-exclusive OEM
agreement. Under the terms of the agreement, Northern Telecom may pay up
to an aggregate of $12.0 million in license and OEM fees under certain
circumstances.
DEPENDENCE UPON KEY EMPLOYEES
The Company is highly dependent upon the technical and management skills
of its key employees.
The Company's growth may cause a significant strain on its management,
operational, and financial resources. The Company's ability to manage its
growth effectively will require it to continue to implement and improve
its operational and financial systems. The Company's success also depends
in large part on a limited number of key technical, marketing, and sales
employees and on the Company's ability to continue to attract and retain
additional highly talented personnel. Competition for qualified personnel
in the PCS equipment and service industries is intense.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's technology business relies on a combination of patents,
trademarks, and nondisclosure and development agreements in order to
establish and protect its proprietary rights. The Company has filed and
intends to continue to file applications as appropriate for patents
covering its technology and products. There can be no assurance that
additional patents will issue, that the existing patents and such
additional patents allowed will be sufficiently broad to protect the
Company's technology or that the confidentiality agreements and other
methods on which the Company relies to protect its trade secrets and
proprietary information will be adequate.
PRO FORMA PRESENTATION (UNAUDITED)
The unaudited pro forma net income (loss) per common share is shown on
the face of the income statement as of December 31, 1995 because the
Company believes the pro forma presentation is more meaningful since it
includes the conversion of the Redeemable Convertible Preferred Stock and
the conversion of the Convertible Subordinated Notes. The unaudited pro
forma net income (loss) per common share is computed based upon the
weighted average number of common and common equivalent shares outstanding
after certain adjustments described below. Common equivalent shares are
included in the calculations where the effect on their inclusion would be
dilutive. In accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 83 ("SAB No. 83"), all common and common
equivalent shares and other potentially dilutive instruments which include
stock options, stock warrants and the Series C Preferred Stock issued
during the twelve month period prior to the filing of the Registration
Statement have been included in the calculation as if they were
Continued
F-8
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
outstanding for all periods. As permitted under SAB No. 83, the common
equivalent shares for stock options and warrants, were determined using
the treasury stock method at the initial public offering price of $16.00
per share. In addition, outstanding shares of Series A and Series B
Preferred Stock to be converted into common stock upon the effectiveness
of the initial public offering are treated as having been converted into
Common Stock at the date of original issuance. The Series C Preferred
Stock, which is considered a common stock equivalent from the date of its
original issuance, was also included pursuant to SAB No. 83 on an as-if
converted basis from January 31, 1995 until the date of its original
issuance. The Convertible Subordinated Notes were treated as if they were
converted on the date of their issuance.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share on a historical basis is computed in
the same manner as pro forma net income (loss) per common share, except
that Redeemable Convertible Preferred Stock and the Convertible
Subordinated Notes are not assumed to be converted. In the computation of
net income (loss) per common share, dividends on Redeemable Convertible
Preferred Stock are included as an increase to net income (loss) to common
stockholders.
Net income (loss) per common share on a historical basis is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
------------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Income (loss) $ (9,330) $(37,770) $(126,930)
Dividends on Redeemable Convertible
Preferred Stock - 3,357 -
------------- --------- ----------
Net income (loss) to common
stockholders $ (9,330) $(41,127) $(126,930)
============= ========= ==========
Net income (loss) per common share $ (0.30) $ (1.31) $ (2.71)
============= ========= ==========
Weighted average number of common
shares outstanding 30,752 31,410 46,818
============= ========= ==========
</TABLE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are stated at cost which approximates market.
The Company considers all highly liquid debt instruments purchased with an
original maturity at time of purchase of three months or less to be cash
equivalents.
INVESTMENTS
Short-term investments consist primarily of money market notes and
preferred stock, commercial paper and corporate fixed income bonds with
original maturities of less than twelve months.
Pursuant to Statement of Financial Accounting Standards No. (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
debt securities that the Company has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities that
the Company does not have the positive intent and ability to hold to
maturity and all marketable equity securities are classified as either
available-for-sale or trading and are carried at fair value. Unrealized
holding
Continued
F-9
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
gains and losses on securities classified as available-for-sale
are carried as a separate component of stockholders' equity. Unrealized
holdings gains and losses on securities classified as trading are reported
as earnings. The fair value of investments is determined based on quoted
market prices. The Company determines the appropriate classification of
marketable securities at the time of purchase and evaluates such
designation at each balance sheet date. The costs of debt securities is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization, interest income, realized gains and losses
and declines in value judged to be other than temporary are included in
interest and other income. The cost of securities is based on specific
identification.
At December 31, 1996, $12.2 million of trading securities and $34.6
million of held to maturity securities were included in short-term
investments. The trading securities consists of money market preferred
stock. The held to maturity securities consist of commercial paper and
fixed income corporate bonds whose cost approximate fair value at December
31 1996.
CONCENTRATION OF CREDIT RISK
The Company places its cash and cash equivalents and investments in high
quality instruments and, by policy, limits the amount of credit
exposure to any one financial institution.
INVENTORY
Inventory is recorded at the lower of cost or market on the basis of
average cost or replacement value. Inventory consists of raw materials
and other items used in development of the Company's technology, handsets,
accessories and SIM cards for sale to subscribers in the New York MTA.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Included in prepaid expenses and other current assets at December 31,
1995 was an advance payment for pilot system equipment financed through
the financing agreement. Upon receipt, the pilot system was expensed and
was included in research and development expense in the statement of
operations.
FIXED ASSETS AND DEPRECIATION
Fixed assets are recorded at cost. Major renewals and improvements are
capitalized; repairs and maintenance are charged to expense. Depreciation
is provided by use of the straight-line method over estimated useful lives
of three to ten years. Depreciation begins when the fixed asset is
placed into service. Upon retirement or sale, the cost of the asset
disposed of and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is credited or charged to income.
OTHER ASSETS
Included in other assets at December 31, 1995 were costs incurred in the
preparation of the Company's initial public offering. The offering costs
which were included in accounts payable and accrued expenses at December
31, 1995 were charged to additional paid-in capital upon the compution of
the offering on January 31, 1996.
LICENSING COSTS, DEFERRED FINANCING COSTS AND OTHER INTANGIBLE ASSETS
Licensing costs represent the license fees of $347.5 million for the
New York MTA License granted by the FCC in December 1994. Among other
conditions, the New York MTA License requires that the Company construct a
30 MHz system in the New York MTA that offers coverage to at least one-
third of the population of the New York MTA within five years of the
license grant date and at least two-thirds of the population within 10
years. The New York MTA license also contains a condition that requires
the Company to construct a PCS system that "substantially uses" the design
and technology upon which the Pioneer's Preference Award was based. The
condition expires upon the system providing coverage for one-third of the
population of the New York MTA.
The New York MTA license expires in December 2004; however, FCC rules
provide for renewal expectancy provisions. The Company expects to
exercise the renewal provisions, and accordingly the New York MTA License
is being amortized using the straight-line method over a period of 40
years.
Continued
F-10
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Licensing costs also include the license fees of the 18 C Block Licenses
granted by the FCC on September 17, 1996. The C Block Licenses and any
other licenses the Company purchases in the future will be accounted for
in accordance with the recently agreed upon industry practices. Based on
the Company's estimates of borrowing costs for debt similar to that issued
by the U.S. government, the Company used an 11% discount rate.
Accordingly, the licenses were recorded at a net present value of $411.0
million. Interest incurred for such licenses will be capitalized during
the build out phase and amortization of such license costs will begin with
the commencement of service to customers over a period of 40 years. The
C Block Licenses are subject to buildout requirements substantially
equivalent to the New York MTA License buildout requirements.
Deferred financing costs include amounts paid related to obtaining
proceeds under debt, credit facilities and financing agreements. These
costs are amortized over the life of the related debt agreement, generally
one to ten years.
Other intangible assets include an asset recorded in connection with
shares of the Company's Common Stock issued in exchange for a previously
granted option to purchase from the Company shares of common stock of OCI
(see Note 14). This asset is being amortized using the straight-line
method over a 40 year period. Other intangible assets also includes costs
incurred for the rights to certain information and technologies. These
costs are being amortized over their estimated useful lives of 5 to 10
years.
Periodically management assesses, based on undiscounted cash flows, if
there has been a permanent impairment in the carrying value of its
intangible assets and, if so, the amount of any such impairment by
comparing anticipated discounted future operating income resulting from
intangible assets with the carrying value of the related asset. In
performing this analysis, management considers such factors as current
results, trends and prospects, in addition other economic factors.
The Company implemented Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" in 1996. As the Company continually
evaluates the realizability of its long-lived assets, including
intangibles, adoption of the statement did not have a material effect on
the Company's financial statements at the date of adoption.
COMMON AND PREFERRED STOCK
On December 27, 1995, the Board of Directors authorized, and on December
28, 1995, the stockholders approved, a 2.5-for-one stock split of the
Common Stock, effected in the form of a stock dividend. All share and per
share data have been restated in these financial statements for all
periods presented to reflect this stock split.
Effective on the closing of the initial public offering, the Company's
Board of Directors authorized 5,000,000 shares of preferred stock. The
Board of Directors has the authority to issue these shares and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without further vote or action by
the stockholders.
REVENUE RECOGNITION
Air time and access charges are recorded as revenue based on the amount of
communications services rendered as measured principally by subscriber
usage and fees after deducting an estimate of the usage that will neither
be billed nor collected . Prepaid revenues are deferred until earned.
Revenue from the sale of handsets and related accessories is recognized
upon shipment or point-of-sale.
Revenue from license fees or equipment sales and related support
services is recognized when hardware or software has been delivered,
providing other obligations are no longer significant, customer acceptance
is reasonably assured and collectibility is deemed probable.
RESEARCH AND DEVELOPMENT
Expenditures for research and development are charged to operations as
incurred. Research and development expenses include costs for both new
product development and ongoing efforts to improve existing technologies.
Costs of internally developed software which qualify for capitalization
are immaterial.
Continued
F-11
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their
bases for financial reporting purposes, including the recognition of
future tax benefits, such as net operating loss carryforwards to the
extent that realization of such benefits are more likely than not.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share," which is effective for fiscal year 1997. SFAS No. 128 is
designed to improve the EPS information provided in financial statements
by simplifying the existing computational guidelines, revising the
disclosure requirements and increasing the comparability of EPS data on an
international basis. The Company is evaluating the impact of this
pronouncement; however, the adoption of this pronouncement is not expected
to have a material impact on the Company's financial statements.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current
year presentation.
2. RELATED PARTY TRANSACTIONS:
--------------------------
Employee notes receivable included a demand note of $158,315 as of
December 31, 1993 due from an employee of the Company with a stated
interest rate of 5%. In accordance with an agreement, the note receivable
was forgiven on April 14, 1994 and recorded as compensation expense.
During 1994 and 1995, two employees executed five-year promissory notes
payable to the Company in the original principal amount of $250,000 and
$75,000, respectively, with interest at the rate of 8.5% per year as
consideration for the purchase of common stock. The annual payments due
under these notes may be forgiven pursuant to a special bonus provision
contained in the employment agreements. In accordance with this provision,
$54,250 of the $250,000 note was forgiven during 1995 representing $50,000
principal and $4,250 of interest. During 1996, $58,500 of the $250,000
note and $16,235 of the $75,000 note was forgiven of which in total
$65,000 of principal and $9,735 of interest was forgiven.
On September 19, 1995, an employee executed a three-year promissory note
payable to the Company in the original principal amount of $87,100, plus
interest on the unpaid principal balance from time to time at the rate of
8.5%. The annual payment due under the note may be forgiven pursuant to a
special bonus provision contained in an amendment to the employee's
employment agreement.
On October 1, 1995, an employee executed a five-year balloon promissory
note payable to the Company in the original principal amount of $750,000,
plus interest on the unpaid principal balance from time to time
outstanding at the rate of 8% per year, as consideration for the purchase
of 125,000 shares of restricted Common Stock at $6.00 per share. The
payment due under the note may be forgiven pursuant to a special bonus
provision contained in the employee's employment agreement.
Interest earned under all employee notes was $2,259, $29,579 and $138,314
for the years ended December 31, 1994, 1995 and 1996, respectively.
During 1996, the Company's Technology division manufactured and delivered
the IS-661 pilot system to the Service division. The Company recognized
the net difference between deferred revenue and deferred assets as
research and development expenses associated with the delivery and
installation of the pilot system.
Continued
F-12
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. PREPAID EXPENSES AND OTHER ASSETS:
----------------------------------
Prepaid expenses and other assets consist of the following at December 31,
1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Advance payment for pilot system equipment financed through
financing agreement $4,840 $ -
Miscellaneous receivables - 720
Deposits 83 773
Other 117 302
------ ------
$5,040 $1,795
====== ======
</TABLE>
4. INVENTORY:
---------
Inventory consists of the following for December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------ -------
<S> <C> <C>
Raw materials $1,310 $ 1,102
GSM Handsets - 33,343
Accessories & SIM Cards - 3,045
------ -------
$1,310 $37,490
====== =======
</TABLE>
5. FIXED ASSETS:
------------
Fixed assets including equipment under capital leases consist of the
following at December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
--------- --------
<S> <C> <C>
Building and building improvements $ 2,515 $ 7,751
Machinery, office and computer equipment 6,060 30,680
Network infrastructure equipment - 67,252
Vehicles 214 452
-------- --------
8,789 106,135
Less: accumulated depreciation (2,466) (8,317)
-------- --------
6,323 97,818
Construction in process 12,634 89,033
-------- --------
$18,957 $186,851
======== ========
</TABLE>
Continued
F-13
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $628,747, $1,448,751 and $5,937,051, respectively. Network
infrastructure construction in progress consists of equipment that had not
been placed into service; accordingly no depreciation has been recorded.
Approximately $2.9 million of capitalized interest has been included in
network infrastructure equipment that was previously or continues to be
construction in progress.
6. ACCRUED EXPENSES:
----------------
Accrued expenses consist of the following at December 31, 1995 and 1996
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------ -------
<S> <C> <C>
Salaries and benefits $1,263 $ 5,316
Bonuses 350 1,564
Advertising and promotion - 2,368
Professional fees 464 1,288
Sales, property and use taxes - 470
Dividends 1,839 -
Initial public offering costs 593 -
Other 84 1,327
------ -------
$4,593 $12,333
====== =======
</TABLE>
Amounts accrued for dividends as of December 31, 1995 include $338,722
payable in 33,872 shares of Series B Preferred Stock and Series B and C
dividends of $1.5 million to be paid in cash.
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
--------------------------------------
The Company authorized 3,000,000 shares of Redeemable Convertible
Preferred Stock in 1991 and an additional 1,000,000 shares in 1993. The
Company authorized an additional 1,750,000 shares of convertible stock in
1995. During 1991, the Company sold 666,667 shares of Series A Convertible
Preferred Stock ("Series A Preferred Stock") for $1,500,000. In August
1993, the Company sold 1,500,000 shares of Series B Convertible Preferred
Stock ("Series B Preferred Stock") for $15,000,000. During 1995, the
Company sold 1,866,338 shares of Series C Convertible Preferred Stock
("Series C Preferred Stock") resulting in gross proceeds of $27,995,070,
including 666,667 shares issued in satisfaction of a $10,000,000
outstanding balance under a line of credit loan agreement (see Note 7).
Issuance costs of the Series C Preferred Stock included a $600,000
brokerage commission, transaction fees of $559,861 to certain investors
and $127,276 of other related issuance costs.
Shares of Common Stock reserved for conversion of the Company's
outstanding Series A, B and C Preferred Stock were 1,666,667, 7,550,000
and 4,665,842 at December 31, 1995, respectively.
The Series A Preferred was convertible at any time into Common Stock of
the Company at a conversion rate of one share of common stock for each
share of Series A Preferred Stock, subject to adjustment in the event of
any stock dividend, stock split or other recapitalization. The Company at
its option could require each share of the Series A Preferred Stock to be
converted into shares of common stock at any time on or after the closing
of the sale of shares of common stock at an initial public offering
meeting certain defined criteria. The holders of the Series A
Continued
F-14
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Preferred Stock were entitled to receive, when and only if declared by the
Board of Directors, dividends in an amount per share equal to the per
share amount to be declared for the common stock. No dividends were
declared. Each holder of outstanding shares of the Series A Preferred
Stock was entitled to the number of votes equal to the number of whole
shares of common stock into which such shares were convertible at the
time. Upon the closing of the initial public offering on January 31, 1996,
the Series A Preferred Stock was converted into 1,666,667 shares of Common
Stock.
The holders of Series B Preferred Stock had the right to convert such
stock at any such time into shares of Common Stock at a one for one
conversion rate subject to, and automatically convert into Common Stock in
the event of a public offering meeting certain defined criteria. The
holders of the Series B Preferred Stock had the right to vote that number
of shares equal to the number of shares of Common Stock issuable upon
conversion. The Series B Preferred Stock accrued a cumulative dividend on
a daily basis, whether declared or not, at the rate of 1.467% of the
original purchase price per quarter, compounded quarterly on principal
investment plus accrued dividends not paid in cash, payable on the last
day of each quarter either in cash or original shares of Series B
Preferred Stock and valued at the original purchase price. In the event of
equity offerings or qualified fundraisings meeting certain criteria, the
dividend rate would have been reduced to zero. Under an amendment to the
Series B Stock Purchase Agreement, unpaid and previously undeclared
cumulative dividends, through April 4, 1995 were paid by the issuance of
151,714 shares of Series B Preferred Stock. As of December 31, 1995,
Series B accrued dividends were $728,197. Upon the closing of the initial
public offering, the Series B Preferred Stock and certain accrued
dividends were converted into 4,273,082 shares of Common Stock.
Additionally, accrued dividends of $236,892 through such date were paid in
cash.
The holders of Series C Preferred Stock had the right to convert the
Series C Preferred Stock at any time into shares of Common Stock at a one
for one conversion rate, and could be required by the Company to be
converted into Common Stock in the event of a public offering meeting
certain defined criteria. The holders of the Series C Preferred Stock had
the right to vote that number of shares equal to the number of shares of
Common Stock issuable upon conversion. The Series C Preferred Stock
accrued a cumulative dividend, whether declared or not, at the rate of
1.9427% per quarter, compounded quarterly on the stated value (plus
cumulative dividends which were accrued but which were not paid). As of
December 31, 1995, Series C accrued dividends of $1,110,835 were payable
in cash. Upon the closing of the initial public offering, the Series C
Preferred Stock was converted into 4,665,842 shares of Common Stock and
accrued dividends of $1,299,326 through such date were paid in cash.
8. NOTES PAYABLE AND FINANCING AGREEMENTS:
--------------------------------------
On January 29, 1993, the Company received $3.0 million from an investor in
exchange for a $3.0 million face value convertible subordinated note and
warrants to purchase 972,223 shares of common stock. The convertible
subordinated note accrued interest at one percent over prime and principal
and interest were payable on January 29, 1994. Interest expense accrued
for the period from January 29, 1993 through December 31, 1993 was
$199,698 at an interest rate of 7%. On January 29, 1994, the $3.0 million
face value convertible subordinated note plus accrued interest of $217,493
was converted into 382,307 shares of common stock of the Company at
approximately $8.40 per share.
On January 31, 1995, the Company entered into a $10.0 million Line of
Credit Loan Agreement with the holder of the Series B Preferred Stock of
the Company, bearing interest at 12%. On March 10, 1995 and April 4, 1995,
the Company was advanced $3.0 million and $7.0 million under the line,
respectively. The Company's shares of OCI stock were pledged as collateral
for the Line of Credit. The Line of Credit expired upon the closing of the
Series C Preferred Stock equity financing on June 29, 1995. The Company
issued warrants to purchase 50,000 shares of common stock at $.004 per
share at the initial closing, and issued additional warrants to purchase
179,168 shares
Continued
F-15
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
of Common Stock at $6.00 per share, which expire on March 10, 2002. In
connection with the warrants, the Company recorded interest expense and an
increase to additional paid-in capital of $299,800 in 1995.
On June 29, 1995, the $10.0 million outstanding balance under the Line of
Credit expired, and was exchanged for 666,667 shares of Series C
Convertible Preferred Stock.
NORTHERN TELECOM FINANCING AGREEMENT
On July 21, 1995 OCI entered into a $382.5 million credit facility (the
"NT Financing Agreement") with Northern Telecom to finance future
purchases and installations of telecommunications equipment, engineering
services, certain related construction costs, third-party equipment and
other expenses.
A portion of the financing agreement, which may be used for working
capital purposes including interest payments on the amounts outstanding on
the NT Financing Agreement, matures June 30, 1997. Any amounts repaid can
be subsequently borrowed for other purposes allowed under the NT Financing
Agreement. The principal amount on the other portions of the NT Financing
Agreement are payable in twenty consecutive quarterly installments
beginning in 2000, with the final payment due on December 31, 2004.
Interest on the unpaid principal balance on all loans payable quarterly in
arrears at varying interest rates at a base or LIBOR rate at the Company's
election.
The Company, at its election, can prepay the outstanding amount of loans
at any time without penalty or premium.
The NT Financing Agreement is collateralized by a pledge of stock of OCI
owned by a wholly-owned subsidiary of the Company and by substantially all
of OCI's assets. Under the terms of the NT Financing Agreement, the
Company is subject to certain financial and operational covenants
including restrictions on the payment of dividends by OCI, restrictions on
additional indebtedness and financial maintenance obligations.
Additionally, the NT Financing Agreement provides that, among other
things, the failure to pay when due amounts owed to the FCC shall
constitute an event of default. As of December 31, 1995, OCI had a
outstanding balance (principal and payment in kind interest) of $31.8
million. OCI had no outstanding balance under the NT Financing Agreement
as of December 31, 1996.
ERICSSON CREDIT FACILITY
On April 16, 1996 OCI entered into a $132.0 million credit facility (the
"Ericsson Credit Facility") with Ericsson, Inc. to finance the purchase of
equipment and services from Ericsson for the New York MTA market.
A portion of the Ericsson Credit Facility, which may be used for interest
payments accruing under such facility, matures on June 30, 1998. The
principal amount on other portions of the facility are payable in twenty
consecutive quarterly installments beginning in 2000, with the final
payment due on December 31, 2004. Amounts borrowed and repaid are not
available for reborrowing. Interest on the Ericsson Credit Facility is
payable quarterly at varying interest rates at a base or LIBOR rate at the
Company's election. At December 31, 1996, the Company had no outstanding
balance on this credit facility.
Under the terms of the Ericsson Credit Facility, OCI is subject to certain
financial and operational covenants including restrictions on OCI's
ability to pay dividends, restrictions on indebtedness and certain
financial maintenance requirements. Additionally, the Ericsson Credit
Facility provides that, among other events, the failure of OCI to pay when
due amounts owing the FCC shall constitute an event of default.
The Ericsson Credit Facility is collateralized by substantially all of
the assets of OCI, including a pledge of all capital stock of OCI owned by
a wholly-owned subsidiary of the Company (which constitutes a 95.58%
ownership interest). All collateral is held by a collateral agent and is
shared on a pari passu basis with Northern Telecom.
Continued
F-16
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CREDIT AGREEMENT
On November 21, 1995, the Company, through its subsidiary Omnipoint PCS
Entrepreneurs, Inc. ("OPCSE"), signed a credit agreement and a term note
with a bank in the original principal amount of $40.0 million. This note
was used to fund the deposit with the Federal Communication Commission in
connection with the C Block Auction.
Interest periods on the term note ranged from one to fourteen days with
interest rates set by the bank based on wholesale money market rates
available to the bank which at December 31, 1995 was 6.375%. The agreement
and term note was collateralized by all assets of OPCSE. Interest accrued
as of December 31, 1995 was $58,172. The Company's outstanding balance at
December 31, 1995 was $36.5 million. During 1996, the Company repaid the
outstanding balance with the proceeds from the convertible subordinated
and senior notes and initial public offering proceeds.
SENIOR NOTES
On November 22, 1995, the Company issued to two institutional investors
both warrants to purchase an aggregate of 625,000 shares of Common Stock
at $.004 per share and two five year term Senior Notes in the aggregate
principal amount of $25.0 million. The Company is subject to certain
restrictions and requirements regarding the issuance of indebtedness
senior or pari passu to the Senior Notes. Under the terms of the notes the
Company is subject to certain covenants which, among other things,
restrict the ability of the Company and certain of its subsidiaries to
incur additional indebtedness; pay dividends or make distributions in
respect of its capital stock or make certain restricted payments; create
liens; or merge or sell all or substantially all of its assets. In the
event that the employment of a senior officer of the Company is terminated
prior to June 30, 1998, the Company must either pay the Senior Notes in
full or pay a one time fee in an amount equal to 5% of the then
outstanding principal of the Senior Notes. The Company may prepay the
Senior Notes at any time. Interest is payable at 6% for the period
November 22, 1995 to November 22, 1996, and thereafter is payable at 12%
semiannually for the period from November 22, 1996 to November 22, 2000.
Interest accrued as of December 31, 1995 and 1996 was $162,500 and
$250,000, respectively. Associated with the valuation of the warrants, the
Company recorded a debt discount and increase in additional paid-in
capital of $8,747,500. The discount will be amortized over the five year
life of the notes and resulted in $232,739 and $2.4 million of
amortization included in interest expense at December 31, 1995 and 1996,
respectively.
10% CONVERTIBLE SUBORDINATED NOTES
On November 29, 1995, the Company issued Convertible Subordinated Notes in
the aggregate amount of $15.0 million, together with warrants to purchase
375,000 shares of Common Stock at an exercise price of $.004 per share. On
December 18, 1995, the Company issued Convertible Subordinated Notes in
the aggregate amount of $10.0 million, together with warrants to purchase
250,000 shares of Common Stock at an exercise price of $.004 per share.
These notes are together known as the "Convertible Subordinated Notes".
The Convertible Subordinated Notes have a stated interest rate of 10%,
payable semiannually on March 31 and September 30, commencing on March 31,
1996. Interest accrued as of December 31, 1995 was $166,982. The
Convertible Subordinated Notes were converted upon the closing of the
initial public offering into an aggregate of 1,562,500 shares of Common
Stock at $16.00 per share. Associated with the valuation of the warrants,
the Company recorded a debt discount and an increase in additional paid-in
capital of $8,747,500.
The Company paid $1.0 million for investment banking services rendered in
connection with the issuance of the Senior Notes and $15.0 million of the
Convertible Subordinated Notes. The unamortized amounts are included in
deferred financing costs and other intangible assets.
Continued
F-17
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11 5/8% SENIOR NOTES DUE 2006
On August 27, 1996, the Company completed the private placement of $250.0
million of the 11 5/8% Senior Notes. The Company received approximately
$241.6 million, net of offering expenses and placed $53.3 million in
escrow to pay interest through August 15, 1998. On November 11, 1996, the
Company offered to exchange its 11 5/8% Senior Notes due 2006 (the "Senior
Notes"), which have been registered under the Securities Act of 1933, as
amended, for any and all of its outstanding Senior Notes. By December 10,
1996, all of the outstanding $250.0 million aggregate principal amount of
the private placement Senior Notes were tendered to exchange for the
Senior Notes. Interest on the Senior Notes will be payable semi-annually
on February 15 and August 15 of each year commencing February 15, 1997.
Interest accrued as of December 31, 1996 was $9.9 million. Under the terms
of the notes the Company is subject to certain covenants which, among
other things, restrict the ability of the Company and certain of its
subsidiaries to incur additional indebtedness, pay dividends or make
distributions in respect of its capital stock or make certain restricted
payments; create liens; or merge or sell all or substantially all of its
assets. The Senior Notes will mature on August 15, 2006 and except as set
forth below, the Senior Notes will not be redeemable at the option of the
Company prior to August 15, 2001. On or after August 15, 2001, the Company
may redeem the Senior Notes, in whole or in part, at the redemption prices
set forth below, plus accrued and unpaid interest and liquidated damages
as defined in the indenture, if any, to the date of redemption.
YEAR REDEMPTION PRICE
2001.............................. 105.81%
2002.............................. 103.88%
2003.............................. 101.94%
2004 and thereafter............... 100.00%
In addition, at any time prior to August 15, 1999, the Company may redeem
up to one-third of the Senior Notes originally outstanding at a redemption
price of 111.625% of the principal amount thereof, plus accrued and unpaid
interest and liquidated damages, if any, to the date of redemption, with
the net proceeds of one or more Public Equity Offerings or sales of
certain capital stock of the Company to one or more Strategic Equity
Investors as defined in the indenture; provided that after any such
redemption at least two-thirds of the aggregate principal amount of the
Notes originally outstanding remains outstanding. Upon the occurrence of a
change of control the Company will be required to offer to repurchase the
outstanding Senior Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any,
to the date of purchase.
The Senior Notes will be senior unsecured obligations of the Company
ranking pari passu in right of payment with all existing and future senior
indebtedness of the Company and will rank senior to all existing and
future subordinated indebtedness of the Company. Since the Company
conducts a substantial amount of its business through subsidiaries, the
Senior Notes will be effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries.
11 5/8% SERIES A SENIOR NOTES DUE 2006
On December 2, 1996, the Company completed a private placement of $200.0
million of the 11 5/8% Series A Senior Notes. The Company received
approximately $202.4 million, net of offering expenses and placed $37.4
million in escrow to pay interest through August 12, 1998. The Company
offered the Series A Senior Notes at 11 5/8% of face value resulting in a
premium to the Company of $9.0 million. This premium is included in
the value of the notes at December 31, 1996 and is being amortized over
the life of the notes resulting in $68,749 of amortization offsetting
interest expense as of December 31, 1996. The interest rate on and
covenants with respect to the Series A Senior Notes are substantially
identical to the interest rate on and covenants with respect to the Senior
Notes. The Series A Senior Notes are obligations of the Company evidencing
the same indebtedness as the Senior Notes and are governed by the same
indenture as the Senior Notes. Interest accrued as of December 31, 1996
was $1.9 million.
LINE OF CREDIT
In August 1996, the Company, through its subsidiary, Omnipoint PCS
Entrepreneurs Two, Inc. ("OPCSE Two"), entered into a credit facility with
a bank. The initial funding took place on August 12, 1996, at which time
the Company drew down $60.0 million which amount was repaid on August 13,
1996. Interest periods ranged from one to fourteen days, with interest
rates set by the bank based on wholesale money market rates available to
the bank. The facility was secured by all assets of OPCSE Two and a pledge
of a capital stock of OPCSE Two owned by a wholly-owned subsidiary of the
Company. The Company has also guaranteed the payment and performance of
OPCSE Two's obligations. The agreement terminated upon the completion of
the D, E and F License Auction in January of 1997.
Total interest expense associated with the notes payable, financing
agreements and Senior Notes as of December 31, 1995 and 1996 was $1.9
million and $17.0 million, respectively.
The following is a schedule of future minimum principal payments of the
Company's long-term debt including license obligations (Note 9) (in
thousands):
Through December 31, 1997 $ -
Through December 31, 1998 79,527
Through December 31, 1999 113,415
Through December 31, 2000 147,463
Through December 31, 2001 32,113
Thereafter 908,220
----------
Total $1,280,738
==========
Continued
F-18
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. LICENSE OBLIGATIONS:
--------------------
NEW YORK MTA LICENSE OBLIGATION
In December 1993, OCI was awarded a final Pioneer's Preference for a
license that required no payment from OCI. Subsequent legislation mandated
a methodology for charging for the New York MTA License. In accordance
with terms defined in that legislation, OCI is obligated to pay a license
fee to the FCC for the New York MTA License awarded in December 1994. The
license fee was derived from 85% of the average per population price
(based on the 1990 population) paid by the winning MTA auction bidders of
the top 23 MTAs excluding the three MTA areas awarded by Pioneer's
Preference. This derived number of $13.158 is multiplied by the 1990 New
York MTA population of 26,411,597 to arrive at the total obligation of
$347.5 million.
Prior to December 31, 1995, the FCC had not implemented the exact terms
for principal and interest payments on the New York MTA License. The
initial terms generally allowed for installment payments over the first
five years of the New York MTA License with interest-only for at least the
first two years. Since payments did not begin until after the New York MTA
License and Pioneer's Preference orders were no longer subject to judicial
review, the FCC had not yet determined the interest rate to be charged,
the timing and nature of the installment payments, and related issues.
Therefore, OCI estimated and accrued interest at the prime rate (8.5% at
December 31, 1994 and 1995) from the date the New York MTA License
obligation was awarded, and had recorded as of December 31, 1995 accrued
interest on the New York MTA license of $33.5 million.
On March 8, 1996, the Federal Communications Commission adopted an Order
which specifies the license payment terms, such as the interest rate and
timetable for payment of the principal obligations for recipients of the
Pioneer's Preference license. The Order provides for the Pioneers to make
their payments in installments over five years. Based on this Order, the
payments will be interest only for the first two years and the unpaid
principal balance and interest will be paid over the remaining three
years. The FCC adopted an interest rate of 7.75%. Payments commence 30
days from the Order date or April 8, 1996, and thereafter will be due on
the last day of each financial quarter over the next five years. The five
year payment period will run and interest will accrue from the adoption
date of March 8, 1996.
Based on the Order, the Company revised its estimate and accrual of
interest. Pursuant to Accounting Principles Board Opinion No. 20,
"Accounting Changes," this change in accounting estimate was recorded in
the Company's financial statements during December 1995, resulting in a
decrease in 1995 interest expense of $33.5 million. Had this adjustment
not been made, the historical net loss and loss per common share for the
year ended December 31, 1995 would have been $(74.7 million) and $(2.37),
respectively after giving effect of the dividends on Redeemable
Convertible Preferred Stock.
In addition, the license is conditioned upon the full and timely
performance of payment obligations under the Company's installment plan.
If the Company is more than ninety days delinquent in any payment, it will
be deemed to be in default.
ENTREPRENEURS' BAND C BLOCK LICENSES
The Company bid successfully for C Block licenses with an aggregate
license fee of approximately $509.1 million (net of the 25% small business
discount). On September 17, 1996, the FCC granted the Company's 18
Entrepreneurs' C Block PCS licenses. The Company has made a 10% down
payment, or approximately $51.0 million, to the FCC for these licenses.
The Company will pay interest only until 2003 and will pay the balance of
$458.2 million and remaining interest in quarterly payments during the
period 2003 to 2006. This obligation will bear interest at 7% per annum
until paid. The C Block BTA licenses and any other licenses the Company
purchases in the future will be accounted for in accordance with the
recently agreed upon industry practices. Based on the Company's estimate
of borrowing costs for debt similar to that issued by the U.S. government,
the Company used an 11% discount rate. Accordingly, the licenses were
recorded at a net present value of $411.0 million.
Continued
F-19
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Interest incurred for such licenses will be capitalized during the
buildout phase and amortization of such license costs will begin with the
commencement of service to customers. As of December 31, 1996, $11.1
million of interest had been capitalized and $1.9 million of the discount
has been amortized into interest expense.
10. AGREEMENTS WITH NORTHERN TELECOM:
---------------------------------
Northern Telecom and the Company have signed a series of OEM equipment and
supply agreements, as well as a vendor financing agreement (see Note 8).
Northern Telecom will make varying payments as it purchases core
electronics (primarily radio and digital cards for base stations) and
software from the Company. Northern Telecom made an initial $3.0 million
license payment in 1994 (part of up to $12.0 million in license and OEM
fees to be paid to the Company under certain circumstances) and may make
additional royalty payments based on shipments of the Company's products.
Northern Telecom will then sell Omnipoint/Northern Telecom integrated
systems to PCS operators, including the Company. The Company's purchases
to build out the New York network will be financed by Northern Telecom
under a financing agreement. The Company has agreed to make certain
product upgrades and warranties available to Northern Telecom's customers.
No equipment, hardware or software sales were made to Northern Telecom
under OEM Agreement during 1994, 1995 and 1996.
During 1994, the Company entered into an agreement to purchase $100.0
million of equipment and services over the next five years with Northern
Telecom. Under the terms of the Supply Agreement, if the conditions of
OCI's purchase obligation are met and OCI fails to purchase $100.0 million
of equipment and services, it may have to pay a penalty of 10% of the
unmet portion of the $100.0 million, which may be waived under certain
conditions. On July 21, 1995, the Company entered into an amendment to
this supply agreement to increase the purchase commitment from $100.0
million to $250.0 million.
MANUFACTURING LICENSE AGREEMENT
On February 28, 1995, the Company entered into an agreement (the
"Manufacturing License Agreement") with Northern Telecom in conjunction
with the OEM Supply Agreement. Under the terms of the Manufacturing
License Agreement, the Company will give Northern Telecom an option to
receive the non-exclusive worldwide right to use, modify, manufacture, or
have manufactured all of the products supplied by the Company under the
OEM Supply Agreement, subject to certain terms and restrictions. This
option can be exercised if: 1) there is a breach of the OEM Supply
Agreement by the Company, 2) a termination of supply of licensed product
under the OEM Supply Agreement by the Company, or 3) mutual agreement to
terminate the OEM Supply Agreement by the Company and Northern Telecom.
Additionally, if Northern Telecom meets certain purchasing thresholds from
the Company, Northern Telecom may also elect to exercise this option. If
the option is exercised under this circumstance, Northern Telecom has
agreed to pay the Company a one-time license fee. In addition, in all
cases, certain royalties on the products licensed are to be paid. The
Manufacturing License Agreement has an initial five-year term unless
terminated earlier in accordance with terms and conditions specified in
the agreement. The agreement may extend for additional one-year terms.
COLLABORATIVE DEVELOPMENT AGREEMENT
On March 4, 1995, the Company entered into a five-year agreement (the
"Collaborative Development Agreement") with Northern Telecom to
collaborate with Northern Telecom on their mutual planning and development
activities for PCS products. Under the terms of the Collaborative
Development Agreement, Northern Telecom and the Company have agreed to
commit resources to joint projects. The Collaborative Development
Agreement may be renewed for successive one-year periods, and is subject
to earlier termination by mutual agreement of the parties or
Continued
F-20
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
by either party upon written notice to the other party thirty days prior
to the end of the initial term or a renewal term.
11. AGREEMENTS WITH ERICSSON, INC.:
-----------------------------
On April 16, 1996, Ericsson, Inc. ("Ericsson") and the Company and their
respective affiliates entered into definitive agreements governing (i) the
licensing and supply arrangement related to the Omnipoint System, (ii) the
purchase by OCI or other Omnipoint affiliates of GSM handsets, (iii) the
sale by Ericsson of IS-661 and GSM infrastructure equipment, and (iv)
cooperation on marketing, standards and technical activities. Each of
these agreements has a term of five years commencing on the date on which
it was executed. In addition, Ericsson and the Company have entered into
the Ericsson Credit Facility for the New York MTA networks.
Under the terms of the licensing and supply agreements, Ericsson will pay
license fees and royalties, including an initial $4.5 million license fee.
The Company entered into a non-binding memorandum of understanding with
Orbitel Mobile Communications Ltd., ("Orbitel"), a wholly-owned subsidiary
of Ericsson, which contemplates agreements pursuant to which Orbitel will
develop, manufacture and supply to the Company IS-661 and dual mode IS-
661/PCS 1900 handsets in a mutually agreeable timetable upon OCI agreeing
to a minimum purchase commitments to be determined when the parties have
ascertained the resources necessary for the development and manufacture of
such handsets.
The Company, through its subsidiary, Omnipoint Communications, Inc.
("OCI"), signed a five year agreement with Ericsson, subject to certain
conditions, including vendor financing to purchase $85.0 million of
infrastructure equipment, software and engineering, installation and
testing services. In addition, since the Company acquired C-Block licenses
covering 13.3 million people, beyond those in the New York MTA, the
Company is obligated to purchase $81.3 million in additional equipment and
services.
Continued
F-21
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. FCC DEPOSIT:
-----------
In November 1995, the Company, through its subsidiary Omnipoint PCS
Entrepreneurs, Inc. ("OPCSE") made a $40.0 million deposit with the FCC to
participate in the Entrepreneurs' Band C Block auction. The deposit
qualified the Company to participate in the Entrepreneurs' Band C Block
auction and was used to satisfy a portion of the first payment on
commitments for the 18 licenses received in such auction.
In August 1996, the Company made a $60.0 million deposit with the FCC to
participate in the D, E and F Block auction. The deposit qualifies the
Company to participate in the D, E and F Block auction and will be used to
satisfy any commitments arising from the Company's successful bidding in
the D, E and F Block auction.
13. COMMITMENTS AND CONTINGENCIES:
-----------------------------
COMMITMENTS
The Company has entered into various leases for its office, facilities
and for equipment used in the development of its products. The leases are
typically three to five years in length and payable monthly. The Company
has various capital lease commitments of approximately $59,000 payable
in 1997. Future minimum rentals under these noncancelable operating
leases as of December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
1997 $ 2,455
1998 2,303
1999 2,236
2000 1,417
2001 1,803
Thereafter 336
-------
$10,550
=======
</TABLE>
Total rental expense for the years ended December 31, 1994, 1995, and 1996
was approximately $399,000, $957,000, and $3,100,000, respectively.
Capital leases in the amount of $591,000 and $591,000, net of $235,000 and
$354,000 accumulated depreciation, respectively, are included in fixed
assets at December 31, 1995 and 1996.
Continued
F-22
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On December 12, 1995, the Company and Hansol Paper Co., Ltd. ("Hansol")
and its telecom affiliates entered into a strategic alliance for the
promotion of the Omnipoint System in the Republic of Korea and other parts
of Asia, and the grant of a license to Hansol to manufacture Omnipoint
System handsets. The agreement provides that Omnipoint will enter into a
purchase order, subject to certain preconditions, including competitive
pricing, to acquire from Hansol handsets for sale to subscribers in areas
covered by licenses, if any, purchased by the Company in the
Entrepreneurs' Band auction.
On July 1, 1996, the Company, through its subsidiary, OCI, signed a five
year agreement with a provider or billing and customer-care services for
which the Company will be provided with software products and services to
support its billing and customer-service requirements. The Company has
committed a minimum amount of $14.1 million in processing fees over the
next five years which may be satisfied by the Company and/or its
affiliates.
The Company, through its subsidiary OCI is in various stages of
negotiation for handsets, accessories and services from various suppliers.
These new contracts could require minimum purchase commitments from the
Company. Management believes that the Company will fulfill these
commitments in the normal course of business.
Continued
F-23
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
LITIGATION
The Company is subject to legal proceedings, administrative proceedings
and claims of various types in the ordinary course of its business. While
the Company cannot estimate the ultimate settlement, if any, it does not
believe that any such legal proceedings will have a material adverse
effect on the Company, its liquidity, financial position or results of
operations.
14. STOCK OPTIONS AND WARRANTS:
--------------------------
During 1991, the Company granted a warrant to purchase 915,000 shares of
common stock at an exercise price of $.008 per share, a price below market
value, exercisable for a period of 10 years in exchange for investment
banking services over five years. In connection with the warrants, the
Company recorded a charge to operations and an increase to paid-in-capital
of $816,180 in 1991. The Company also issued a warrant to purchase 750,000
shares of Common Stock originally exercisable for a period of five years
from the date of issuance. The warrants are exercisable for a price of
$1.00 per share for the first 250,000 shares exercised, $1.10 per share
for the next 250,000 shares exercised and $1.20 per share for the
remaining 250,000 shares exercised. Subsequent to December 31, 1994, the
Company and the warrant holder agreed that the warrant holder could loan
to the Company an amount equal to the aggregate exercise price of the
warrant on or before the original expiration date. In such event the
expiration date of the warrant would be extended for an additional five
years. The Company issued 229,168 of which 50,000 have a strike price of
$0.004 and the remainder have a strike price of $6.00 to the holder of the
Credit Loan Agreement. These warrants expire on March 10, 2002. In
connection with the Senior Notes and Convertible Subordinated Notes issued
during 1995, the Company granted to the holders of the notes warrants to
purchase 1,250,000 shares of common stock at an exercise price of $.004
per share, a price below market value, exercisable for a period of five
years from the date of issuance. In connection with the warrants, the
Company recorded a discount on the notes and an increase to paid-in
capital of $17.5 million. During 1996, approximately 597,000 warrants
were exercised with an exercise price of $0.004.
The 1990 stock option plan authorizes the grant of options exercisable for
a maximum of 6,250,000 of Common Stock to key employees, consultants,
officers and directors of the Company. Options under the plan expire 10
years from the date of the grant for incentive stock options and 10 years
plus 30 days for nonstatutory options. Prior to the approval of the 1990
stock option plan, the Company granted a total of 890,000 nonstatutory
stock options at an exercise price below the fair value of the stock.
During 1995 and 1996, the Company granted 5,044 and 384,745,
respectively, of additional stock options at an exercise price below the
fair value of the stock. The Company recorded approximately $23,000,
$109,000 and $768,000 of compensation expense during 1994, 1995 and 1996
associated with these options. Options granted vest rateably over five
years.
In June 1994, an unrelated party acquired 1,125,000 shares of Common Stock
of the Company in exchange for an option held by such unrelated party an
option to purchase a 9.85% interest in OCI. The estimated fair value of
the Common Stock of $4.5 million at the time of the exercise of the option
has been recorded as an additional investment in the subsidiary, with a
corresponding intangible asset. Also in June 1994, an unrelated party
exercised its option to purchase 549 shares (4.42%) of Omnipoint's stock
in OCI for approximately $3.2 million resulting in a gain of the same
amount. The Company issued the options in 1992 to other Pioneer's
Preference applicants who were ultimately unsuccessful in obtaining a
preference award.
The 1996 employee stock purchase plan authorizes the issuance of a maximum
of 200,000 shares of common stock through payroll deductions to employees
of the Company. Employees of the Company, who are scheduled to work 20 or
more hours per week and are employed as of the first day of each offering
period, will be eligible to participate in the purchase plan. Except for
the initial offering which consisted of a six-month period from July 1,
1996 through December 31, 1996, each offering under the Purchase Plan will
be for the 12-month calendar year (the "Offering Period"). Each Offering
Period other than the initial Offering Period will consist of two six-
month purchase periods commencing on the first business day on or after
January 1 or July 1 of each year (each, a
Continued
F-24
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
"Purchase Period"). Participating employees may contribute from 1% to 10%
of compensation through payroll deductions. On the last business day of
each Purchase Period (the "Exercise Date"), the employee's payroll
deductions will be used to purchase shares of the Company's Common Stock
for the employee. The price of the shares purchased will be the lower of
(i) 85% of the stock's closing price on the commencement date of the
Offering Period or (ii) 85% of the stock's closing price on the Exercise
Date. The maximum aggregate purchases which an employee will be able to
make in a single calendar year is $25,000, based on the fair market value
of such Common Stock determined at the commencement date of the Offering
Period.
The Company has two stock-based compensation plans, which are described
above. In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation." SFAS No. 123 is effective for periods
beginning after December 15, 1995. SFAS No. 123 requires that companies
either recognize compensation expense for grants of stock, stock options,
and other equity instruments based on fair value, or provide pro forma
disclosure of net income and earnings per share in the notes to the
financial statements. The Company adopted the disclosure provisions of
SFAS No. 123 in 1996 and has applied APB Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation
cost has been recognized for its stock option plans other than options
issued under fair market value. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates as calculated in accordance with SFAS No. 123, the
Company's net loss and earnings per share for the years ended December 31,
1996 and 1995 would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1995
-------------------------- ---------------------------
Net Income Earnings Per Net Income Earnings Per
----------- -----------
(in 000s) Share (in 000s) Share
------------- --------------
<S> <C> <C> <C> <C>
As Reported $(126,930) $(2.71) $(37,770) $(0.96) (a)
Pro forma $(128,585) $(2.74) $(37,792) $(0.96) (a)
</TABLE>
(a) Earnings per share as of December 31, 1995 is presented on a pro forma
giving effect to certain items related to the Company's initial public
offering on January 31, 1996.
The fair value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions: an expected life of 5.75 years, expected volatility
of 0% and 49.55%, for 1995 and 1996, respectively, a dividend yield of 0%
and a risk-free interest rate of 6.3%.
The effects of applying SFAS No. 123 for the purpose of providing pro
forma disclosure may not be indicative of the effects on reported net loss
and net loss per share for future years, as the pro forma disclosures
include the effects of only those awards granted after January 1, 1995.
The fair value of the employee stock purchase plan periods during 1996 is
estimated on the date of purchase using the Black-Scholes Option pricing
model utilizing the following weighted average assumptions an expected
life of six months, expected volatility of 49.55% a dividend yield of 0%
and a risk-free interest rate of 5.4%. The amount of compensation expense,
net of income taxes related to the employee stock purchase plan included
in the pro forma net loss and earnings per detail above, is approximately
$228,000, for 1996.
A summary of the status of the Company's stock option plans as of December
31, 1996, 1995 and 1994 and changes during the years ending on those dates
is presented below:
Continued
F-25
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
Wtd Avg. Wtd Avg. Wtd Avg.
Price Price Price
Shares Per Share Shares Per Share Shares Per Share
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of
year January 1, 4,598,408 $ 4.6343 3,243,476 $ 1.6112 2,972,306 0.6580
Granted
At fair value 721,322 27.9624 813,332 5.1240 330,126 10.0000
At greater than fair value - - 633,510 19.0764 -
At less than fair value 384,745 2.7946 5,044 4.81
Exercised (995,592) 0.7423 (83,994) 0.9611 (57,560) 0.3034
Canceled (32,584) 15.2166 (12,960) 9.9581 (1,396) 0.9000
----------- ---------- ----------- ---------- --------- -------
Options outstanding at end of year December 31, 4,676,299 $ 8.8353 4,598,408 $ 4.6343 3,243,476 1.6112
=========== ========== =========== ========== ========== =======
Options exercisable at December 31, 2,124,625 2,813,624 2,682,013
=========== =========== ==========
Options available for future grant at
December 31, 1,573,701 1,651,592 3,006,524
=========== =========== ==========
Weighted average fair value of options granted
during the year 17.14 .17
=========== ===========
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- -----------------------------
Weight-Average
Remaining
Range of Number Contractual Weight-Average Number Weighted-Average
Exercise Prices Outstanding Life Exercise Price Exercisable Exercise Price
- ---------------------- --------------- --------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.004-$0.444 1,172,538 4.85 $ 0.1882 963,188 $ 0.2269
$0.448-$4.000 815,010 4.26 $ .8307 815,010 $ .8307
$6.00-$6.00 1,269,114 8.47 $ 5.8531 315,890 $ 5.7310
$10.00-$34.50 1,419,637 9.24 $ 23.2414 30,537 $ 17.7974
- ---------------------- --------------- --------------- --------------- ----------- ---------------
$0.004-$34.50 4,676,299 7.06 $ 8.8353 2,124,625 $ 1.5294
====================== =============== =============== =============== =========== ===============
</TABLE>
Continued
F-26
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
At December 31, 1996, of the 4,676,299 options outstanding, 1,394,516 were
issued under the Incentive Stock Option Plan with a range of exercise
prices of $0.44 to $34.50, while 3,281,783 were issued under the
nonstatutory stock option plan and had an exercise price range of $0.004
to $34.50.
15. INCOME TAXES:
------------
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $222.7 million to be used to offset future taxable income;
these carryforwards expire during the years through 2011. Approximately
$20.0 million of these net operating losses were related to stock option
exercises, the tax benefit of which, when ultimately realized, would be
reflected as component of equity. Under the Tax Reform Act of 1986, the
amount of and benefits from net operating losses that can be carried
forward may be impaired or limited in certain circumstances.
Deferred tax assets and liabilities are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
----------- ----------
<S> <C> <C>
Deferred tax assets:
Inventory $ 244 $ 4,134
Compensation related 361 1,180
Deferred revenue 1,720 -
Start up costs - 1,130
Reserves - 1,008
Other 144 -
Net operating loss carryforwards 25,680 81,100
Valuation allowance (21,611) (74,419)
Deferred tax liabilities:
FCC license (6,393) (12,181)
Fixed assets (145) (1,952)
----------- ----------
Net deferred tax assets $ - $ -
=========== ==========
</TABLE>
Due to the uncertainty surrounding the realization of the deferred tax
asset, the Company has placed a valuation allowance against its otherwise
recognizable net deferred tax assets.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:
-----------------------------------
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been
determined by the Company, using available market information and
appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
Continued
F-27
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------------- ------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Credit Agreement $ 36,500 $ 36,500 $ - $ -
Convertible Subordinated Notes 16,250 25,000 - -
Loan payable under financing agreement 31,758 31,758 - -
Senior Notes 16,485 25,000 18,617 25,930
11 5/8% Senior Notes, due 2006 - - 250,000 261,960
11 5/8% Series A Senior Notes due 2006 - - 208,886 209,568
C Block License Obligation - - 362,335 371,137
New York MTA License Obligation 347,518 347,518 347,518 347,518
</TABLE>
CASH AND CASH EQUIVALENTS, PREPAID EXPENSES AND OTHER ASSETS, ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
The carrying amounts of these items are a reasonable estimate of their
fair value.
LONG-TERM AND SHORT-TERM DEBT
The fair value of these securities are estimated based on recent
transactions. The value of these transactions are based on interest rates
that are available to the Company for issuance of debt with similar terms
and maturities because there are no public market quotes available for
these securities.
NEW YORK MTA LICENSE OBLIGATION
The fair value of this obligation on the prevailing terms the United
States Government offers other Pioneer Preference license holders. The
terms and conditions for this obligation are set by the Federal
Communications Commission based on authority granted by the Congress of
the United States of America.
C BLOCK LICENSE OBLIGATIONS
The fair value of these obligations are based on the Company's estimate
of borrowing costs for debt similar to that issued by the U.S. government.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995 and December
31, 1996. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial
statements since those dates, and current estimates of fair value may
differ significantly from the amounts presented herein.
Continued
F-28
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
17. SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid for interest $ 107 $ 501 $ 23,125
Cash paid for taxes 9 32 -
Non cash investing and financing activities:
Liability incurred for acquisition of the license $347,518 $ - $360,442
Capital lease obligations incurred and notes payable
issued in exchange for fixed assets 233 88 -
Common stock issued upon conversion of subordinated
note 3,217 - 16,250
Common stock issued in exchange for an option held by
a third-party to purchase shares of subsidiary 4,500 - -
Common stock issued in exchange for employee notes
notes receivable 250 825 -
Issuance of Series B preferred stock in payment of
Series B dividend - 1,517 576
Issuance of Series C preferred stock in exchange for
amounts due under line of credit - 10,000 -
Dividends accrued on Series B and Series C preferred
stock - 1,839 -
Proceeds from financing agreement used to pay
origination fee - 7,500 150
Common stock issued in exchange for services - 59 -
Fixed assets and capitalized interest funded by
financing agreement - 13,312 -
Advance payment of pilot system equipment financed
through financing agreement - 4,840 -
Pilot system equipment funded by financing agreement - 1,053 1,321
Issuance of options at below fair market value - 112 9,628
Conversion of preferred stock in connection with the
initial public offering - - 44,703
</TABLE>
Continued
F-29
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
18. INDUSTRY SEGMENT INFORMATION:
----------------------------
<TABLE>
<CAPTION>
1996
--------------------------------------
PARENT
COMPANY
AND
EQUIPMENT SERVICE
DIVISION DIVISION TOTAL
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues $ - $ 531 $ 531
Income (loss) from operations (11,005) (89,356) (100,401)
Identifiable assets 342,497 1,076,975 1,419,472
Depreciation and amortization 3,001 12,586 15,587
Captital expenditures 7,128 166,703 173,831
Interest income (expense), net 1,340 (27,869) (26,529)
<CAPTION>
1995
--------------------------------------
PARENT
COMPANY
AND
EQUIPMENT SERVICE
DIVISION DIVISION TOTAL
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues $ - $ - $ -
Income (loss) from operations (23,664) (14,338) (38,002)
Identifiable assets 108,684 366,306 474,990
Depreciation and amortization 1,900 9,138 11,038
Captital expenditures 2,459 14,844 17,303
Interest income (expense), net 57 175 232
<CAPTION>
1994
--------------------------------------
PARENT
COMPANY
AND
EQUIPMENT SERVICE
DIVISION DIVISION TOTAL
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues $ 3,000 $ - $ 3,000
Income (loss) from operations 3,217 (14,650) (11,433)
Identifiable assets 13,810 347,136 360,946
Depreciation and amortization 688 437 1,125
Captital expenditures 2,419 5 2,424
Interest income (expense), net 301 (1,457) (1,156)
</TABLE>
Continued
F-30
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
------------------------------------------
The following table provides quarterly data for the fiscal years ended
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
MARCH 1 JUNE 30 SEPTEMBER 30 DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ 531
Operating expenses:
Research and development 4,759 8,659 8,257 16,536
Sales, general, and administrative 5,172 4,867 11,418 25,683
Depreciation and amortization 3,501 3,094 2,779 6,213
--------- ---------- ----------- ------------
Total operating expenses 13,432 16,620 22,454 48,432
Loss from operations (13,432) (16,620) (22,448) (47,901)
Other income (expense):
Interest income 1,398 1,313 3,119 4,867
Interest expense (3,869) (6,203) (8,522) (18,632)
--------- ---------- ----------- ------------
Net (loss) $ (15,903) $ (21,510) $ (27,851) $ (61,666)
========= ========== =========== ===========
Net (loss) per common share $ (0.39) $ (0.47) $ (0.55) $ (1.21)
========= ========== =========== ===========
Weighted average number of common shares
outstanding 40,469 45,620 50,278 50,937
<CAPTION>
1995
------------------------------------------------------------------------
MARCH 1 JUNE 30 SEPTEMBER 30 DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Operating expenses:
Research and development 2,317 2,860 3,643 5,525
Sales, general, and administrative 1,785 2,639 3,649 4,546
Depreciation and amortization 2,690 2,690 2,907 2,751
--------- ---------- ----------- ------------
Total operating expenses 6,792 8,189 10,199 12,822
Loss from operations (6,792) (8,189) (10,199) (12,822)
Other income (expense):
Interest income 50 102 400 197
Interest expense (Note 8) (7,982) (8,352) (8,270) 24,087
--------- ---------- ----------- ------------
Net income (loss) $ (14,724) $ (16,439) $ (18,069) $ 11,462
========= ========== =========== ===========
Net income (loss) per common share $ (0.47) $ (0.52) $ (0.58) $ 0.36
========= ========== =========== ===========
Weighted average number of common shares
outstanding 31,345 31,870 31,397 31,529
</TABLE>
F-31
<PAGE>
OMNIPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
20. SUBSEQUENT EVENTS:
----------------
D, E AND F BLOCK LICENSES
On January 14, 1997, the Company successfully bid for 109 D, E and F block
licenses for an aggregate of $181.4 million (net of the 25% small business
discount for the F Block licenses). The Company will make its first
payment of $28.8 million utilizing the $60.0 million deposit with the FCC;
the remaining $31.2 million of such deposit will be refunded to the
Company. The Company is preparing its long-form application for these
licenses. At the time the licenses are awarded, the Company will pay an
additional $93.1 million at which time payments will be complete for the D
and E Block licenses. The remaining $59.5 million for the F Block licenses
is payable over a 10-year period. The F Block licenses require interest-
only payments for the first two years at the 10-year Treasury Bill rate on
the date the licenses are awarded. Principal and interest will be due over
the remaining eight years. The Company anticipates that these licenses
will be issued by the end of June 1997, unless delayed by FCC proceedings
or litigation. The D, E and F Block licenses and any other licenses
purchased by the Company in the future will be accounted for in accordance
with the recently agreed upon industry practices. Accordingly, interest
incurred for the licenses will be capitalized during the buildout phase
and amortization of the license cost will begin with the commencement of
service to customers.
REGISTRATION OF SERIES A SENIOR NOTES
On February 19, 1997, the Company offered to exchange its 11 5/8% Series A
Senior Notes due 2006, which have been registered under the Securities Act
of 1933, as amended, for any and all of its outstanding 11 5/8% Series A
Senior Notes were tendered to exchange these notes. The interest rate on
and covenants with respect to the notes are substantially identical to the
interest rate on and covenant with respect to the 11 5/8% Series A Senior
Notes. The notes are obligations of the Company evidencing the same
indebtedness as the 11 5/8% Series A Senior Notes and are governed by the
same indenture as the 11 5/8% Series A Senior Notes.
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of
Omnipoint Corporation and its Subsidiaries as of December 31, 1995 and 1996, and
for each of the three years in the period ended December 31, 1996, which
financial statements are included in this Form 10-K, we have also audited the
financial statement schedule listed in Item 14(a) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included herein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 31, 1997
<PAGE>
SCHEDULE I
OMNIPOINT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1994, 1995, and 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
OF PERIOD EXPENSES RESERVES PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Period ended December 31,
1994:
Reserve for doubtful accounts $369,946 - $369,946 -
Period ended December 31,
1995:
Reserve for doubtful accounts - - - -
Period ended December 31,
1996
Reserve for doubtful accounts - - - -
</TABLE>
S-1
<PAGE>
OMNIPOINT CORPORATION
________________
FORM 10-K
________________
EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL PAGE NO.
------- ----------- -------------------
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2@@@ Amended and Restated Bylaws of the Registrant.
4.2 See Exhibit 3.1.
10.1@ Registrant's Amended and Restated 1990 Stock Option Plan.
10.2@ Form of Incentive Stock Option Agreement under Registrant's 1990
Stock Option Plan.
10.3@ Form of Stock Option Agreement under Registrant's 1990 Stock Option
Plan for non-qualified options.
10.4@ Form of Stock Option Agreement outside scope of Registrant's 1990
Stock Option Plan for non-qualified options.
10.5@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.6@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.7@ Letter agreement, dated June 29, 1995, by and between the Registrant
and Allen & Company Incorporated (relating to Exhibit 10.6).
10.8 [Intentionally left blank].
10.9@ Common Stock Purchase Warrant issued March 10, 1995, granted to
Madison Dearborn Capital Partners, L.P.
10.10@ Common Stock Purchase Warrant issued March 10, 1995, granted to
Madison Dearborn Capital Partners, L.P.
10.11@ Employment Agreement, effective October 1, 1995, by and between the
Registrant, Omnipoint Communications Inc. and George F. Schmitt.
10.12@ Promissory Note, dated October 1, 1995, by George F. Schmitt.
10.13@ Stock Restriction Agreement, dated October 1, 1995, by and between
the Registrant and George F. Schmitt.
10.14@ Employment Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.15@ Promissory Note, dated April 17, 1995, by Bradley E. Sparks.
10.16@ Stock Restriction Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.17 Employment Agreement, dated November 3, 1996, by and between the
Registrant and Kjell S. Andersson.
10.18 Promissory Note, dated February 24, 1997, by Kjell S. Andersson.
10.19 Stock Restriction Agreement, dated February 24, 1997, by and between
the Registrant and Kjell S. Andersson.
10.20@ Series B Convertible Preferred Stock Purchase Agreement, dated August
9,1993, by and among the Registrant and Madison Dearborn Capital
Partners, L.P.
10.21@ Amendment No. 1 to Series B Convertible Preferred Stock Purchase
Agreement, dated June 29, 1995, by and between the Registrant and
Madison Dearborn Capital Partners, L.P.
<PAGE>
10.22@ Series C Convertible Preferred Stock Purchase Agreement, dated June
29, 1995, by and among the Registrant and the other parties named
therein.
10.23@ Amended and Restated Registration Rights Agreement, dated June 29,
1995, by and among the Registrant and the parties named therein.
10.24@ First Amended and Restated Voting Agreement, dated June 29, 1995, by
and among the Registrant and the other parties named therein.
10.25@ OEM Supply Agreement for Omnipoint PCS (Personal Communication
Systems) Products, dated September 22, 1994, by and between the
Registrant and Northern Telecom Inc.
10.26@ Manufacturing License and Escrow Agreement for Personal Communication
Service Products, dated February 28, 1995, by and between the
Registrant and Northern Telecom Inc.
10.27@ Collaborative Development Agreement, dated March 1, 1995, by and
between the Registrant and Northern Telecom Inc.
10.28@ Reciprocal OEM Agreement Memorandum of Understanding, dated March 30,
1995, by and between the Registrant and Northern Telecom Inc.
10.29@ Supply Agreement, dated September 22, 1994, by and between Omnipoint
Communications Inc. and Northern Telecom Inc.
10.30@ Amendment No. 1 to Supply Agreement, dated July 21, 1995, by and
between Omnipoint Communications Inc. and Northern Telecom Inc.
10.31 [Intentionally left blank].
10.32+++ Amended and Restated Loan Agreement, dated August 7, 1996,
by and between Omnipoint Communications Inc. and Northern Telecom
Inc.
10.33+++ Loan Agreement, dated August 7, 1996, by and between Omnipoint
Communications Inc. and Ericsson Inc., as amended.
10.34@ Memorandum of Understanding, dated April 21, 1995, by and between the
Registrant and Pacific Bell Mobile Services.
10.35@ Note and Warrant Purchase Agreement dated November 22, 1995, between
the Registrant and the purchasers named therein.
10.36@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
10.37@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
10.38@+ Memorandum of Understanding, dated November 22, 1995, by and between
the Registrant and Ericsson Inc.
10.39@ Letter Agreement, dated January 24, 1996, by and between the
Registrant and between Ericsson Inc.
10.40@ Letter of Intent, dated October 26, 1995, by and between the
Registrant and BellSouth Personal Communications, Inc.
<PAGE>
10.41@ Contract for Sale of Real Estate, dated August 30, 1995, by and
between F&R Bari Realty, Ltd., Inc. and Omnipoint Communications
Inc.
10.42@ Lease Agreement, dated October 15, 1995, by and between the
Registrant and Baetis Properties, Inc.
10.43**++ Acquisition Agreement for Ericsson CMS 40 Personal Communications
Systems (PCS) Infrastructure Equipment, dated as of April 16,
1996, by and between Ericsson Inc. and Omnipoint Communications.
10.44**++ Acquisition Supply and License Agreement for Omnipoint Personal
Communications Systems (PCS) Infrastructure Equipment, dated as of
April 16, 1996, by and between Ericsson Inc. and the Registrant.
10.45**++ Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal
Units, dated as of April 16, 1996, by and between Ericsson, Inc.
and Omnipoint Communications, Inc.
10.46**++ Memorandum of Understanding, dated April 2, 1996, by and between
Orbitel Mobile Communications Inc. and the Registrant
10.47@@ Letter of Intent, dated November 20, 1995, by and between the
Registrant and Western Wireless Corporation
10.48@@ Letter of Intent, dated February 26, 1996, by and between
Omnipoint Communications Inc. and American Portable Telecom, Inc.
10.49@@ Letter of Intent, dated March 22, 1996, by and between Omnipoint
Communications Inc. and American Personal Communications.
10.50@@ Letter of Intent, dated May 13, 1996, by and between the
Registrant and InterCel, Inc.
10.51@@ License Agreement, dated March 22, 1996, by and between the
Registrant and Bender & Company, Inc.
10.52@@ Second License Agreement, dated April 17, 1996, by and between
Registrant and Bender & Company, Inc.
10.53@@ Lease Agreement, dated March 1, 1996, by and between Omniset
Corporation and Roots Stone Limited Partnership.
10.54 Agreement dated as of February 24, 1997, between the Registrant
and Kjell S. Andersson, amending Employment Agreement dated
November 3, 1996.
11.1 Statement of computation of loss per share.
21.1@ Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included in signature pages).
27 Financial Data Schedule.
___________________________
@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 33-98360.
@@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 33-03739.
@@@Incorporated by reference to the Company's Registration Statement on Form
S-4, No. 333-19895.
* Incorporated herein by reference to Company's Annual Report on Form 10-K
for the fiscal year ended
December 31, 1995.
** Incorporated by reference to the Company's Current Report on Form 8-K,
filed May 3, 1996.
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 of the
Act, which application was granted by the Commission.
++ Portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 24b-2 under the
Exchange Act of 1934, filed May 3,1996.
+++ Portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 24b-2 under the
Exchange Act of 1934, filed March 31, 1997.
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 3rd day of
November, 1996 (the "Effective Date") is entered into by OMNIPOINT CORPORATION,
a Delaware corporation with its principal place of business at 2000 North 14th
Street, Suite 550, Arlington, Virginia 22201 (the "Company"), and KJELL S.
ANDERSSON (the "Employee").
The Company desires to employ the Employee, and the Employee desires to
be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on February 2,
1997 or such earlier date as may be agreed to between the Employee and the
Company (the "Commencement Date") and ending five years after the Commencement
Date (such period, as it may be extended, the "Employment Period"), unless
sooner terminated in accordance with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as President of the
---------------
Omnipoint Technology Division ("OT") and Executive Vice President of Omnipoint
Corporation. The Employee shall be based at the Company's office in Colorado
Springs or such other place as reasonable requested by the Company. The Employee
shall be subject to the supervision of, and shall have such authority as is
delegated to him by, the President and Chief Executive Officer of the Company or
if separate persons, the senior most position of the Company or the Board of
Directors (the "Board").
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the President shall from time to time reasonably assign to
him. The Employee agrees to devote his entire business time, attention and
energies to the business and interests of the Company during the Employment
Period; provided that for reasonable periods of time each month the Employee may
engage in non-competitive business or charitable activities so long as such
activities do not interfere with the Employee's responsibilities hereunder. The
Employee agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company, except for minor violations of the rules
and policies, and any changes therein which may be adopted from time to time by
the Company. The Employee acknowledges receipt of copies of all such rules and
policies committed to writing as of the date of this Agreement.
<PAGE>
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee an annual
------
salary of $225,000, to be paid in accordance with the Company's payroll
practices commencing on the Commencement Date and continuing for the duration of
the Employment Period, prorated for any partial compensation period. Such salary
shall be subject to upward adjustment thereafter by the Board or by the
Compensation Committee of the Board (the "Compensation Committee"), if such
duties have been delegated thereto by the Board. Each year beginning at the
first annual review of the Employee's compensation, the Board or the
Compensation Committee will increase the Employee's salary by a minimum of five
percent (5%).
3.2 Bonus. The Employee shall be eligible to receive a cash
-----
bonus award in the amount of $100,000, which shall be payable within 30 days of
the Commencement Date, with up to $50,000 repayable to the Company to the extent
the Employee receives any bonuses related to services performed during calendar
1996 from, or fees for serving on the Board of Directors of, Employee's former
employer, Ericsson Radio Systems, AB. The Employee shall report the receipt of
any such bonuses or fees to the Board within five days of the receipt of such
bonuses or fees. Commencing with the calendar year 1997, the Employee shall also
be eligible to receive a cash bonus award in an amount up to 100% of the
Employee's then current salary (with a target bonus of 50%) per calendar year
based on meeting annual deliverables or goals agreed to with the Board or the
Compensation Committee.
In the event that the Employee purchased 60,000 shares of
Common Stock from the Company as contemplated in Section 3.3 and issued to the
Company a note in the principal amount of $1,560,000 and the Employee shall have
been continuously employed by the Company on the fifth anniversary of the
Commencement Date, the Employee shall be entitled to receive a special bonus
(the "Special Bonus") in the amount equal to $2,147,388.50 (the amount of the
note plus accrued interest of 6.6% per annum). In lieu of direct payment of the
Special Bonus to the Employee, the Company at its election may cancel any
outstanding indebtedness of the Employee to the Company.
3.3 Fringe Benefits. The Employee shall be entitled to
---------------
participate in all benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate, including those outlined on Exhibit A.
3.4 Initial Purchase of Stock.
-------------------------
(a) At the Commencement Date, the Employee shall be
entitled to purchase from the Company 60,000 shares of the Company's Common
Stock at a purchase price of $26 per share ("the Purchase Price"), pursuant to
the terms and conditions of the Stock Restriction Agreement to be executed and
dated as of the Commencement Date between the Company and the Employee, the form
of which is set forth as Exhibit C.
---------
-2-
<PAGE>
(b) At the fifth anniversary, upon the Employee's receipt
of the Special Bonus, as defined in the Employment Agreement, if the Employee is
unable to sell Shares to pay federal and state income taxes on compensation
arising due to the Special Bonuses due to limitations imposed under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, if any, the Company shall make reasonable efforts to secure a loan for
the Employee to pay such taxes.
3.5 Stock Option Plan. The Employee shall be entitled to
-----------------
participate in the Company's Amended and Restated 1990 Stock Option Plan (the
"1990 Plan") in the amount and subject to the terms and conditions set out in
the Stock Option Agreements attached hereto as Exhibit D. Such agreements shall
---------
be signed and executed by the Company as of the Commencement Date. The Employee
shall be entitled to further participate in the 1990 Plan or such other stock
option plan from time to time as determined by the Board or the Compensation
Committee.
3.6 Omnipoint Technology Options. At such time that the
----------------------------
Company finalizes the Omnipoint Technologies, Inc. Equity Incentive Plan (the
"Incentive Plan"), the Employee shall be entitled to participate in the
Incentive Plan in the amount and subject to the terms and conditions set out in
the Equity Incentive Option Agreement attached hereto as Exhibit E.
---------
3.7 Reimbursement of Expenses.
-------------------------
(a) The Company shall reimburse the Employee for
reasonable moving expenses to the Colorado Springs, Colorado metropolitan area,
in the lump sum amount of $50,000, plus $40,000, an amount equal to the
Employee's state and federal income taxes incurred with respect to such
reimbursed moving expenses, based on the Employee's average marginal rate for
such taxes. The Company shall also reimburse the Employee for the reasonable
closing costs, which shall include legal expenses and mortgage points, related
to the purchase of a home in Colorado Springs. Such expenses shall be payable
after incurrence and during calendar year 1996 or 1997, at the Employee's
election.
(b) The Company shall reimburse the Employee for actual
reasonable legal fees and related expenses incurred in connection with the
review of this Agreement for state law compliance, not to exceed $5,000, upon
presentation to the Company by the Employee of invoices for such legal fees.
(c) The Company shall reimburse the Employee for all
reasonable travel, entertainment and other expenses incurred or paid by the
Employee in connection with, or related to, the performance of his duties,
responsibilities or services under this Agreement, upon presentation by the
Employee of documentation, expense statements, vouchers, and such other
supporting information as the Company may request, or as may be consistent with
standard company practices, provided, however, that the amount available for
such travel, entertainment and other expenses may require approval in advance by
the President or may be fixed in advance by the Board.
-3-
<PAGE>
3.8 Car Allowance. The Company shall provide the Employee with
-------------
an automobile expense allowance in an amount per month sufficient to cover the
reasonable lease of an American-made or Volvo full-size sedan and reasonable
maintenance, insurance and operating expenses for business usage. If the
Employee uses the automobile for personal use, the payment for such expenses
shall be reduced on a pro rata mileage basis.
4. Employment Termination. The employment of the Employee by
----------------------
the Company pursuant to this Agreement shall terminate upon the occurrence of
any of the following:
4.1 Expiration of the Employment Period in accordance with
Section 1;
4.2 At the election of the Company, for cause, immediately
upon written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon either (a) the
conviction of the Employee of, or the entry of a pleading of guilty or nolo
contendere by the Employee to, any crime involving moral turpitude that may
reasonably be expected to have an adverse impact on the Company's reputation or
standing in the community or any felony, or (b) willful misconduct in connection
with the Employee's duties, or willful failure to perform his responsibilities
in the best interest of the Company (including, without limitation, material
breach by the Employee of this Agreement but not minor violations of rules and
policies), except in cases involving the mental or physical incapacity or
disability of the Employee; provided however, that the Board may terminate the
Employee's employment pursuant to Section 4.2(b) only after the failure by the
Employee to correct or cure, or to commence and continue to pursue the
correction or curing of, such refusals within thirty (30) days after receipt by
the Employee of written notice by the Board of each specific claim of any such
misconduct or failure. The Employee shall have the opportunity to appear before
the Board to discuss such written notice during such thirty (30) day period.
"Willful misconduct" and "willful failure to perform" shall not include action
or inaction on the part of the Employee which were taken or not taken in good
faith by the Employee;
4.3 Upon the death or thirty (30) days after the disability of
the Employee. As used in this Agreement, the term "disability" shall mean the
inability of the Employee, due to a physical or mental disability, for a period
of one hundred eighty (180) days, regardless of whether consecutive, during any
360-day period to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both
the Employee and the Company, provided that if the Employee and the Company do
not agree on a physician, the Employee and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to disability shall be binding on all parties;
4.4 At the election of the Employee, upon not less than thirty
(30) days prior written notice of termination other than for "good reason" as
defined below; or
4.5 At the election of the Company, otherwise than for cause,
upon not less than seven (7) days prior written notice or at the election of the
Employee for "good reason" upon not less than thirty (30) days prior written
notice of termination. "Good reason" shall include and be limited to the
occurrence of (A) a material breach of this Agreement by the Company, (B) a
-4-
<PAGE>
change in the reporting responsibilities of the Employee to someone other than
the Parent President or the Board of either the Company or OT, or (C) material
diminution of the Employee's responsibilities.
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at the Election of the Employee.
--------------------------------------------------------
In the event the Employee's employment is terminated for cause pursuant to
Section 4.2, or at the election of the Employee pursuant to Section 4.4, the
Company shall pay to the Employee the salary and benefits otherwise payable to
him under Section 3 through the last day of his actual employment by the
Company.
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability as determined
pursuant to Section 4.3, the Company shall pay to the estate of the Employee or
to the Employee, as the case may be, the salary and benefits which would
otherwise be payable to the Employee up to the end of the month in which the
termination of his employment because of death or disability occurs.
5.3 Termination at the Election of the Company or the Employee
----------------------------------------------------------
for Good Reason. If the Employee's employment is terminated at the election of
- ---------------
the Company or by the Employee for good reason pursuant to Section 4.5, subject
to this Section 5.3, the Company shall pay to the Employee the base salary,
bonus compensation and medical benefits for the most recent twelve month period
which would otherwise be payable to the Employee of up to two (2) years
following the Employee's termination. In the event that the Employee secures
alternative employment, any amounts received therefrom shall serve to offset,
dollar for dollar, the amounts paid by the Company pursuant to this Section 5.3.
The offset of all amounts otherwise to be paid by the Company pursuant to the
previous sentence shall not be deemed to be an election by the Company to cease
the payments hereunder, and thus, the terms of Section 6(a) shall continue to
apply to the Employee. The Company may elect to cease to make payments hereunder
at any time, provided that the non-compete restrictions set forth in Sections
6(a) and 6(b) shall also cease at such time, except that the Company will be
obligated to pay the Employee his base salary and medical benefits for a period
of six months after notification of its intention to release the Employee from
his non-compete restrictions and bonus compensation equivalent to one-half the
bonus for the most recent twelve month period prior to termination.
5.4 Survival. The provisions of Sections 6 and 7 shall survive
--------
the termination of this Agreement.
6. Non-Compete.
-----------
(a) So long as the Company is not in breach of this Agreement,
during the Employment Period and for a period of two years after the termination
(subject to early termination as provided herein) or expiration thereof, the
Employee will not directly or indirectly:
-5-
<PAGE>
(i) other than through his ownership of stock of the
Company, as an individual proprietor, partner, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any other capacity whatsoever
(other than as the holder of not more than one percent (1%) of the total
outstanding stock of a publicly held company), engage in any business anywhere
in the world that provides equipment or services that are being provided by or
are under development by OT at the time the Employee ceases employment with the
Company or engage in any business in any area in which equipment or services are
being provided by or under development by the Company at the time the Employee
ceases employment with the Company; or
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company or its affiliates to terminate their
employment with, or otherwise cease their relationship with, the Company or its
affiliates; or
(iii) solicit, divert or take away, or attempt to divert
or to take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company or its
affiliates which were contacted, solicited or served by the Employee while
employed by the Company.
(b) The parties agree that the relevant public policy aspects
of covenants not to compete have been discussed, and that every effort has been
made to limit the restrictions placed upon the Employee to those that are
reasonable and necessary to protect the Company's legitimate interests.
(c) If any restriction set forth in this Section 6 is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(d) The restrictions contained in this Section 6 are necessary
for the protection of the business and goodwill of the Company and/or its
affiliates and are considered by the Employee to be reasonable for such
purposes. The Employee agrees that any material breach of this Section 6 will
cause the Company and/or its affiliates substantial and irrevocable damage and
therefore, in the event of any such breach, in addition to such other remedies
which may be available, the Company shall have the right to seek specific
performance and injunctive relief. The Employee acknowledges that he has
received compensation for the terms of this Section 6 pursuant to various stock
option agreements and other compensation.
7. Proprietary Information and Developments.
----------------------------------------
7.1 Proprietary Information.
-----------------------
(a) The Employee agrees that all information and know-how,
whether or not in writing, relating to the business, technical or financial
affairs of the Company and that is generally understood in the industry as being
trade secret, confidential and/or proprietary, that is
-6-
<PAGE>
designated as being confidential or proprietary information of the Company,
either verbally or in writing, or that is designated as representing trade
secrets of the Company, either verbally or in writing (collectively,
"Proprietary Information"), is and shall be the exclusive property of the
Company. For purposes of this Agreement, Proprietary Information shall mean, by
way of illustration and not limitation, all confidential information and
know-how (whether or not patentable and whether or not copyrightable) owned,
possessed or used by the Company, including, without limitation, any invention,
existing or future product, formula, method, manufacturing techniques and
procedures, composition, compound, project, development, plan, vendor
information, supplier information, customer information, apparatus, equipment,
trade secret, process, research, reports, clinical data, financial data,
technical data, test data, know-how, computer program, software, software
documentation, hardware design, technology, marketing or business plan,
forecast, unpublished financial statement, budget license, patent applications,
contracts, joint ventures, price, cost and personnel data.
(b) The Employee agrees not to and will not disclose any
Proprietary Information to others outside the Company or use the same for any
unauthorized purposes without written approval by an officer of the Company,
from the Effective Date, during or after his employment unless and until such
Proprietary Information (i) has become public knowledge through legal means
without fault by the Employee, or (ii) is already public knowledge prior to the
signing of this Agreement.
(c) The Employee agrees that all files, letters,
memoranda, reports, records, data, schematics, sketches, drawings, laboratory
notebooks, program listings, computer programs, databases, products, test
equipment, prototypes or other written, photographic, magnetic or other tangible
material containing or embodying Proprietary Information, whether created by the
Employee or others, which shall come into his custody or possession (hereinafter
collectively referred to as the Company Records) shall be, shall continue to be
and are the exclusive property of the Company to be used by the Employee only in
the performance of his duties for the Company. All such Company Records or
copies thereof and all other tangible property of the Company in the custody or
possession of the Employee shall be delivered to the Company, upon the earlier
of (i) a request by the Company or (ii) termination of this Agreement. After
such request, termination or delivery, the Employee agrees not to and shall not
retain any such Company Records or copies thereof or any such other tangible
property.
7.2 Developments.
------------
(a) The Employee agrees to make and will make full and
prompt disclosure to the Company of all inventions, know-how, improvements,
product ideas, new products, discoveries, methods, developments, software, and
works of authorship, whether or not patentable and whether or not copyrightable,
and all other intellectual property rights, including but not limited to
patents, copyrights, copyrightable works, trade secrets and trademarks, and all
books, schematics, magnetic files and written records related thereto which are
or were created, made, conceived, reduced to practice by or became owned by the
Employee or under his direction or jointly with others either (i) during his
employment whether or not during normal working
-7-
<PAGE>
hours or on the premises of the Company, or (ii) prior to his employment by the
Company if used by the Company during his employment by the Company, in either
event, to the extent relevant to the Company's business, including but not
limited to, its techniques, developments, projects or products, but excluding
systems, methods and techniques used prior to his employment by the Company (all
of which, whether disclosed or not, are collectively referred to in this
Agreement as "Developments").
(b) The Employee agrees to assign and does hereby assign,
convey and transfer to the Company (or any person or entity designated by the
Company) all his rights, title and interest in and to all Developments; provided
that the Employee may use Developments described in (a)(ii) above in a manner
that complies with terms set forth in Section 6 (Non-Compete) and Section 7.1
(Proprietary Information) hereof.
(c) The Employee agrees to cooperate fully with the
Company, both during and after his employment with the Company, with respect to
the worldwide procurement, maintenance and enforcement, including assistance or
cooperation in legal proceedings, of copyrights, patents and similar protections
(both in the United States and foreign countries) relating to Developments; and,
if such cooperation by the Employee is required after the Employee has ceased to
be employed by the Company, then the Company will reimburse the Employee for any
expenses reasonably incurred by Employee in connection with such cooperation.
The Employee shall sign all papers, copyright applications, assignments,
declarations, powers of attorney, patent applications, and other related or
necessary documents, which the Company may deem necessary or desirable in order
to enforce and/or protect its rights and interests in any Developments or any
Proprietary Information.
7.3 Other Agreements. Except as set forth in Exhibit B,
----------------
Employee hereby represents that he is not bound by the terms of any agreement
with any previous employer or other party to refrain from using or disclosing
any trade secret or confidential or proprietary information in the course of his
employment with the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. The
Employee intends to exercise his best efforts and use his best skills in
performing his obligations under this Agreement, except to the extent it may be
prohibited by prior employment agreements. The Employee represents that his
performance of all the terms of this Agreement and as an employee of the Company
does not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust prior
to his employment with the Company.
7.4 Company and Affiliates. Where the term "Company" is used
----------------------
in this Section 7 it will be deemed to include any affiliate of the Company,
including but not limited to OT.
8. Notices. All notices required or permitted under this
-------
Agreement shall be in writing and shall be deemed effective upon delivery
personally, by facsimile or by overnight mail, or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to the other party at the address shown above, or at such other address or
addresses as either party shall designate to the other in accordance with this
Section 8.
8
<PAGE>
9. Pronouns. Whenever the context may require, any pronouns used
--------
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
10. Entire Agreement. This Agreement and the exhibits hereto
----------------
constitutes the entire agreement between the parties and supersedes all prior
agreements and understandings, whether written or oral, relating to the subject
matter of this Agreement.
11. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted
-------------
and enforced in accordance with the laws of the State of Colorado.
13. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
14. Arbitration. The parties agree that any controversy, claim, or
-----------
dispute arising out of or relating to this Agreement, or the breach thereof, or
arising out of or relating to the employment of the Employee, or the termination
thereof, including any claims under federal, state, or local law, shall be
resolved by arbitration in Colorado Springs, Colorado in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association. The
parties agree that any award rendered by the arbitrator shall be final and
binding, and that judgment upon the award may be entered in any court having
jurisdiction thereof.
15. Indemnification. The Company shall indemnify and save harmless
---------------
the Employee for any liability incurred by reason of any act or omission
performed by the Employee while acting in good faith on behalf of the Company
and within the scope of the authority of the Employee pursuant to this Agreement
and under the rules and policies of the Company, except that the Employee must
have in good faith believed that such action was in the best interests of the
Company and such course of action or inaction must not have constituted
negligence, fraud, willful misconduct, malfeasance, breach of any representation
or agreement set forth in this Agreement or breach of a fiduciary duty.
16. Miscellaneous.
-------------
16.1 No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
-9-
<PAGE>
16.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
16.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
16.4 This Agreement is effective as of the date of execution
of this Agreement, will survive Employees employment with the Company, and does
not in any way restrict Employees right or the right of the Company to terminate
Employee's employment.
16.5 Employee certifies and acknowledges that he has carefully
read all of the provisions of this Agreement and that he understands and will
fully and faithfully comply with its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
OMNIPOINT CORPORATION
By: /s/ Douglas G. Smith
-------------------------
Its: President and Chief Executive Officer
--------------------------------------
EMPLOYEE
/s/ Kjell S. Andersson
- ---------------------------
Kjell S. Andersson
-10-
<PAGE>
Exhibit 10.18
PROMISSORY NOTE
---------------
$1,087,500.00 February 24, 1997
FOR VALUE RECEIVED, Kjell S. Andersson ("Maker") promises to pay to
Omnipoint Corporation (the "Company"), or order, on February 10, 2002 (the
"Maturity Date") the principal sum of $1,087,500.00 and interest on the unpaid
principal balance hereof from time to time outstanding at the rate of 6.6% per
annum until paid in full, payable as set forth below. Interest shall be
calculated on the basis of a 360-day year of twelve 30-day months. Payment of
principal and interest shall be made at the Company's offices at 2000 N. 14th
Street, Suite 550, Arlington, Virginia 22201, or at such other address as the
Company may designate in writing to the Maker.
Principal and interest shall be paid in full on the Maturity Date.
This Note may be prepaid in whole or in part at any time, without
penalty.
This Note shall become immediately due and payable without notice or
demand upon the occurrence at any time of any of the following events of default
(collectively, "Events of Default"):
(1) default in the payment or performance of this Note; or
(2) the termination of the Maker's employment with the Company or its
affiliates.
In lieu of payment hereof, the Maker may elect to surrender shares of
the Company's Common Stock in accordance with the terms of the Stock Restriction
Agreement between the Company and the Maker of even date herewith.
The Maker agrees to pay on demand all costs of collection, including
reasonable attorneys' fees, incurred by the holder in enforcing the obligations
created by this Note.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Maker and every endorser or guarantor of this Note, regardless of the time,
order or place of signing, waives presentment, demand, protest and notices of
every kind and assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or
secondarily liable.
<PAGE>
None of the terms or provisions of this Note may be excluded, modified,
or amended except by a written instrument duly executed on behalf of the holder
expressly referring hereto and setting forth the provision so excluded, modified
or amended.
All rights and obligations hereunder shall be governed by the laws of
the State of Colorado and this Note shall be deemed to be under seal.
/s/ Kjell S. Andersson
-----------------------------------
Maker
AGREED AND ACCEPTED:
Omnipoint Corporation
By: /s/ Douglas G. Smith
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
-2-
<PAGE>
Exhibit 10.19
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (the "Agreement") made as of
the 24th day of February, 1997 (the "Effective Date"), between Omnipoint
Corporation, a Delaware corporation (the "Company"), and Kjell S. Andersson (the
"Employee").
For valuable consideration, receipt of which is acknowledged,
the parties hereto agree as follows:
1. Purchase of Shares. The Employee hereby subscribes for and,
------------------
upon acceptance hereof, shall purchase, subject to the terms and conditions set
forth in this Agreement, 60,000 shares (the "Shares") of common stock, $.01 par
value, of the Company ("Common Stock"), at a purchase price per share equal to
$18.125 ("the Purchase Price"). In consideration of the receipt by the Employee
of the Shares, the Employee shall deliver to the Company a five-year Note in the
principal amount of $1,087,500 bearing interest at the rate of 6.6% per annum
(the "Note") payable to the Company. Principal and interest on the Note shall be
due and payable upon the earlier of February 24, 2002, or the termination of
Employee's employment. Upon receipt of the Note by the Company for the Shares,
the Company shall cause to be issued to the Employee a certificate in the name
of the Employee for the Shares. The Employee agrees that the Shares shall be
subject to the Purchase Option (as defined below) set forth in Section 2 of this
Agreement and the restrictions on transfer set forth in Section 5 of this
Agreement.
2. Purchase Option. Subject to the provisions of Paragraph 4,
---------------
if the Employee ceases to be employed by the Company for any reason other than
for cause pursuant to Section 4.2 of the Employment Agreement between the
Employee and the Company dated February 24, 1997 (the "Employment Agreement"),
the Company shall have the right and option to purchase (the "Purchase Option")
from the Employee, for a sum of $18.125 per share (the "Option Price"), up to
that percentage of the Shares as is set forth in the second column of the table
set forth below opposite the period in which the Employee ceases to be so
employed.
<TABLE>
<CAPTION>
If Cessation of Employment Percentage of Shares
Occurs: Subject to Purchase Option
------ --------------------------
<S> <C>
Before the second anniversary 66 2/3%
of the Effective Date
On or after the second anniversary 50%
of the Effective Date but before
the third anniversary of the
Effective Date
</TABLE>
<PAGE>
<TABLE>
<S> <C>
On or after the third anniversary 33 1/3%
of the Effective Date but before
the fourth anniversary of the
Effective Date
On or after the fourth anniversary 16 2/3%
of the Effective Date but before
the fifth anniversary of the
Effective Date
After the fifth anniversary of the
Effective Date 0%
</TABLE>
3. Exercise of Purchase Option and Closing.
---------------------------------------
(a) The Company, or its designee, shall exercise the Purchase
Option granted to it by delivering or mailing to the Employee, in accordance
with Section 11, written notice of exercise within 90 days after the termination
of the employment of the Employee with the Company. Such notice shall specify
the number of Shares to be purchased. If and to the extent the Purchase Option
is not so exercised within such 90-day period, the Purchase Option shall
automatically expire and terminate effective upon the expiration of such 90-day
period.
(b) Subject to the provisions of Paragraph 4, within 10 days
after his receipt of the Company's or its designee's notice of the exercise of
the Purchase Option pursuant to subsection (a) above, the Employee (or his
estate) shall tender to the Company or its designee at its principal offices the
certificate or certificates representing the Shares that the Company or its
designee has elected to purchase, duly endorsed in blank by the Employee or with
duly endorsed stock powers attached thereto, all in form suitable for the
transfer of such Shares to the Company or its designee. Upon its receipt of such
Shares, the Company or its designee shall cancel such portion of the Employee's
indebtedness under the Note that relates to the repurchased Shares at the
aggregate Option Price for such shares.
(c) After the time at which any Shares are required to be
delivered to the Company or its designee for transfer to the Company or its
designee pursuant to subsection (b) above, the Company shall not pay any
dividend to the Employee on account of such Shares or permit the Employee to
exercise any of the privileges or rights of a stockholder with respect to such
Shares, but shall, in so far as permitted by law, treat the Company or its
designee as the owner of such Shares.
(d) The Company or its designee shall not purchase any
fraction of a Share upon exercise of the Purchase Option, and any fraction of a
Share resulting from a computation made pursuant to Section 2 of this Agreement
shall be rounded to the nearest whole Share (with any one-half Share being
rounded upward).
-2-
<PAGE>
4. Termination of Employment.
-------------------------
(a) Notwithstanding other provisions of this Agreement, if the
Employee is terminated without cause or leaves the Company for good reason, as
such term is defined in Section 4.5 of the Employment Agreement (such day the
Employee so terminates or leaves, the "Termination Date"), prior to the fifth
anniversary of this employment with the Company, the Employee will be entitled
to the following:
(i) If the Equity Value, as determined below, is less
than $1,000,000 as of the Termination Date, and the Measurement Date, as defined
below, is such Termination Date, notwithstanding the provisions of Section 2
above, the Employee will be entitled to the retain such number of shares
remaining subject to the Purchase Option that together with the Owned Shares and
the Sold Shares, each defined below, would have an Equity Value of $1,000,000,
and the Company will repurchase the balance of the Shares in full settlement of
the Note.
(ii) If the Equity Value is less than $1,000,000 as of
the Termination Date, the Company may delay the Measurement Date for satisfying
this requirement to any date it may fix on not less than ten (10) days written
notice on or before the fifth anniversary of the commencement of Employee's
employment. During such period, the Employee shall report to the Company any
shares that he sells and the proceeds received for them. In the event that, as a
result, (1) the Measurement Date is after the Company's exercise of its Purchase
Option and (2) the Equity Value as of such date is less than $1,000,000, the
Company shall, in its sole discretion and in full satisfaction of the Note,
either (a) issue to the Employee the lesser of (i) a number of shares having a
Fair Market Value equal to the difference or (ii) the number of shares
repurchased by the Company under the Purchase Option or (b) deliver to the
Employee cash for the amount of such difference.
(iii) If the Equity Value is greater than $1,000,000 as of
the Termination Date, the Employee will surrender the Shares subject to the
Purchase Option in full satisfaction of the Note.
(iv) The Company shall select a date on which the Equity
Value of the Shares shall be determined, as set forth in this Section 4 (such
date, the "Measurement Date"). The Company may not select a Measurement Date
that is a date that is prior to the earlier of (A) the minimum holding period
requirement for the Shares as set forth in Rule 144 of the Securities Act, as
defined below (one year, effective April 29, 1997) or (B) the date on which a
registration statement filed with the Securities and Exchange Commission is
declared effective covering such number of Shares to which the Purchase Option
no longer applies.
(v) The "Equity Value" will be determined by (a)
multiplying the closing price of the Common Stock on the Nasdaq National Market
(or any other market on which the shares trade) on the Measurement Date, or if
the Measurement Date is not a date on which the Nasdaq National Market is open,
the next such date (the "Fair Market Value"), by the number of shares of Common
Stock (i) held by the Employee and not subject to the Purchase
-3-
<PAGE>
Option or (ii) issuable to the Employee upon exercise of vested options as of
the Measurement Date (all of such shares and options collectively, the "Owned
Shares") and (b) adding the product to the sum of the proceeds received by the
Employee from sales of shares of Common Stock (whether purchased directly or
upon the exercise of options) from the Commencement Date through the Measurement
Date (the "Sold Shares") and (c) subtracting cash amounts actually paid for
shares acquired upon exercise of options or required to be paid for the exercise
of vested unexercised options.
(b) If the Employee is terminated for cause, as defined in
Section 4.2 of the Employment Agreement, the Note plus accrued interest will be
immediately due and payable. The Employee's obligation to repay the outstanding
balance will be limited to the lesser of (i) the Option Price for the shares no
longer subject to the Purchase Option, or (ii) the Fair Market Value at the time
of termination of the Shares no longer subject to the Purchase Option that the
Employee still holds plus the proceeds of any Sold Shares.
(c) Should the Employee resign from the Company without good
reason, as defined in the Employment Agreement, prior to the first anniversary
of the Effective Date, the Employee shall pay to the Company any remaining
obligation under the Note should the Fair Market Value of the Shares remaining
subject to the Purchase Option be less than the principal balance of the Note
plus accrued interest, provided, however that the Employee's repayment
obligation shall not exceed the Fair Market Value of 10,000 shares of Common
Stock as of the date of the Employee's resignation without good reason. If the
Employee resigns without good reason after the first anniversary of the
Effective Date, the Shares remaining subject to the Purchase Option shall
satisfy the Employee's repayment obligations under the Note.
(d) If the Employee is terminated without cause or leaves with
good reason following a change of control of the Company, as defined below, or
if, following a change of control of the Company that is not approved by the
Board of Directors of the Company, the Employee either resigns with or without
good reason or is terminated without cause, no Shares shall remain subject to
the Purchase Option, and any outstanding amounts under the Note will be
forgiven. A "change of control" shall be deemed to occur upon the first of the
following events:
(i) any person becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding voting securities and
such person has the ability to elect a majority of the members of the Company's
Board of Directors, if such ownership is not in place on the date of grant;
(ii) any person becomes the beneficial owner, directly or
indirectly, of securities of the Company sufficient to elect a majority of the
members of the Board of Directors of the Company, provided that the Employee's
responsibilities as an executive of the Company are materially adversely
diminished by such change in control; or
(iii) the sale of all or substantially all the assets of
the Company, or a merger, consolidation, or similar transaction of the Company
in which the Company is not the
-4-
<PAGE>
surviving entity or in which the Company's stockholders immediately prior to
such transaction hold less than 50% of the voting securities of the surviving
entity.
A "change in control" shall not include either of the
following events:
(i) a transaction, the sole purpose of which is to
change the state of the Company's incorporation; or
(ii) a transaction, the result of which is to sell all or
substantially all of the assets of the Company to another entity (the "surviving
entity"); provided that the surviving entity is owned directly or indirectly by
the Company's stockholders immediately following such transaction in
substantially the same proportions as their ownership of the Company's voting
capital stock immediately preceding such transaction.
(e) In addition, if the Omnipoint Technology Division ("OT")
is sold and following such sale the Employee remains an employee of OT at the
request of the Company, then no Shares shall remain subject to the Purchase
Option, and any outstanding amounts under the Note will be forgiven.
(f) At the fifth anniversary, upon the Employee's receipt of
the Special Bonus, as defined in the Employment Agreement, if the Employee is
unable to sell Shares to pay federal and state income taxes on compensation
arising due to the Special Bonuses due to limitations imposed under the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended, if any, the Company shall make reasonable
efforts to secure a loan for the Employee to pay such taxes.
5. Restrictions on Transfer.
------------------------
(a) The Employee shall not sell, assign, pledge or otherwise
transfer (collectively, "transfer") the Shares or any right or interest therein,
whether voluntarily or by operation of law, or by gift or otherwise, unless the
Purchase Option has expired with respect to the Shares to be so transferred.
(b) The Company shall not be required:
(i) to transfer on its books any of the shares which
shall have been sold or transferred in violation of any of the provisions set
forth in this Agreement; or
(ii) to treat as owner of such Shares or to pay dividends
to any transferee to whom any such Shares shall have been so sold or
transferred.
(c) All certificates representing Shares shall have affixed
thereto legends in substantially the following form, in addition to any other
legend that may be required under federal or state securities laws:
-5-
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
sold, transferred or otherwise disposed of in the absence of an
effective registration statement under such Act or an opinion of
counsel satisfactory to the corporation to the effect that such
registration is not required."
The Company shall remove the foregoing legend following the
satisfaction of the registration requirements under the Securities Act or until
such time as the Employee may sell the Shares pursuant to Rule 144(k) of the
Securities Act without restriction.
In addition, 40,000 of the shares shall have affixed thereto
legends in substantially the following form:
"The shares of stock represented by this certificate are
subject to restrictions on transfer set forth in a certain Stock
Restriction Agreement between the corporation and the registered owner
of this certificate (or his or her predecessor in interest), and such
Agreement is available for inspection without charge at the office of
the Treasurer of the corporation."
The Company shall remove this legend upon the expiration of
the Purchase Option with respect to the Shares.
6. Investment Representations. The Employee represents,
--------------------------
warrants and covenants as follows:
(a) The Employee is purchasing the Shares for his own account
for investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had such opportunity as he has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit him to evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Shares and to make an informed investment decision with respect to such
purchase.
(d) He can afford a complete loss of the value of the Shares
and is able to bear the economic risk of holding such Shares for an indefinite
period.
(e) He understands that:
-6-
<PAGE>
(i) the Shares have not been registered under the Securities
Act and are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) the Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities Act or
an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule
144 will not be available for at least one year (effective April 29, 1997) and
even then will not be available unless a public market then exists for the
Common Stock, adequate information concerning the Company is then available to
the public, and other terms and conditions of Rule 144 are complied with; and
(iv) there is now no registration statement on file with the
Securities and Exchange Commission with respect to the Shares and although the
Company has no obligation or current intention to register the Shares under the
Securities Act, the Company may choose to register the Shares in the future.
7. Adjustments for Stock Splits, Stock Dividends, etc.
---------------------------------------------------
(a) If from time to time during the term of this Agreement
there is any stock split-up, stock dividend, stock distribution or other
reclassification of the Common Stock of the Company, any and all new,
substituted or additional securities to which the Employee is entitled by reason
of his ownership of the Shares shall be immediately subject to the Purchase
Option granted to the Company pursuant to Section 2 hereof, the restrictions on
transfer and other provisions of this Agreement in the same manner and to the
same extent as the Shares.
(b) If the Shares are converted into or exchanged for, or
stockholders of the Company receive by reason of any distribution in total or
partial liquidation, securities of another corporation, or other property
(including cash), pursuant to any merger of the Company or acquisition of its
assets, then the rights of the Company under this Agreement shall inure to the
benefit of the Company's successor and this Agreement shall apply to the
securities or other property received upon such conversion, exchange or
distribution in the same manner and to the same extent as the Shares.
8. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
9. Waiver. Any provision contained in this Agreement may be
------
waived, either generally or in any particular instance, by the Board of
Directors of the Company.
10. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the Company and the Employee and their respective heirs,
executors, administrators,
-7-
<PAGE>
legal representatives, successors and assigns, subject to the restrictions on
transfer set forth in Section 4 of this Agreement.
11. No Rights To Employment. Nothing contained in this
-----------------------
Agreement shall be construed as giving the Employee any right to be retained, in
any position, as an employee of the Company.
12. Notice. All notices required or permitted hereunder
------
shall be in writing and deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party hereto at the address shown
beneath his or its respective signature to this Agreement, or at such other
address or addresses as either party shall designate to the other in accordance
with this Section 11.
13. Pronouns. Whenever the context may require, any pronouns
--------
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
14. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties, and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement.
15. Amendment. This Agreement may be amended or modified
---------
only by a written instrument executed by both the Company and the Employee.
16. Governing Law. This Agreement shall be construed,
-------------
interpreted and enforced in accordance with the laws of the State of Delaware.
17. Confidentiality. The Employee agrees to keep all terms
---------------
of this Agreement confidential unless otherwise agreed to by the Company.
[Signatures on next page]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
THE COMPANY:
OMNIPOINT CORPORATION
By: /s/ Douglas G. Smith
----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
EMPLOYEE
/s/ Kjell S. Andersson
-------------------------------------------
Kjell S. Andersson
Address:
-----------------------------------
-------------------------------------------
-9-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
This AMENDED AND RESTATED LOAN AGREEMENT is made as of the 7th day of
August, 1996, by and among (a) OMNIPOINT COMMUNICATIONS INC. (the "Borrower"), a
Delaware corporation having its principal place of business at 2000 North 14th
Street, Suite 550, Arlington, Virginia 22201, (b) NORTHERN TELECOM INC., a
Delaware corporation having a principal place of business at 200 Athens Way,
Nashville, Tennessee 37228 as administrative agent for itself and the other
Lenders party hereto and (c) the Lenders. This Amended and Restated Loan
Agreement amends and restates the original Loan Agreement between Borrower and
Northern Telecom Inc. dated as of July 21, 1995 in its entirety.
(S)I. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
(S)A. DEFINITIONS.
-----------
The following terms shall have the meanings set forth in this (S)1 or
elsewhere in the provisions of this Loan Agreement referred to below:
Accounts. As defined in the Borrower Security Agreement.
--------
Accounts Receivable. As defined in the Borrower Security Agreement.
-------------------
Additional Commitments. (1) Loan Commitments, (2) Equity Commitments, (3)
----------------------
Borrower's Working Capital; (4) the then undrawn amount of any loan from an AC
Lender pursuant to loan documentation that is finalized and in place; and (5)
the then undrawn amount of any equity line from an AC Equity Investor pursuant
to equity investment agreements that are finalized and in place. The aggregate
of items (1) through (5) (after eliminating any duplication among such items)
shall be in an amount that will be sufficient to cover (a) all operational cash
requirements of Borrower shown as "cash from operations before cap/ex financing"
on the Approved Full-Term Operating Business Plan, including, without limitation
all interest payable to the FCC with respect to the License for the New York PCS
Network for the period commencing on the measuring date in question (as
specified in (S)7.12 hereof) and continuing until Borrower's EBTDA is positive
(as shown on such Approved Full-Term Operating Business Plan), and (b) all
principal payments on the Indebtedness to the FCC for the purchase price for the
License for the New York PCS Network, provided that with respect to the
--------
principal due to the FCC on account of the purchase price for the New York PCS
Network License, the operational cash requirements shall only include all
principal due to the FCC on the New York PCS Network License for the twelve (12)
months succeeding such measuring date.
1
<PAGE>
Adjusted Borrower's Equity. For any period, the sum of (i) Borrower's
--------------------------
Equity and (to the extent not otherwise included), (ii) Subordinated Debt and
(iii) $95,194,000 (representing the difference between the price paid for a so-
called "B Band" PCS License for the New York MTA ($442,712,00) and Borrower's
cost of the License for the New York MTA ($347,518,000), less the cumulative
amount of retained earnings (or deficit) of Borrower as determined in accordance
with GAAP.
Adjusted EBITDA. For any period the sum of (i) EBITDA and (ii) Contributed
---------------
Capital infused into Borrower in the current calendar quarter.
Adjusted Indebtedness. For any period, Borrower's Indebtedness less
---------------------
Subordinated Debt owing to Parent or Grand Parent or any other Affiliate.
Adjusted Total Debt. Borrower's Indebtedness less Subordinated Debt.
-------------------
Adjusted Working Capital. The difference from year to year between
------------------------
Borrower's "current assets" and "current liabilities" as shown on the audited
balance sheet of Borrower (delivered pursuant to (S)7.18D); provided that in
calculating Adjusted Working Capital hereunder the following shall be excluded:
(i) all receivables outstanding more than 60 days past invoice date; (ii) all
inventories that otherwise would be included as current assets under such
balance sheet; and (iii) the current portion of long-term debt, in each case
consistently applied.
Administrative Agent. Northern Telecom Inc. and each successor
--------------------
Administrative Agent appointed pursuant to (S)13.9 hereof.
Administrative Agent's Office. The Administrative Agent's office set forth
-----------------------------
in the preamble hereof and upon the appointment of a successor Administrative
Agent pursuant to (S)13.9 hereof such address as shall be provided by such
successor Administrative Agent.
Administrative Agent's Special Counsel. Hale and Dorr.
--------------------------------------
Affiliate. As to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with
such person. For purposes of this definition, control of a Person shall include
the power, direct or indirect, (i) to vote 50% or more of the securities or
other interests having ordinary voting power for the election of directors or
other managing Persons of such Person or (ii) to direct or cause direction of
the management and policies of such Person whether by contract or otherwise.
Applicable Commitment. Each Lender's commitment to make Tranche A Loans,
---------------------
Tranche B Loans and Tranche C Loans.
2
<PAGE>
Applicable Lending Period. For Tranche A Loans and Tranche B Loans, the
-------------------------
period beginning with the Closing Date and ending on the Tranche A and B
Commitment Termination Date (inclusive), and for Tranche C Loans, the period
beginning with the Closing Date and ending on the Tranche C Final Repayment
Date.
Applicable Margin. For LIBOR Rate Tranche A Loans, * per annum; for
-----------------
LIBOR Rate Tranche B Loans and LIBOR Rate Tranche C Loans, * per annum.
Approved Annual Operating Business Plan. See (S)7.18B.
---------------------------------------
Approved Full Term Operating Business Plan. See (S)7.18A.
------------------------------------------
Assignment and Acceptance. See (S)17.1.
-------------------------
Assignment and Acceptance Agreement. An assignment and acceptance
-----------------------------------
agreement executed by an assignor and an assignee pursuant to which the
assignor, subject to and in accordance with the terms hereof, assigns to
assignee all or any portion of such assignor's Notes and Commitments,
substantially in the form of Exhibit D.
------- -
BTA. The unit of division (of which there are 493) for the United States
---
of America, devised by Rand McNally based upon geography, population and other
factors, which units form the basis for the auction of PCS Licenses by the FCC.
Balance Sheet Date. December 31, 1995.
------------------
Base LIBOR Rate. For any Interest Period, the rate which appears on Page
---------------
3750 of the Dow Jones & Company Telerate screen or any successor page as the
composite offered rate for London interbank deposits in an amount approximately
equal to the amount of the requested Loan for a three-month period, as shown
under the heading "USD" as of 11:00 a.m. (London time), two (2) LIBOR Business
Days before the first day of such Interest Period provided, that, in the event
--------
no such rate is available, the rate shall be the rate per annum equal to the
arithmetic mean of the rates shown on the LIBO page of Reuters Money Service at
approximately 11:00 a.m. (London time) as of such day in an amount
approximately equal to the amount of the requested Loan as of the first day of
the relevant Interest Period.
Base Rate. For Tranche A Loans for the applicable Interest Period, the per
---------
annum rate equal to the sum of (i) the Prime Rate in effect on the first
Business Day of the applicable Interest Period and (ii) * .
For Tranche B and C Loans for the applicable Interest Period, the per annum
rate equal to the sum of (i) the Prime Rate in effect on the first Business Day
of the applicable Interest Period and (ii) * %.
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
3
<PAGE>
For all Base Rate Loans, the Base Rate, once determined, shall remain
unchanged during the applicable Interest Period.
Base Rate Loans. Loans bearing interest calculated by reference to the
---------------
Base Rate.
Borrower. As defined in the preamble hereto.
--------
Borrower Security Agreement. That certain Amended and Restated Borrower
---------------------------
Security Agreement in substantially the form of Exhibit E attached hereto, among
---------
Borrower, the Collateral Agent, the Nortel Administrative Agent and the Ericsson
Administrative Agent of even date, as may be amended, restated, modified or
supplemented and in effect from time to time.
Borrower's Equity. The amount of shareholder equity shown on Borrower's
-----------------
balance sheet prepared in accordance with GAAP.
Borrower's Obligations. All indebtedness, obligations and liabilities of
----------------------
Borrower to the Administrative Agent and the Lenders, arising or incurred under
this Loan Agreement or any of the other Loan Documents or in respect of any of
the Loans made or any of the Notes or other instruments at any time evidencing
any thereof, existing on the date of this Loan Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.
Breakage Costs. Any loss, cost or expense (including loss of anticipated
--------------
profit) that any Lender or the Administrative Agent may sustain or incur as a
consequence of (a) a default by Borrower in payment of the principal amount of
or any interest on any LIBOR Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Lender or
the Administrative Agent to lenders of funds obtained by it in order to make its
LIBOR Rate Loans or (b) the making of any payment of a LIBOR Rate Loan on a day
that is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Lender or the Administrative Agent to
lenders of funds obtained by it in order to maintain any such Loans.
Business Day. Any day other than a Saturday, a Sunday or a day on which
------------
commercial banks located in New York City are authorized or required by law or
other governmental action to close.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible
4
<PAGE>
(such as patents, copyrights, trademarks, franchises, Licenses and good will);
provided that Capital Assets shall not include any item customarily charged
- --------
directly to expense or any item the entire useful life of which is depreciated
over a period of twelve (12) months or less in accordance with generally
accepted accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by Borrower in
--------------------
connection with the purchase or lease by Borrower of Capital Assets that would
be required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles.
Capitalized Leases. Leases under which Borrower is the lessee or obligor,
------------------
the discounted future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance with
generally accepted accounting principles.
Cash. For any period, the sum of (i) Borrower's cash, (ii) Borrower's
----
Investments to the extent they are permitted by (S)8.4 (b) through (e) below,
(iii) Loan Commitments, the proceeds of which are available to be used for
general business purposes of Borrower including the payment of interest owed
with respect to Indebtedness permitted by Section 8.1., (iv) the portion of the
Tranche C Commitment then remaining undrawn, (v) Equity Commitments and (vi)
until June 30, 1998, the greater of (a) zero and (b)(1) the lesser of
$25,000,000 and the then remaining undrawn amount of the Tranche A Advance
Commitments (as defined in the Ericsson Loan Agreement) minus (2) the aggregate
amount of interest accrued on advances (whether or not paid) under the Ericsson
Loan Agreement.
Change in Control. The acquisition by any Person, or two or more Persons
-----------------
acting in concert (a "group"), of beneficial ownership (within the meaning of
-----
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 50% or more of the outstanding shares of Voting Stock
of Borrower, provided, however, that if a change of ownership which would
--------
otherwise constitute a Change in Control results from a publicly underwritten
offering of Borrower's, securities and the proceeds of such public offering are
used to create a reserve sufficient in amount to pay all Indebtedness owing with
respect to Borrower's FCC Licenses and other Capital Expenditures (other than
Capital Expenditures financed by this Loan Agreement) for the amortization
period of the FCC Licenses, then such change of ownership shall not by itself
constitute a Change in Control.
Closing Date. The first date on which the conditions set forth in (S)9
------------
have been satisfied or waived through written acknowledgment of Administrative
Agent.
Collateral. All of the property, rights and interests of
----------
5
<PAGE>
Borrower and Parent that are or are intended to be subject to the security
interests created by the Borrower Security Agreement and the Pledge Agreement.
Collateral Agent. Mellon Bank, N.A. or any successor thereto appointed
----------------
pursuant to (S)6.5 of the Intercreditor Agreement.
Collateral Documents. The Borrower Security Agreement and the Pledge
--------------------
Agreement.
Commitment. The obligation of the Lenders to make Loans to Borrower,
----------
subject to the terms and conditions hereof, in an aggregate outstanding
principal amount not exceeding $382,500,000.
Commitment Percentage. The percentages in which the Lenders are bound to
---------------------
make Loans to the Borrower under the Commitment. Prior to the occurrence of an
Assignment and Acceptance of any portion of NTI's Commitment, NTI's Commitment
Percentage shall be 100%.
Communications Act. The Communications Act of 1934, as amended, and the
------------------
rules and regulations issued thereunder, as from time to time in effect.
Compliance Certificate. As defined in (S)7.18E and in substantially the
----------------------
form set forth in Exhibit C attached hereto.
---------
Contingent Obligation. As to any Person, any obligation of such Person
---------------------
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner, whether directly or indirectly, including, without
- -------
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain net worth,
solvency or other financial statement condition of the primary obligor, (c) to
purchase Property, securities or services primarily for the purpose of assuring
the beneficiary or holder of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise to
assure, protect from loss, or hold harmless the beneficiary or holder of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include the indorsement of instruments for
deposit or collection in the ordinary course of business. The term Contingent
Obligation shall also include the liability of a general partner in respect of
the recourse liabilities of the partnership in which it is a general partner.
The amount of any Contingent Obligation of a Person shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such
6
<PAGE>
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith.
Contributed Capital. The sum of (i) proceeds from the sale of Borrower's
-------------------
equity securities received during the applicable period, plus (ii) Subordinated
Debt incurred by Borrower during the applicable period and interest which has
accrued thereon and which remains unpaid.
Debt Service. For any period, the aggregate amount of interest and
------------
principal required to be paid by Borrower during such period on all Indebtedness
of Borrower outstanding during all or any part of such period (excluding (a) the
amount of any Net Funds Payment required to be paid during such period pursuant
to (S)3.2.B hereof, (b) the amount of any prepayment required to be paid during
such period pursuant to (S)3.C hereof or (S)3.02(a) or (b) of the Ericsson Loan
Agreement and (c) interest capitalized under loans where such loans provide for
the funding of interest costs), whether such interest and principal was or is
required to be reflected as an item of expense or capitalized, including
scheduled payments in respect of Capitalized Leases and including commitment
fees, agency fees, facility fees, origination fees, balance deficiency fees and
similar fees or expenses in connection with Indebtedness.
Default. Any of the events or circumstances specified in (S)11.1, whether
-------
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
Distribution. The declaration or payment of any cash dividend, dividend in
------------
kind or cash equity distributions on or in respect of any shares of any class of
capital Stock of Borrower, other than dividends payable solely in shares of
common Stock of Borrower; the purchase, redemption, or other retirement of any
shares of any class of capital Stock of Borrower; the return of capital by
Borrower to its shareholders as such; or any other distribution on or in respect
of any shares of any class of capital Stock of Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
------------
Domestic Lending Office. In respect of any Lender, initially, the office
-----------------------
or offices of such Lender in the United States designated as such on Schedule
--------
1.1; or thereafter, such other office, if any, of such Lender through which it
- ---
shall be making or maintaining Base Rate Loans, as reported by such Lender in
the United States to the Administrative Agent and the Borrower.
Draw Request. See (S)2.8.
------------
Drawdown Date. The date on which any Loan is made or is
-------------
7
<PAGE>
to be made. Notwithstanding the foregoing, if the applicable Drawdown Date would
occur on a day which is not a Business Day, the Drawdown Date shall be the next
Business Day.
Drawdown Report and Certificate. A report signed by the Borrower's Chief
-------------------------------
Financial Officer or other authorized officer of the Borrower and submitted to
Administrative Agent with each Tranche B Draw Request certifying that the
proceeds of the prior month's Tranche B Loans were used to pay those Tranche B
Eligible Expenses for which such Tranche B Loans were requested (except to the
extent that Borrower disputes in good faith its obligation to pay a Tranche B
Eligible Expense), a list of all Tranche B Eligible Expense payments made,
showing the identity of the Person paid, the amount and the reasons for such
payment, a list of all Persons who were scheduled to be paid or who were paid
$100,000 or more during the prior month together with satisfactory evidence of
payment, and a list of all Tranche B Eligible Expenses which are in dispute;
provided that if Borrower asserts that it is barred from providing certain of
the supporting documentation required hereunder by reason of a confidentiality
agreement with any vendor, Borrower shall be required, as a condition of
receiving the payment therefor, to provide Administrative Agent with (a) a copy
of the confidentiality agreement in question (b) a description of the particular
items associated with such vendor, and (c) such other information as
Administrative Agent reasonably believes is necessary (consistent with the
confidentiality agreement) to substantiate the applicable Tranche B Eligible
Expenses.
EBITDA. For any period, Net Income (or loss) of the Borrower for such
------
period plus, to the extent deducted or accrued in determining Net Income, the
sum of each of the following for such period: (i) depreciation, amortization
and other non-cash charges; (ii) income tax expense; and (iii) Total Interest
Expense.
EBTDA. For any period, Net Income (or loss) of the Borrower for such
-----
period plus, to the extent deducted or accrued in determining Net Income, the
sum of each of the following for such period: (i) depreciation, amortization
and other non-cash charges; (ii) income tax expense; and (iii) cash interest not
being paid as an express feature of the related debt instrument.
Eligible Assignee. See (S)17.1.
-----------------
Employee Benefit Plan. Any employee benefit plan within the meaning of
---------------------
(S)3(3) of ERISA maintained or contributed to by any of Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. Any federal, state or local law, statute, rule or
------------------
regulation or the common law relating to the environment or occupational health
and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
8
<PAGE>
industrial, toxic or hazardous substances or solid or hazardous waste; (ii) air,
water or noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wildlife, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed receptacles; (vii)
health and safety of employees and other persons; and (viii) manufacture,
processing, use, distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or oil or petroleum products or solid or hazardous waste,
including, without limitation, (a) the Comprehensive Environmental Response.
Compensation and Liability Act, as amended, 42 USCA (S)9601 et seq. ("CERCLA");
------ ------
(b) the Resource Conservation and Recovery Act of 1976, as amended, 42 USCA
(S)6901 et. seq. ("RCRA"); (c) the Toxic Substance Control Act, as amended, 15
-------
USCA (S)2601 et seq.; (d) the Water Pollution Control Act, as amended, 33 USCA
------
(S)1251 et seq.; (e) the Clean Air Act, as amended 42 USCA (S)7401 et seq.; (f)
------
the Hazardous Material Transportation Act, as amended, 49 USCA (S)1801 et seq.
------
(g) the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), and (h)
all rules, regulations judgments decrees injunctions and restrictions thereunder
and any analogous state law. As used above, the terms "release," "threatened
release," "hazardous substance" and "environment" shall have the meaning set
forth in CERCLA, and the terms "solid waste" and "dispose" (or "disposal") shall
have the meaning set forth in the RCRA.
Environmental Permits. See (S)6.25(d).
---------------------
Equipment. As defined in the Borrower Security Agreement.
---------
Equity Commitment. Binding written commitment(s) (not in default) for the
-----------------
making of a cash equity investment in Borrower from a Person or entity (the "AC
Equity Investor") which (I) in the sole judgment of the Required Lenders has the
financial resources and capability of performing the commitment and making the
equity investment or (II) is from Parent or Grand Parent if and to the extent
such Person is holding cash, securities for which there is a readily available
market on established stock exchanges including over-the- counter exchanges or
other permitted Investments under (S)8.4(b) through (e) equal to or in excess of
the amount of the Equity Commitment in question (and which equity investment is
to be made in the form of Subordinated Debt or equity), which equity commitment
(w) is complete, with all schedules, (x) is in the form customarily utilized by
institutional venture capital firms for binding written commitments that have
passed all internal credit reviews, (y) has been fully executed by the AC Equity
investor and
9
<PAGE>
Borrower and (z) makes the AC Equity Investor's obligation to make the equity
investment subject only to (i) credit verification of the Borrower showing no
material adverse change in the financial condition of Borrower since the date of
the credit review (on which the equity commitment was predicated) and (ii)
completion and delivery of documentation and other documents, certificates and
opinions customarily required by institutional equity investors satisfactory to
AC Equity Investor's counsel.
Ericsson Loan Agreement. The Loan Agreement dated as of August 7, 1996
-----------------------
among the Borrower, Ericsson, Inc., as Administrative Agent and the lenders
parties thereto, as the same may be amended from time to time in compliance with
the Intercreditor Agreement.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
-----
from time to time, and the rules and regulations issued thereunder as from time
to time in effect.
ERISA Affiliate. Any Person which is treated as a single employer with
---------------
Borrower under (S)414 of the IRC.
ERISA Event. With respect to Borrower or any ERISA Affiliate, (a) a
-----------
Reportable Event, (b) the withdrawal of Borrower or any ERISA Affiliate from a
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001 (a)(2) of ERISA, (c) the filing of a notice of intent to terminate
a Plan for a distress termination of the Plan under (S)4041(c) of ERISA, or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d)
the institution of proceedings to terminate a Plan by the PBGC under Section
4042 of ERISA, or (e) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan or to cause the
imposition of any liability (other than PBGC premiums due but not delinquent
under Section 4007 of ERISA) in excess of $250,000 under Title IV of ERISA.
Event of Default. Any of the events specified in (S)11.1, provided,
----------------
however, that any requirement for the giving of notice, or the lapse of time, or
both, or any other condition, event or act has been satisfied.
Excess Amount. See (S)7.6.
-------------
Expense Allocation Agreement. That certain Expense Allocation Agreement
----------------------------
among Borrower, Parent and Grand Parent dated as of July 21, 1995, which
provides for the allocation of expenses and overhead among Borrower, Parent,
Grand Parent and their Affiliates satisfactory to Administrative Agent and the
Required Lenders (as may be amended from time to time, but only if approved by
the Administrative Agent and the Required Lenders).
10
<PAGE>
FCC. The Federal Communications Commission or any Governmental Body
---
succeeding to the functions thereof.
Full Term Operating Business Plan. See (S)7.18A.
---------------------------------
GAAP or generally accepted accounting principles. Whether directly or
------------------------------------------------
indirectly through reference to a capitalized term used therein, means (i)
principles that are consistent with the principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors, in effect for the
fiscal year ended on the Balance Sheet Date, and (ii) to the extent consistent
with such principles, the accounting practice of Borrower reflected in its
financial statements for the year ended on the Balance Sheet Date, provided that
--------
if such Board after the date hereof shall promulgate or adopt accounting
principles that materially differ over the term of this Loan Agreement from
those in effect on the Balance Sheet Date, Borrower and the Administrative Agent
will endeavor in good faith to amend (i) the definition of GAAP to include such
different principles and (ii) the covenants contained in (S)7.19 hereof in order
to reflect in substance the same limitations and restrictions as in effect prior
to such amendment to the definition of GAAP, it being understood that until the
Administrative Agent and Borrower shall reach agreements on such new covenants,
the covenants contained in (S)7.19 hereof continue to be effective, and (b) when
used in general, other than as provided above, means principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (ii) consistently applied with past financial statements of Borrower
adopting the same principles, provided that in each case referred to in this
--------
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles are presented fairly in all material
respects in conformity with such principles applied on a consistent basis.
General Intangibles. As defined in the Borrower Security Agreement.
-------------------
Governmental Body. Any nation or government, any state or other political
-----------------
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
court or arbitrator.
Grand Parent. Omnipoint Corporation, a Delaware corporation.
------------
Grants of Security Interests. As defined in the Borrower Security
----------------------------
Agreement.
11
<PAGE>
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(3) of ERISA maintained or contributed to by any of Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guaranty Agreement. That certain Limited Recourse Guaranty Agreement of
------------------
even date, substantially in the form attached hereto as Exhibit F-1 executed by
Parent in favor of the Administrative Agent and Lenders as the same may be
amended, restated, modified or supplemented in accordance with the Loan
Documents and in effect from time to time.
Highest Lawful Rate. As to any Lender the maximum rate of interest, if
-------------------
any, that at any time or from time to time may be contracted for, taken, charged
or received by such Lender on the Notes held thereby, as the case may be, or
which may be owing to such Lender pursuant to this Loan Agreement and the other
Loan Documents under the laws applicable to such Lender and this transaction.
IRC. The Internal Revenue Code of 1986, as amended.
---
Indebtedness. As to any Person, at a particular time, all items which
------------
constitute, without duplication, (i) indebtedness for borrowed money or the
deferred purchase price of Property (other than trade payables incurred in the
ordinary course of business), (ii) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (iii) obligations with respect to any
conditional sale or title retention agreement, (iv) indebtedness arising under
acceptance facilities and the amount available to be drawn under all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder to the extent such Person shall not have reimbursed the
issuer in respect of the issuer's payment of such drafts, (v) all liabilities
secured by any Lien on any Property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment thereof (other
than carriers', warehousemen's, mechanics', repairmen's or other like non-
consensual Liens arising in the ordinary course of business), (vi) obligations
under Capitalized Leases, (vii) amounts owed to the FCC on the FCC License for
the New York PCS Network, (viii) all Contingent Obligations and (ix) interest
that is accreted or otherwise accrued and unpaid on Subordinated Debt.
Indebtedness Cap. In the aggregate, at any one time outstanding, One
----------------
Billion Dollars ($1,000,000,000); provided, however, that such amount shall be
(a) decreased to the extent that Borrower sells, in compliance with applicable
law and with all Necessary Authorizations, any portion of the License for the
New York PCS Network and (b) increased if and to the extent Borrower acquires
additional Licenses for other PCS Networks, in each case
12
<PAGE>
with the adjustment (upward or downward) to be calculated on the basis of $37.50
times the total number of persons in the United States population ("POP's") in
the FCC licensed area sold (or acquired) as the case may be and provided further
that no adjustment of the Indebtedness Cap shall be made for actual changes in
the POP's in the absence of any purchase or sale transaction.
Information. Collectively, the information which Borrower or Parent has
-----------
previously provided or caused to be provided to Administrative Agent relating to
Borrower's and Parent's business and operations and other information which is
available generally and of which Administrative Agent is aware relating to
Borrower's and Parent's business and operations.
Insolvent or Insolvency. With respect to any Person on a particular date,
--------- ----------
the condition that on such date, (i) the present fair salable value of the
assets of such Person is less than the amount that will be required to pay the
probable liabilities of such Person as and when they become due including,
without limitation, Contingent Obligations, of such Person, or (ii) such Person
is not generally paying its debts as and when they become due, or (iii) such
Person is engaged in business or a transaction, or is about to engage in
business or a transaction, for which such Person's Property would constitute an
unreasonably small amount of capital. With respect to determining in (i) the
fair salable value of an FCC License during the initial three year period in
which transfers are restricted by the FCC, the effect of such a transfer
restriction shall be ignored.
Intellectual Property. All copyrights, Trademarks, service marks, Patents,
---------------------
trade names and service names, Licenses and the like.
Intercreditor Agreement. See (S)8.2.
-----------------------
Interest Payment Date. The last day of any Interest Period.
---------------------
Interest Period. With respect to each Loan, (a) initially, the period
---------------
commencing on the Drawdown Date of such Loan (inclusive) and ending on the last
day of the sooner of March, June, September or December (inclusive); and (b)
thereafter, each period commencing on the first day after the end of the
immediately preceding Interest Period (inclusive) and ending on the last day of
the sooner of March, June, September or December (inclusive). Interest shall be
due and payable with respect to any Loan as provided in (S)2.6 and other
applicable provisions hereof. Notwithstanding the foregoing:
(A) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest Period
shall end on the immediately preceding LIBOR Business Day (inclusive);
13
<PAGE>
(B) if any Interest Period with respect to a Base Rate Loan would end on a
day that is not a Business Day, that Interest Period shall end on the
immediately preceding Business Day (inclusive); and
(C) with respect to Tranche A Loans or Tranche B Loans, any Interest Period
that would otherwise end after the Tranche A and B Maturity Date shall end on
the Tranche A and B Maturity Date (inclusive); and
(D) with respect to Tranche C Loans, any Interest Period that would
otherwise end after the Tranche C Final Repayment Date shall end on the Tranche
C Final Repayment Date (inclusive).
Interest Rate Election Notice. See (S)2.6A(b).
-----------------------------
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under Contingent
Obligations), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Key Barometers. For any quarterly period, the number of cell sites
--------------
constructed, the total number of customers, the number of new customers
acquired, the number of customers who terminated and the average monthly charges
billed to customers during the applicable quarter.
Lender. NTI and any other Person which becomes a Lender by reason of an
------
Assignment and Acceptance in accordance with the terms of this Loan Agreement
after the Closing Date.
Lenders' Tranche A Commitment. The obligation for the Lenders to make
-----------------------------
Tranche A loans to Borrower, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not exceeding * ; or if such
commitment is terminated pursuant to the provisions hereof, zero.
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
14
<PAGE>
Lenders' Tranche B Commitment. The obligations of the Lenders to make
-----------------------------
Tranche B Loans to Borrower, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not exceeding * or if such
commitment is terminated pursuant to the provisions hereof, zero.
Lenders' Tranche C Commitment. The obligation of the Lenders to make
-----------------------------
Tranche C Loans to Borrower, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not exceeding * ; or if such
commitment is terminated pursuant to the provisions hereof, zero.
LIBOR Business Day. Any day on which commercial banks are open for
------------------
international business (including dealings in Dollar deposits) in London.
LIBOR Lending Office. In respect of any Lender, initially, the office or
--------------------
branch of such Lender designated as such on Schedule 1.1 (or, if no such office
-------- ---
or branch is specified, its Domestic Lending Office); or thereafter, such other
office or branch, if any, of such Lender which shall be making or maintaining
LIBOR Rate Loans, as reported by such Lender to the Administrative Agent and the
Borrower.
LIBOR Rate. For the applicable Interest Period, a simple per annum
----------
interest rate (rounded upward, if necessary, to the nearest one-hundredth
(1/100th) of one percent) equal to the sum of (a) the quotient of (i) the Base
LIBOR Rate divided by (ii) one minus the LIBOR Reserve Rate, stated as a
decimal, plus (b) the Applicable Margin. The LIBOR Rate, once determined, shall
remain unchanged during the applicable Interest Period, except for changes to
reflect adjustments in the LIBOR Reserve Rate.
LIBOR Rate Loans. Loans bearing interest calculated by reference to the
----------------
LIBOR Rate.
LIBOR Reserve Rate. With respect to the Interest Period for any LIBOR Rate
------------------
Loan, the maximum rate (expressed as a decimal) applicable during such Interest
Period at which any Lender subject thereto would be required to maintain
reserves under Regulation D of the Board of Governors of the Federal Reserve
System (or any successor or similar regulations relating to such reserve
requirements) against "Eurocurrency Liabilities" (as that term is used in
Regulation D), if such liabilities were outstanding and having a term equal to
such Interest Period in an amount comparable to the amount of such LIBOR Rate
Loan. The LIBOR Rate shall be adjusted automatically on and as of the effective
date of any change in the LIBOR Reserve Rate.
Licenses. Any mobile telephone, cellular telephone, microwave, paging or
--------
other license, authorization, certificate of compliance, franchise, approval or
permit, whether for the
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
15
<PAGE>
construction or the operation of any PCS System, granted or issued by the FCC
and any other federal Governmental Bodies and held by the Borrower. The initial
list of Licenses of Borrower as of the Closing Date are identified on Schedule
--------
1.2 attached hereto.
- ---
Lien. Any mortgage, pledge, hypothecation, assignment, deposit or
----
preferential arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement and any Capital Lease or other financing lease having substantially
the same economic effect as any of the foregoing.
Loan Agreement. That certain Loan Agreement dated as of July 21, 1995
--------------
among the Borrower, the Administrative Agent and the lenders party thereto, as
amended and restated in its entirety by this Amended and Restated Loan
Agreement, including the Schedules and Exhibits hereto, as the same may be
amended, restated, modified or supplemented and in effect from time to time.
Loan Commitment. Binding written commitment(s) (not in default) for the
---------------
making of a loan (in cash) to Borrower that is Subordinated Debt from a Person
or entity (the "AC Lender") which has, in the sole judgment of the Required
Lenders, the financial resources and capability of performing the commitment and
making the loan, which loan commitment (w) is complete with all schedule(s), (x)
is in the form customarily utilized by institutional lenders for binding written
loan commitments that have received all internal credit approvals, (y) has been
fully executed by the AC Lender and Borrower and (z) makes the AC Lender's
obligation to lend subject only to (i) credit verification of Borrower showing
no material adverse change in the financial condition of Borrower since the date
of the credit review (on which the loan commitment was predicated) and (ii)
completion and delivery of loan documentation and other documents, certificates,
and opinions customarily required by institutional lenders satisfactory to the
AC Lender's counsel.
Loan Documents. This Loan Agreement, the Notes, the Borrower Security
--------------
Agreement, the Pledge Agreement, the Guaranty Agreement, the Subordination
Agreement (Parent), the Subordination Agreement (Grand Parent), the Mortgage,
the Intercreditor Agreement, the Draw Requests, any mortgage or deed of trust
entered into pursuant to (S) 7.20, any option entered into pursuant to (S)
8.2(g)(II) and any other agreements or documents contemplated hereby or thereby
and all schedules, exhibits and annexes thereto.
Loans. Collectively, the Tranche A Loans, the Tranche B Loans and the
-----
Tranche C Loans.
MTA. Any "major trading area" as set forth on the Rand McNally 1992
---
Commercial Atlas & Marketing Guide, 123rd Edition, at pages 38-39 ("BTA/MTA
Map") and utilized by the FCC in dividing the
16
<PAGE>
50 states, the District of Columbia and United States territories into 51 MTAs
for the purpose of licensing PCS Systems.
Material Adverse Effect. An effect resulting from any circumstance or
-----------------------
event of whatever nature (including, without limitation, any adverse
determination in any litigation) which does, or could reasonably be expected to,
materially and adversely (i) impair the validity or enforceability of any of the
Loan Documents, (ii) impair the ability of the Borrower to pay the Borrower's
Obligations in accordance with their terms, (iii) cause a Default, (iv) affect
the business, property, operations, or financial or other condition of Borrower
or Parent, or (v) impair or affect the Collateral or Lender's Liens on the
Collateral or the priority of such Liens.
Material Contract. With respect to any Person, each contract to which such
-----------------
Person is a party involving aggregate consideration payable to or by such Person
of $5,000,000 or more in any 12-month period or otherwise material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
Material Employment Agreements. The material employment and similar
------------------------------
contracts and agreements for the categories of officer and employment
responsibilities set forth on Schedule 1.3 as the same may be amended,
-------- ---
supplemented or otherwise modified from time to time, and any agreements entered
into with successor employees and officers relating to the same categories of
responsibilities.
Materials of Environmental Concern. Any chemicals, pollutants or
----------------------------------
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the RCRA), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Laws.
Maturity Date. For Tranche A and Tranche B Loans, the Tranche A and B
-------------
Maturity Date; for Tranche C Loans, the Tranche C Final Repayment Date.
Mortgage. The Purchase Money Commercial Mortgage and Security Agreement
--------
dated as of November 1, 1995 in favor of Lender, as amended and assigned to the
Collateral Agent by Amendment and Assignment dated August 7, 1996, and as
further amended from time to time in compliance with the Loan Documents.
Multiemployer Plan. A "multiemployer plan" as defined in Sections
------------------
4001(a)(3) and 3(37)(A) of ERISA, and to which Borrower or any ERISA Affiliate
is making, or is obligated to make, contributions or has made, or been obligated
to make, contributions.
NTI. Northern Telecom Inc., a Delaware corporation.
---
17
<PAGE>
Necessary Authorizations. All approvals and licenses from, and all filings
------------------------
and registrations with, any governmental or other regulatory authority,
including, without limitation, the Licenses and all grants, approvals, licenses,
filings and registrations under the Communications Act, necessary in order to
enable Borrower to own, construct, maintain and operate PCS Systems and to make
and hold investments in other Persons who own, construct, maintain and operate
PCS Systems.
Net Cash Proceeds. With respect to any transaction by any Person, the
-----------------
aggregate amount of cash received from time to time by or on behalf of such
Person in connection with such transaction, after deducting therefrom only
(a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finder's fees and other similar fees
and commissions, and
(b) the amount of taxes payable in connection with or as a
result of such transaction,
in each case to the extent, but only to the extent, that the amounts so deducted
are, at the time of receipt of such cash, actually paid to a Person that is not
an Affiliate of the Borrower and are properly attributable to such transaction
or to the asset that is the subject thereof.
Net Funds Amount. With respect to any date of determination, the sum
----------------
of (a) EBTDA for the most recent completed fiscal year of the Borrower preceding
such date of determination (the "Prior Fiscal Year"), plus (b) to the extent
deducted in calculating Net Income for the Prior Fiscal Year, the aggregate
amount of interest payments made by Borrower in respect of Subordinated Debt
owing to Parent or Grand Parent less (without duplication) the following: (i)
taxes actually paid during the Prior Fiscal Year, (ii) Capital Expenditures, net
of proceeds of new financing(s) for all or any portion of such Capital
Expenditures made during the Prior Fiscal Year, (iii) the aggregate amount of
scheduled principal payments required under this Loan Agreement or on
Indebtedness owed to an Other Lender as well as to holders of Indebtedness
allowed under Sections 8.1(c) and (g) during the Prior Fiscal Year, and during
the fiscal year of the Borrower in which such date of determination falls, (iv)
the aggregate amount of mandatory prepayments (other than mandatory prepayments
under (S)3.2C hereunder or (S)3.02(b) of the Ericsson Loan Agreement or an
equivalent mandatory prepayment on Indebtedness owed to an Other Lender) made
under this Loan Agreement, the Ericsson Loan Agreement or on Indebtedness owed
to an Other Lender for the Prior Fiscal Year, (v) Adjusted Working Capital
during the Prior Fiscal Year and (vi) scheduled principal payments actually made
by Borrower with respect to the FCC License for the New York PCS Network.
18
<PAGE>
Net Funds Payment. See (S)3.2.C.
-----------------
Net Income. For any period, net income determined in accordance with
----------
GAAP.
New York PCS Network. A PCS Network in the New York MTA pursuant to
--------------------
an FCC License awarded to Borrower.
Note Record. A Record with respect to a Note.
-----------
Notes. The Tranche A Notes, the Tranche B Notes, and/or the Tranche C
-----
Notes, as the case may be.
Operating Cash Flow. EBITDA after eliminating any extraordinary gains
-------------------
and losses, including gains and losses from the sale of assets not in the
ordinary course of business.
Orbitel. Orbitel Mobile Communications, Ltd.
-------
Origination Fee. $7,500,000.
---------------
Other Lender. See (S)8.2.
------------
Outstanding Amount. With respect to the Loans, the aggregate unpaid
------------------
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of
----
ERISA, or any Governmental Body succeeding to the functions thereof.
PCS. The business of providing mobile communications services through
---
the use of microcells on microwave broadband frequencies with numerous low-power
transmitters, each serving a small area, but excluding cellular telephone
services.
PCS System. A PCS radio telephone system constructed and operated in
----------
a BTA or an MTA (or any successor territorial designation) pursuant to an FCC
License therefor.
Parent. Omnipoint PCS, Inc., a Delaware corporation.
------
Patents. As defined in the Security Agreement.
-------
Payment Date. See (S)3.1A.
------------
Permitted Liens. Liens, security interests and other encumbrances
---------------
permitted by (S)8.2.
Person. Any natural person, corporation, firm, joint venture, limited
------
liability company, partnership, association, enterprise, trust or other entity
or organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
19
<PAGE>
Plan. With respect to Borrower or any ERISA Affiliate, at any time,
----
an employee pension benefit plan as defined in Section 3(2) of ERISA (other than
a Multiemployer Plan) that is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the IRC and is maintained for the
employees of Borrower or any ERISA Affiliate.
Pledge Agreement. That certain Amended and Restated Pledge Agreement
----------------
of even date in substantially the form attached hereto as Exhibit F executed
---------
among Parent, Collateral Agent, the Nortel Administrative Agent and the Ericsson
Administrative Agent, as may be amended, restated, modified or supplemented in
accordance with the Loan Documents and in effect from time to time.
Pledged Collateral. As defined in the Pledge Agreement.
------------------
Pledged Shares. As defined in the Pledge Agreement.
--------------
Prime Rate. The rate of interest quoted at such time by the Toronto-
----------
Dominion Bank, New York Branch as its "base rate" or "prime rate" provided,
--------
that, in the event no such rate is available, the rate shall be the rate of
interest quoted in The Wall Street Journal's "Money Rates" section as the prime
-----------------------
rate. The Prime Rate is not necessarily the lowest rate of interest charged to
borrowers at any applicable time.
Proceeds. As defined in the Borrower Security Agreement and Pledge
--------
Agreement, respectively.
Property. All types of real, personal, tangible, intangible or mixed
--------
property, including, without limitation, all FCC Licenses.
Purchaser. Omnipoint Communications Inc., a Delaware corporation, in
---------
its capacity as a purchaser under the Supply Agreement.
Rate Hedging Agreements. (i) any and all agreements, devices or
-----------------------
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or dollar
protection agreements, forward rate currency or interest rate options, puts and
warrants, and (ii) any and all cancellations, buy backs, reversals, terminations
or assignments of any of the foregoing.
Real Estate. Any parcel of real property or any facility currently
-----------
(or for purposes of compliance with Environmental Laws, formerly) owned,
operated or controlled by the Borrower.
20
<PAGE>
Record. The grid attached to a Note, or the continuation of such
------
grid, or any other similar record, including computer records, maintained by the
Lender with respect to any Loan referred to in such Note.
Register. See (S)17.3.
--------
Reportable Event. Any of the events set forth in Section 4043(b) of
----------------
ERISA or the regulations thereunder.
Required Lenders. (i) unless and until an Assignment and Acceptance
----------------
occurs in accordance with the terms of this Loan Agreement, NTI, and (ii) upon
the occurrence of an Assignment and Acceptance by NTI in accordance with the
terms of this Loan Agreement (a) at any time that there exists no Default
hereunder, Lenders the total of whose portion of the Commitment equals or
exceeds fifty-one percent (51%), or (b) at any time that there exists a Default
hereunder, Lenders the total of whose Loans outstanding equals or exceeds fifty-
one percent (51%) of the total Outstanding Amount of the Loans.
Revenue. For any period, the sum of (a) gross billings to
-------
subscribers, net of taxes and other direct pass-through charges, (b) net revenue
from the sale of equipment, (c) so-called roamer revenue, net of direct pass-
through charges and (d) other revenue of Borrower (in the case of resales net of
associated direct costs), in each case as determined in accordance with GAAP
(less all revenues from Affiliates (except where the Affiliate is acting as a
reseller of goods or services for the Borrower)).
Solvent. With respect to any Person on a particular date, the
-------
condition that on such date, (i) the present fair salable value of the assets of
such Person is greater than the total amount that will be required to pay the
probable liabilities of such Person as and when they become due, including,
without limitation, Contingent Obligations, of such Person, (ii) such Person is
paying, and believes that it will be able to pay in the future, its debts
generally as and when they become due, or (iii) such Person is not engaged in
business or a transaction, or is not about to engage in business or a
transaction, for which such Person's Property would constitute an unreasonably
small amount of capital. With respect to determining in (i), above, the fair
salable value of an FCC License during the initial three year period in which
transfers are restricted by the FCC, the effect of such a transfer restriction
shall be ignored.
Stock. Any and all shares, interests, participations, warrants or
-----
other equivalents (however designated) of corporate stock.
Subordinated Debt. Indebtedness of Borrower the payment of which is
-----------------
subordinated to the prior payment in full in cash of the Loans as to which the
holder thereof has executed a Subordination Agreement.
21
<PAGE>
Subordination Agreement. With respect to any Person that certain
-----------------------
Subordination Agreement in substantially the form attached hereto as Exhibit J.
---------
Subsidiary. As to any Person, any corporation, association,
----------
partnership, joint venture or other business entity of which such Person and/or
any Subsidiary of such Person, directly or indirectly, either (i) in respect of
a corporation, owns or controls more than 50% of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors or similar
managing body, irrespective of whether a class or classes shall or might have
voting power by reason of the happening of any contingency, or (ii) in respect
of an association, partnership, joint venture or other business entity, is
entitled to share in more than 50% of the profits and losses, however
determined.
Supplier. Northern Telecom Inc., a Delaware Corporation, in its
--------
capacity as a supplier under the Supply Agreement.
Supply Agreement. That certain Personal Communications Systems Supply
----------------
Agreement dated September 22, 1994, as amended by Amendment No. 1 dated as of
July 21, 1995, between Borrower and the Supplier and as may be further amended,
restated, modified or supplemented and in effect from time to time.
Total Interest Expense. For any period, the aggregate amount of
----------------------
interest required to be accrued by Borrower during such period on all
Indebtedness of Borrower outstanding during all or any part of such period,
whether such interest was or is required to be reflected as an item of expense
or capitalized, including payments consisting of interest in respect of
Capitalized Leases and including arrangement fees, commitment fees, agency fees,
facility fees, origination fees (provided that, if the origination fees are paid
-------- ----
from the proceeds of financing, such origination fees will be treated as
amortized evenly over the term of the financing and provided further that the
cash origination fees payable pursuant to Section 2.03(a) of the Ericsson Loan
Agreement shall be treated as incurred in the period when such fees are
payable), balance deficiency fees and similar fees or expenses in connection
with the borrowing of money, all as determined in accordance with generally
accepted accounting principles.
Total Lender Commitment. The sum of the Commitments of the Lenders,
-----------------------
as a whole, as in effect from time to time.
Total Loan Commitment. $382,500,000.
---------------------
Trademarks. As defined in the Borrower Security Agreement.
----------
22
<PAGE>
Tranche. Any or all, as applicable, of Tranche A Loans, Tranche B
-------
Loans or Tranche C Loans.
Tranche A and B Commitment Termination Date. The earlier of (a)
-------------------------------------------
December 31, 1999, or (b) the termination of the Tranche A and B Commitments
pursuant to (S) 11.1.
Tranche A and B Maturity Date. The earlier of (a) December 31, 2004,
-----------------------------
and (b) the acceleration of the Loans pursuant to (S) 11.1.
Tranche A Commitment. An amount equal to US * or if such commitment
--------------------
is terminated pursuant to the provisions hereof, zero.
Tranche A Draw Date. See (S)2.8A.
-------------------
Tranche A Draw Request. See (S)2.8A.
----------------------
Tranche A Loans. Loans made under Tranche A.
---------------
Tranche A Notes. The promissory notes of Borrower substantially in
---------------
the form of Exhibit A-1 evidencing the Tranche A Loans.
-----------
Tranche B Advance Schedule. That certain schedule of Tranche B
--------------------------
Eligible Expenses attached hereto as Schedule 2.4 to be updated (with the
-------- ---
approval of the Administrative Agent in its sole and absolute discretion) and
delivered annually to Administrative Agent prior to December 1 of each calendar
year through calendar year 1998. Such schedule shall be made on both a
quarterly and cumulative basis and shall be in reasonable detail. The Tranche B
Advance Schedule may be updated, amended or modified, from time to time, with
the approval of the Administrative Agent in its sole and absolute discretion.
Tranche B Balance Requirement. Effective as of the Tranche C Final
-----------------------------
Repayment Date, the requirement that, as of each June 30 and December 31 through
the Tranche A and B Commitment Termination Date, the Outstanding Amount of
Tranche B Loans not exceed 50% of the sum of Outstanding Amount of Tranche A
Loans plus the amount of unfilled purchase orders under the Supply Agreement.
Tranche B Commitment. An amount equal to the difference between US
--------------------
* and the Outstanding Amount of Tranche C Loans as the same may be reduced from
time to time; or if such commitment is terminated pursuant to the provisions
hereof, zero.
Tranche B Draw Request. See (S)2.8B.
----------------------
Tranche B Eligible Expenses. Expenses incurred by Borrower to pay for
---------------------------
(i) costs incurred in connection with the construction, engineering, design and
site acquisition for the New
- -------------------
* Confidentail information has been omitted and filed separately with the
Commission.
23
<PAGE>
York PCS Network, (ii) the actual costs of physically relocating existing
microwave installations which are incompatible with the New York PCS Network,
(iii) costs incurred to vendors of equipment to build the New York PCS Network
from Persons other than the Supplier, and (iv) on the Tranche C Final Repayment
Date, the Outstanding Amount of Tranche C Loans, in each case with respect to
items (i), (ii) and (iii) above, to the extent and for the amounts provided for
in the Approved Annual Operating Business Plan or the Approved Full Term
Operating Business Plan, (whichever may apply for the applicable period).
Tranche B Loans. Loans made under Tranche B.
---------------
Tranche B Notes. The promissory notes of Borrower substantially in
---------------
the form of Exhibit A-2, evidencing the Tranche B Loans.
-----------
Tranche C Advance Schedule. That certain schedule of Tranche C
--------------------------
Eligible Expenses attached hereto as Schedule 2.5. Such schedule shall be made
-------- ---
on both a quarterly and cumulative basis and shall be in reasonable detail. The
Tranche C Advance Schedule may be amended or modified, from time to time, with
the approval of the Administrative Agent in its sole and absolute discretion.
Tranche C Commitment: An amount equal to US * .
--------------------
Tranche C Draw Request. See (S)2.8C.
----------------------
Tranche C Eligible Expenses. Expenses incurred by Borrower to pay for
---------------------------
(i) interest on the Loans, (ii) those certain pre-closing expenses set forth on
Schedule 1.4, (iii) operating and start-up expenses of Borrower consistent with
- -------------
the Approved Annual Operating Business Plan and relating exclusively to the
operation of the New York PCS Network, (iv) intercompany expenses and overhead
charged to Borrower by Parent or Grand Parent pursuant to the Expense Allocation
Agreement, in each case with respect to items (iii) and (iv) above, to the
extent and for the amounts provided for in the Approved Annual Operating
Business Plan or the Approved Full Term Operating Business Plan, (whichever may
apply for the applicable period).
Tranche C Final Repayment Date. The earlier to occur of (a) June 30,
------------------------------
1997 and (b) the acceleration of the Loans pursuant to (S) 11.1.
Tranche C Loans. Loans made under Tranche C.
---------------
Tranche C Notes. The promissory notes of Borrower, substantially in
---------------
the form of Exhibit A-3, evidencing the Tranche C Loans.
-----------
Type. As to any Loan, its nature as a Base Rate Loan, or a LIBOR Rate
----
Loan.
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
24
<PAGE>
Voting Stock. Stock or similar interests, of any class or classes
------------
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
Working Capital. The difference between Borrower's "current assets"
---------------
and "current liabilities" as certified at each measuring date by the Chief
Financial Officer of Borrower in accordance with GAAP, consistently applied.
(S)B. RULES OF INTERPRETATION.
-----------------------
a. A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Loan Agreement. In accordance
with the foregoing, the parties hereto agree that with respect to Exhibits A-1,
A-2, A-3, B-1, B-2, B-3, C, and D, the forms of those Exhibits as attached to
the original Loan Agreement dated as of July 21, 1995 are incorporated herein by
reference and all references in (x) such Exhibits to the "Loan Agreement" and
(y) the originals of such instruments, shall be deemed to be references to the
Loan Agreement as defined in this Amended and Restated Loan Agreement
b. The singular includes the plural and the plural includes the
singular.
c. A reference to any law includes any amendment or modification to
such law.
d. A reference to any Person includes its permitted successors and
permitted assigns.
e. Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
f. The words "include", "includes" and "including" are not limiting.
g. All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the State of New York, have the meanings
assigned to them therein.
h. Reference to a particular "(S)" refers to that section of this
Loan Agreement unless otherwise indicated.
25
<PAGE>
i. The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Loan Agreement as a whole and not to any particular
section or subdivision of this Loan Agreement.
(S)II. THE LOANS.
---------
(S)A. COMMITMENT TO LEND.
------------------
Subject to the terms and conditions set forth in this Loan Agreement,
the Lender agrees to lend to Borrower from time to time during the Applicable
Lending Period under the terms and conditions set forth herein, such sums as are
requested by Borrower up to a maximum aggregate amount (after giving effect to
all amounts requested) at any one time equal to the Total Loan Commitment and
the Lender's Commitment applicable to each Tranche of Loans. Subject to (S)2.9,
all Loans shall be made pro rata in accordance with each Lender's Commitment
--------
Percentage. Notwithstanding any provision of this Loan Agreement to the
contrary, all Loans and any unpaid Borrower Obligations under or pursuant to the
Loan Documents shall constitute one obligation of Borrower to the Lenders.
(S)B. THE NOTES.
---------
The Loans shall be evidenced by the Notes in substantially the forms
of Exhibits A-1 through A-3 hereto dated as of the Closing Date and completed
------------ ---
with appropriate insertions. One Tranche A Note, Tranche B Note and Tranche C
Note shall be payable to the order of each Lender in a principal amount equal to
such Lender's Applicable Commitment or, if less, the amount of all Outstanding
Tranche A, B or C Loans made by such Lender, plus interest accrued thereon.
Borrower irrevocably authorizes each Lender to make or cause to be made, an
appropriate notation on such Lender's Note Record reflecting the making of Loans
or (as the case may be) the receipt of payments. The amount of the Loans set
forth on such Lender's outstanding Note Record shall be prima facie evidence of
-----------
the principal amount thereof owing and unpaid to such Lender, but the failure to
record, or any error in so recording, any such amount on such Lender's Note
Record shall not limit or otherwise affect the Borrower's Obligations hereunder
or under the Notes to make payments of principal of or interest on the Notes
when due.
(S)C. TRANCHE A LOAN AMOUNTS.
----------------------
Tranche A Loans shall be available solely for the purpose of paying
amounts due to Supplier under the Supply Agreement, including, without
limitation, sales taxes thereon to the extent applicable, and the Origination
Fee. The Outstanding Amount of Tranche A Loans at any one time may not exceed
the Tranche A Commitment. Borrower shall not be entitled to make a Tranche A
borrowing if it has terminated the Supply Agreement for any reason
26
<PAGE>
whatsoever; provided that, Borrower may make a Tranche A borrowing in an amount
-------------
sufficient to cover those purchase orders that are outstanding at the time of
the termination of the Supply Agreement which, but for such termination,
Borrower would be entitled to borrow under this (S)2.3.
(S)D. TRANCHE B LOAN AMOUNTS.
----------------------
Tranche B Loans shall be available solely for the purpose of paying
Tranche B Eligible Expenses. The amount of Tranche B Loans shall not exceed the
Tranche B Commitment. The amount of Tranche B Loans available for borrowing
during any fiscal quarter may not exceed the sum of:
(i) the cumulative amount of Tranche B Eligible Expenses as shown on
the Tranche B Advance Schedule as of the applicable fiscal quarter less the
total amount of all Tranche B Loans previously made for Tranche B Eligible
Expenses; and
(ii) the amount of Tranche B Eligible Expenses budgeted for the next
succeeding fiscal quarter as shown on the Tranche B Advance Schedule.
No Tranche B Loan shall be available if on any June 30 or December 31
after the Tranche C Final Repayment Date, (after giving effect to the requested
Tranche B Loan), Borrower would not be in compliance with the Tranche B Balance
Requirement. The amount of available Tranche B Loans at any time shall be
reduced by an amount equal to Tranche B Eligible Expenses for which a Tranche B
Loan has been made and such an expense has not been paid by Borrower. Upon
payment of such amount to the appropriate Person for such an expense the amount
of Tranche B Loans available for borrowing shall be restored to the amount
otherwise available. Borrower shall not be entitled to make a Tranche B
borrowing if it has terminated the Supply Agreement for any reason whatsoever;
provided that, Borrower may make a Tranche B borrowing in an amount sufficient
- -------- ----
to cover those Tranche B Eligible Expenses reflected in purchase orders that are
outstanding at the time of the termination of the Supply Agreement which, but
for such termination, Borrower would be entitled to borrow under this (S)2.4.
(S)E. TRANCHE C LOAN AMOUNTS.
----------------------
Tranche C Loans shall be available solely for the purpose of paying
Tranche C Eligible Expenses. The amount of Tranche C Loans shall not exceed the
Tranche C Commitment. The amount of Tranche C Loans available for borrowing
during any fiscal quarter may not exceed the sum of:
(a)(i) the cumulative amount of Tranche C Eligible Expenses as shown
on the Tranche C Advance Schedule as of the applicable fiscal quarter less the
total amount of all Tranche C Loans previously made (exclusive of interest on
the Loans) for Tranche C Eligible Expenses; and
27
<PAGE>
(ii) the amount of Tranche C Eligible Expense budgeted for the next
succeeding fiscal quarter as shown on the Tranche C Advance Schedule; and
(b) the amount, if not otherwise paid by Borrower, required to make
interest payments when due under this Loan Agreement.
The amount of available Tranche C Loans at any time shall be reduced
by an amount equal to Tranche C Eligible Expenses for which a Tranche C Loan has
been made and which Tranche C Eligible Expenses have not been paid. Upon
payment of such amount to the appropriate Person for such an expense the
available amount of Tranche C Loans available for borrowing shall be restored to
the amount otherwise available. Borrower shall not be entitled to make a
Tranche C borrowing if it has terminated the Supply Agreement for any reason
whatsoever; provided that, Borrower may make a Tranche C borrowing in an amount
-------- ----
sufficient to cover Tranche C Eligible Expenses that are the subject of binding
commitments to non-affiliates and are outstanding at the time of the termination
of the Supply Agreement which, but for such termination, Borrower would be
entitled to borrow under this (S)2.5.
Notwithstanding the above, Borrower shall not be entitled to make a
Tranche C borrowing unless it has hired permanent employees to fill those job
functions listed on Schedule 7.17 within the time periods set forth thereon.
--------------
(S)F. INTEREST ON LOANS.
-----------------
Except as otherwise provided in (S)4.10, and provided that in no event
shall the interest rate payable in respect hereof exceed the Highest Lawful
Rate:
1. RATE.
-----
a. Initial Interest Period. For all Loans the Drawdown Dates for
-----------------------
which are on or before September 30, 1995, the interest rate for the initial
Interest Period on the Outstanding Amount of such Loans shall be a simple per
annum interest rate equal to the sum of (i) 5.875% per annum, plus (ii) the
Applicable Margin. Interest on all Loans shall be calculated on the basis of a
360-day year and the actual number of days elapsed.
b. Subsequent Interest Periods. For all Interest Periods beginning
---------------------------
after September 30, 1995, at Borrower's election, the interest rate on all
Outstanding Loans shall be the then applicable (i) Base Rate or (ii) LIBOR Rate.
Borrower shall give the Administrative Agent at least three (3) Business Days'
irrevocable notice (each, an "Interest Rate Election Notice") prior to each
Interest Payment Date stating which interest rate it shall elect for the next
Interest Period following such Interest Payment
28
<PAGE>
Date. The type of interest rate elected shall apply to the Outstanding Amount of
all Loans for the term of the applicable Interest Period. For any Interest
Period prior to which Borrower fails to timely submit an Interest Rate Election
Notice to Administrative Agent, the LIBOR Rate in effect two (2) LIBOR Business
Days prior to the beginning of the next Interest Payment Date shall apply in the
next Interest Period. Interest on all Loans shall be calculated on the basis of
a 360-day year and the actual number of days elapsed. Each Base Rate Loan and
LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period (inclusive) with
respect thereto at the rate per annum equal to the Base Rate or LIBOR Rate, as
elected.
2. TIME FOR PAYMENT.
----------------
Interest on the unpaid principal balance of all Loans under all
Tranches shall be due and payable quarterly in arrears on each Interest Payment
Date.
3. MANNER OF PAYMENT.
-----------------
On each Interest Payment Date which occurs prior to the Tranche C
Final Repayment Date, unless otherwise paid by Borrower, the Lenders shall make
a Tranche C Loan for the amount owing for interest on the Outstanding Amount of
Loans, provided, that no Default or Event of Default has occurred and is
--------
continuing. Borrower irrevocably instructs the Administrative Agent to disburse
Tranche C borrowings to pay interest on the Outstanding Amount of Loans directly
to the Lenders. If interest is paid other than by a Tranche C Loan, the payment
shall be made when due in immediately available funds at the office of the
Administrative Agent for the ratable benefit of the Lenders.
4. STATEMENT FROM ADMINISTRATIVE AGENT.
-----------------------------------
Prior to the end of each Interest Period, Administrative Agent will
endeavor to provide a statement to Borrower listing the amount of interest
Administrative Agent estimates Borrower will owe on the Outstanding Amount of
Loans on the upcoming Interest Payment Date. The failure of Administrative
Agent to provide such a statement, or any error made by Administrative Agent on
the statement shall not limit or otherwise affect Borrower's Obligations
hereunder or under the Notes to make payments of interest in the correct amount
as and when due.
(S)G. BORROWINGS AND DRAWDOWN PERIOD.
------------------------------
Each Lender's Commitment to make Loans under the Loan Agreement shall
terminate at the end of the Applicable Lending Period and shall be suspended
during any time that an event or circumstance that constitutes a Default has
occurred and is continuing under the Loan Agreement.
29
<PAGE>
Notwithstanding the foregoing, so long as the Required Lenders agree,
in writing, the Lenders may (a) make Tranche A Loans to pay for equipment, goods
and services under the Supply Agreement and (b) Tranche C Loans to pay accrued
but unpaid interest on the Outstanding Amount of Loans notwithstanding the
occurrence and continuance of an event or circumstance that constitutes a
Default.
If, prior to the end of the Applicable Lending Period, the Borrower
submits a Draw Request for which the applicable Drawdown Date (five Business
Days after the receipt of such request by Administrative Agent) would occur
after the termination of the Applicable Lending Period, the Lenders and the
Administrative Agent will use reasonable commercial efforts to fund the
requested amount prior to the termination of the Applicable Lending Period,
provided that, all other conditions to borrowing have been satisfied. In no
- -------------
event will the Administrative Agent and the Lenders make a Loan or be obligated
to make a Loan after the termination of the Applicable Lending Period.
(S)H. REQUESTS FOR LOANS.
------------------
Promptly upon receipt of any request for a borrowing under any Tranche
in accordance with the terms below (each, a "Draw Request"), the Administrative
Agent shall notify each of the Lenders of the Draw Request and the date that the
Administrative Agent intends to make a Loan pursuant to such Draw Request. Each
Draw Request shall be irrevocable and binding on Borrower, and shall obligate
Borrower to accept the Loan requested from the Lenders on the Drawdown Date.
1. TRANCHE A DRAW REQUESTS.
-----------------------
Each request for borrowings under Tranche A (a "Tranche A Draw
Request") must be received by the Administrative Agent not less than five (5)
Business Days prior to the Drawdown Date requested in the Tranche A Draw
Request. Each Tranche A Draw Request must be signed by an authorized officer of
Borrower and be substantially in the form of Exhibit B-1. Borrowings under
-----------
Tranche A may be made no more frequently than two times per month (each, a
"Tranche A Draw Date"). The amount of each Tranche A borrowing shall equal the
amount then due under the Supply Agreement as of the Tranche A Draw Date.
Notwithstanding anything to the contrary contained herein, nothing
contained herein shall be deemed to alter or affect the rights and obligations
of the Purchaser and Supplier arising under or pursuant to the Supply Agreement.
2. TRANCHE B DRAW REQUESTS.
-----------------------
Each request for borrowings under Tranche B (the
30
<PAGE>
"Tranche B Draw Request") must be received by the Administrative Agent not less
than five (5) Business Days prior to the Drawdown Date requested in the Tranche
B Draw Request. Each Tranche B Draw Request shall be signed by an authorized
officer of Borrower and be substantially in the form of Exhibit B-2. Tranche B
-----------
Draw Requests may not be submitted more frequently than two (2) times
per month. Lender may reject a Tranche B Draw Request if the amount requested is
more than the amount available for borrowing under (S)2.4 as of the proposed
Drawdown Date or if the Drawdown Report and Certificate submitted with the
Tranche B Draw Request is unsatisfactory to the Administrative Agent in any
material respect.
3. TRANCHE C DRAW REQUESTS.
-----------------------
Each request for borrowings under Tranche C, except for a Tranche C
Loan the proceeds of which will be used to pay interest on the Loans, must (i)
be accompanied by a properly completed Tranche C draw request (a "Tranche C Draw
Request") and (ii) be received by the Administrative Agent not less than five
(5) Business Days prior to the Drawdown Date requested in the Tranche C Draw
Request. Each Tranche C Draw Request must be signed by an authorized officer of
Borrower and be substantially in the form of Exhibit B-3. Tranche C Draw
-----------
Requests may not be submitted more frequently then two (2) times per quarter.
Tranche C Loans to pay interest on the Loans shall be made in the amounts and at
the times specified in (S)2.6 above.
(S)I. FUNDS FOR LOANS.
---------------
1. Unless and until an Assignment and Acceptance occurs in
accordance with the terms of this Loan Agreement, prior to 3:00 p.m. (New York
time) on the Drawdown Date, the Lender shall, subject to the satisfaction of the
conditions set forth in this Loan Agreement disburse the amount of such Loan by
(a) transferring the amount of such Loan to the Borrower by wire transfer
pursuant to the Borrower's instructions in the Draw Requests, or (b) if such
Loan is a Tranche A Loan to be used to pay the purchase price of equipment,
software or services and the applicable sales taxes thereon, if any, by the
Borrower under the Supply Agreement, crediting such payment of such purchase
price by wire transfer pursuant to the terms of the Tranche A Draw Request. The
Lender will endeavor to disburse the appropriate amount of a Loan to the
Borrower by 1:00 p.m. (New York time) rather than 3:00 p.m. (New York time) on
the Drawdown Date but is in no respect obligated to do so.
2. a. Following the occurrence of an Assignment and Acceptance in
accordance with the terms of this Loan Agreement, upon receipt of a Draw Request
from the Borrower, the Administrative Agent shall promptly notify each Lender by
telephone or telecopy of the Draw Request. Each Lender shall, not later than
11:00 a.m. (New York time) on the Drawdown Date make available to the
Administrative Agent at the Administrative Agent's Office or at
31
<PAGE>
such other location as the Administrative Agent shall designate, the amount of
such Lender's ratable portion of such Loan in immediately available funds. Prior
to 3:00 p.m. (New York time) on the Drawdown Date, the Administrative Agent
shall, subject to the satisfaction of the conditions set forth in this Loan
Agreement, disburse the amounts made available to it by the Lenders in like
funds by (i) transferring the amounts so made available by wire transfer
pursuant to the Borrower's instructions, or (ii) if such Loan is a Tranche A
Loan to be used to pay the purchase price of equipment, software or services and
the applicable sales taxes thereof, if any by the Borrower under the Supply
Agreement, crediting such portion to payment of such purchase price by wire
transfer pursuant to the terms thereof. The Administrative Agent will endeavor
to disburse the appropriate amount of a Loan to the Borrower by 1:00 p.m. (New
York time) rather than 3:00 p.m. (New York time) on the Drawdown Date but is in
no respect obligated to do so.
b. If the Administrative Agent shall not have received from a
Lender prior to 2:00 p.m. (New York time) on any Drawdown Date such Lender's
ratable portion of such Loan, either (but not both) the Administrative Agent or
NTI (if NTI is not the Administrative Agent and has agreed with the
Administrative Agent to do so in the stead of the Administrative Agent), shall
make available to the Borrower on such date (in addition to its pro rata share
of the Loan made in its capacity as a Lender) the full amount of the portion of
the Loan not received by the Administrative Agent from such Lender. If and to
the extent the Administrative Agent or NTI so funds a portion of a Loan on
behalf of a Lender, such Lender shall repay to the Administrative Agent or NTI
(whichever one paid such Lender's portion) on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent or NTI, at the applicable interest rate.
c. If such Lender shall repay to the Administrative Agent or
NTI such corresponding amount, such amount so repaid shall thereafter constitute
such Lender's portion of the applicable Loan for purposes of this Loan
Agreement. The failure of any Lender to fund its ratable portion of any Loan
shall not relieve (i) either (but not both) the Administrative Agent or NTI (if
NTI is not the Administrative Agent and has agreed with Administrative Agent to
fund in the stead of the Administrative Agent), of its obligation to fund the
full amount of the Loan or (ii) any other Lender of its obligation hereunder to
fund its respective portion of the Loan on the date of such borrowing, but no
Lender (other than the Administrative Agent or NTI (if NTI is not the
Administrative Agent and has agreed with Administrative Agent to do so), but not
both) shall be responsible for any such failure of any other Lender.
d. In the event that, at any time when the
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Borrower is not in Default and has satisfied all applicable conditions set forth
in (S)10, a Lender for any reason fails or refuses to fund its portion of an
Loan, then, until such time as such Lender has funded its portion of such Loan,
or all other Lenders have received payment in full (whether by repayment or
prepayment) of the principal and interest due in respect of such Loan, such non-
funding Lender shall not have the right (i) to vote or consent regarding any
issue on which voting or consenting is required or advisable under this Loan
Agreement or any other Loan Document and the amount of the Loan or Commitment
held by such Lender shall not be counted as outstanding for purposes of
determining "Required Lenders" hereunder, or (ii) to receive payments of
principal, interest or fees from the Borrower in respect of its unfunded portion
of Loans (but instead such payments shall be made to either the Administrative
Agent or NTI (whichever one paid such Lender's portion) in respect to the
portion of such Loans funded by it pursuant to this (S)2.9).
(S)III. REPAYMENT OF THE LOANS.
----------------------
(S)A. TERM/AMORTIZATION.
-----------------
1. TRANCHE A AND B.
---------------
The Outstanding Amount of Tranche A and Tranche B Loans shall be
repayable over five (5) years, in twenty consecutive quarterly payments
commencing March 31, 2000 and continuing on the last day of each June,
September, December and March thereafter to and including the Tranche A and B
Maturity Date (each, a "Payment Date"). On the Tranche A and B Maturity Date,
Borrower shall pay all of the Outstanding Amount of Tranche A Loans and Tranche
B Loans, together with any and all accrued and unpaid interest thereon. Prior
to the Tranche A and B Maturity Date, the Outstanding Amount of Tranche A and
Tranche B Loans as of the Tranche A and B Commitment Termination Date shall be
paid in accordance with the following schedule:
From March 31, 2000 to and
including December 31, 2001 3.75% of the Outstanding Amounts of
Tranche A and Tranche B Loans as of the
Tranche A and B Commitment Termination
Date per Payment Date
From March 31, 2002 to and
including December 31, 2002 5.0% of the Outstanding Amounts of
Tranche A and Tranche B Loans as of the
Tranche A and B Commitment Termination
Date per Payment Date
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From March 31, 2003 to and
including December 31, 2004 6.25% of the Outstanding Amounts of
Tranche A and Tranche B Loans as of the
Tranche A and B Commitment Termination
Date per Payment Date
2. TRANCHE C.
---------
Principal under Tranche C shall be repayable on the Tranche C
Final Repayment Date.
(S)B. MANDATORY PREPAYMENTS OF LOANS.
------------------------------
1. EXCESS BORROWINGS.
-----------------
If at any time the Outstanding Loans for any Tranche exceeds the
maximum Commitment for such Tranche, then Borrower shall within three (3)
Business Days of the date the Administrative Agent so notifies the Borrower in
writing pay to the Administrative Agent the amount of such excess for the
respective accounts of the Lenders. Each repayment under this subparagraph
shall be allocated among the Lenders, in proportion, as nearly as practicable,
to the respective Outstanding Amounts under the appropriate Tranche in inverse
order of maturity, with adjustments to the extent practicable to equalize any
prior payments or repayments not exactly in proportion.
2. SALES OF ASSETS.
---------------
No later than three Business Days after its receipt of any Net Cash
Proceeds from the sale of any assets described below the Borrower will prepay
the interest and the Outstanding Amount of Tranche C Loans, and if there is no
Outstanding Amount of Tranche C Loans then to interest and Outstanding Amount of
Tranche B Loans, and if there is no Outstanding Amount of Tranche B Loans then
to interest and Outstanding Amount of Tranche A Loans in an amount equal to (i)
the Net Cash Proceeds from the direct or indirect sale of any assets of the
Borrower (other than the Borrower's inventory and other goods sold in the
ordinary course of the Borrower's business) that is otherwise permitted under
this Agreement, during any calendar year, to the extent such aggregate Net Cash
Proceeds received during such calendar year shall exceed $5,000,000, multiplied
by (ii) a fraction, (A) the numerator of which is the aggregate principal amount
of the Outstanding Amount outstanding at the time of such sale, and (B) the
denominator of which is such aggregate principal amount, plus the aggregate
principal amount of all Indebtedness outstanding at the time of such sale under
the Ericsson Loan Agreement, plus the aggregate principal amount of equivalent
Loans owing to Other Lenders, with an equivalent mandatory prepayment provision,
outstanding at the time of such sale. All payments hereunder applicable to
principal
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shall be applied in inverse order of maturity. Each repayment hereunder shall be
allocated among the Lenders, as nearly as practicable, to the respective
Outstanding Amounts under the applicable Tranche, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly on
proportion. All prepayments required in this (S)3.2B shall be accompanied by
such additional amounts as are sufficient to pay the Lenders' Breakage Costs
associated with such prepayments.
3. NET FUNDS PAYMENT.
-----------------
On or before the one-hundred-and-twentieth day of each year commencing
in the year 2001, and each year for so long as Tranche B Loans remain
outstanding, Borrower shall pay to Administrative Agent an amount equal to the
Net Funds Amount multiplied by a fraction (i) the numerator of which is the
aggregate principal amount of Tranche B Loans then outstanding at the time of
such date of determination and (ii) the denominator of which is such aggregate
principal amount plus the aggregate principal amount of the Tranche B Advances
(as defined in the Ericsson Loan Agreement) then outstanding under the Ericsson
Loan Agreement, plus the aggregate principal amount of equivalent loans owing to
Other Lenders with such an equivalent mandatory prepayment provision and then
outstanding if the loan agreement for such Other Lender provides for mandatory
prepayments from the Net Funds Amount and such mandatory prepayment is permitted
under the Intercreditor Agreement (the "Net Funds Payment"). The Net Funds
Payment shall be applied against interest and then Outstanding Amount of Tranche
B Loans in inverse order of maturity. Each repayment hereunder shall be
allocated among the Lenders, as nearly as practicable, to the respective
Outstanding Amount under the applicable Tranche, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion. The Borrower shall not be required to pay to the Administrative
Agent any Breakage Costs with respect to any Net Funds Payment.
4. DEFICIENCIES IN TRANCHE B BALANCE REQUIREMENT.
---------------------------------------------
Within 30 days after written notice from Administrative Agent,
Borrower shall make any prepayments which may be required to cure any deficiency
in the Tranche B Balance Requirement. The amount so paid will be applied
against the Outstanding Amount of Tranche B Loans in inverse order of maturity.
(S)C. OPTIONAL PREPAYMENTS OF LOANS.
-----------------------------
Borrower shall have the right, at its election, to prepay the
Outstanding Amount of Loans under any Tranche, as a whole or in part, at any
time without penalty or premium, provided that any full or partial prepayment of
--------
the Outstanding Amount of any LIBOR Rate Loans pursuant to this (S)3.3 may be
made only on the last day of the Interest Period relating thereto unless such
prepayments are
35
<PAGE>
accompanied by such additional amounts as are sufficient to pay the Lender's
Breakage Costs associated with such prepayments. Borrower shall give the
Administrative Agent, no later than 10:00 a.m., New York time, at least three
(3) Business Days' prior written notice of any proposed prepayment pursuant to
this (S)3.3 of Base Rate Loans, and four (4) LIBOR Business Days' notice of any
proposed prepayment pursuant to this (S)3.3 of LIBOR Rate Loans, in each case
specifying the proposed date of prepayment of Loans, the principal amount to be
prepaid and which Tranche shall be prepaid. Each partial prepayment of the Loans
(i) shall be in a minimum amount of $1,000,000 and in integral multiples of
$100,000, (ii) shall be accompanied by the payment of accrued interest on the
principal prepaid to the date of prepayment, (iii) shall be accompanied by the
payment of the appropriate Breakage Costs, if any, and (iv) shall be applied to
installment payments of principal in direct order of maturity on the applicable
Tranche. In the absence of instruction by Borrower, the prepayment shall be
first applied to interest and installment payments of principal outstanding
under Tranche C, then to interest and installment payments of principal
outstanding under Tranche B. Each partial prepayment shall be allocated among
the Lenders, in proportion, as nearly as practicable, to the respective
Outstanding Amount under the appropriate Tranche, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.
Tranche A Loans which are prepaid may be reborrowed, provided such
reborrowing is made in accordance with all terms and conditions applicable to
borrowings under Tranche A.
Amounts of Tranche B Loans which are prepaid may not be reborrowed.
Amounts of Tranche C Loans which are prepaid will be added to and made
available for one-time borrowing under Tranche B, provided that such Tranche B
borrowing is made in accordance with all terms and conditions applicable to
Tranche B borrowings.
(S)IV. CERTAIN GENERAL PROVISIONS.
--------------------------
(S)A. ORIGINATION FEE.
---------------
Borrower shall pay to the Administrative Agent on the Closing Date the
Origination Fee which shall be paid with the proceeds of a Tranche A Loan, as
provided above. (Administrative Agent acknowledges that this fee has been paid
prior to the date hereof).
(S)B. FUNDS FOR PAYMENTS.
------------------
1. All payments of principal (including the Origination Fee),
interest, expenses and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Administrative Agent, for the respective
accounts of the Lenders
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<PAGE>
and the Administrative Agent, at the Administrative Agent's Office or at such
other location as the Administrative Agent may from time to time designate, in
each case in immediately available funds.
2. All payments by Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding within thirty (30) days
from the date the Administrative Agent makes written demand therefor. Subject
to the provisions of (S)4.6, if any such obligation is imposed upon Borrower
with respect to any amount payable by them hereunder or under any of the other
Loan Documents, Borrower shall pay to the Administrative Agent, for the account
of the Lenders or (as the case may be) the Administrative Agent, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable the
Lenders or the Administrative Agent to receive the same net amount which the
Lenders or the Administrative Agent would have received on such due date had no
such obligation been imposed upon Borrower. Borrower shall deliver promptly to
the Administrative Agent certificates or other valid vouchers for all taxes or
other charges deducted from or paid with respect to payments made by Borrower
hereunder or under such other Loan Document.
(S)C. COMPUTATIONS.
------------
All computations of interest on the Loans and of fees, or other
expenses shall, unless otherwise expressly provided herein, shall be based on a
360-day year and paid for the actual number of days elapsed. Except as
otherwise provided in the definition of the term "Interest Period" with respect
to LIBOR Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue at the then applicable interest rate during such extension. The
Outstanding Amount of the Loans as reflected on the Note Records from time to
time shall be prima facie evidence of the Outstanding Amount of the Loans,
-----------
unless within ten (10) Business Days after receipt of any notice by the
Administrative Agent or any of the Lenders of such Outstanding Amount, the
Administrative Agent or such Lender shall notify Borrower to the contrary.
(S)D. INABILITY TO DETERMINE LIBOR RATE OR PRIME RATE.
-----------------------------------------------
In the event, prior to the commencement of any Interest Period
relating to any LIBOR Rate Loan, the Administrative Agent
37
<PAGE>
shall determine that adequate and reasonable methods do not exist for
ascertaining the LIBOR Rate that would otherwise determine the rate of interest
to be applicable to any LIBOR Rate Loan during any Interest Period, the
Administrative Agent shall forthwith give notice of such determination (which
shall be conclusive and binding on Borrower and the Lenders) to Borrower and the
Lenders. In such event (a) any Draw Request with respect to LIBOR Rate Loans
shall be automatically withdrawn and shall be deemed a request for Base Rate
Loans, (b) each LIBOR Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan, and (c) the
obligations of the Lenders to make LIBOR Rate Loans shall be suspended until the
Administrative Agent determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Administrative Agent shall so notify
Borrower and the Lenders.
In the event prior to the commencement of any Interest Period relating
to any Base Rate Loan, the Administrative Agent shall determine that adequate
and reasonable methods do not exist for ascertaining the Prime Rate that would
otherwise determine the rate of interest to be applicable to any Base Rate Loan
during any Interest Period, the Administrative Agent shall forthwith give notice
of such determination (which shall be conclusive and binding on the Borrower and
the Lenders) to the Borrower and the Lenders. In such event (a) any Draw Request
with respect to Base Rate Loans shall be automatically withdrawn and shall be
deemed a request for LIBOR Rate Loans, (b) each Base Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a LIBOR Rate Loan, and (c) the obligations of the Lenders to
make Base Rate Loans shall be suspended until the Administrative Agent
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Administrative Agent shall so notify the Borrower and the
Lenders.
(S)E. ILLEGALITY.
----------
Notwithstanding any other provisions herein, if any present or future
law, regulation, treaty or directive or the interpretation or application
thereof shall make it unlawful for any Lender to make or maintain LIBOR Rate
Loans, such Lender shall forthwith give notice of such circumstances to
Borrower, the Administrative Agent and the other Lenders and thereupon (a) the
Commitment of such Lender to make LIBOR Rate Loans shall forthwith be suspended
until such notifying Lender shall have notified the Administrative Agent and the
Borrower that the circumstance giving rise to such determination no longer
exists (and if such notifying Lender shall determine that such circumstance no
longer exists it shall so notify the Administrative Agent and the Borrower
promptly after determining the same) and (b) the Outstanding Amount of such
Lender's LIBOR Rate Loans, if any, shall be converted automatically to Base Rate
Loans on the last day of each Interest Period applicable to such LIBOR Rate
Loans or within such earlier period as may be required by law. Borrower hereby
agrees to pay the
38
<PAGE>
Administrative Agent for the account of such Lender, within ten (10) Business
Days of receipt by the Borrower of a statement from Lender, any additional
amounts necessary to compensate such Lender for any costs incurred by such
Lender in making any conversion in accordance with this (S)4.5, including any
interest or fees payable by such Lender to lenders of funds obtained by it in
order to make or maintain its LIBOR Rate Loans hereunder. Any such statement
shall disclose the amounts in reasonable detail. Before giving any notice
pursuant to this (S)4.5, the affected Lender shall use reasonable commercial
efforts to designate a new LIBOR Lending Office if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of such Lender, subject such Lender to additional costs or otherwise be
disadvantageous to such Lender.
(S)F. ADDITIONAL COSTS, ETC.
---------------------
If any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Lender or the Administrative
Agent by any central bank or other fiscal, monetary or other authority (whether
or not having the force of law), shall:
a. Subject any Lender or the Administrative Agent to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Loan Agreement, the other Loan Documents, such Lender's
Commitment or the Loans (other than taxes based upon or measured by the income
or profits of such Lender or the Administrative Agent), or
b. Materially change the basis of taxation (except for changes
in taxes on income or profits) of payments to any Lender of the principal of or
the interest on any Loans or any other amounts payable to any Lender or the
Administrative Agent under this Loan Agreement or any of the other Loan
Documents, or
c. Impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Loan Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or commitments of an office of
any Lender, or
d. Impose on any Lender or the Administrative Agent any other
conditions or requirements with respect to this Loan Agreement, the other Loan
Documents, such Lender's Commitment, or any class of loans, or commitments of
which any of the Loans or such Lender's Commitment forms a part, and the result
of any of the foregoing is
39
<PAGE>
I. to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such Lender's
Commitment, or
II. to reduce the amount of principal, interest, or other
amount payable to such Lender or the Administrative Agent hereunder on account
of such Lender's Commitment, or any of the Loans, or
III. to require such Lender or the Administrative Agent to
make any payment or to forego any interest or other sum payable hereunder, the
amount of which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by such
Lender or the Administrative Agent from Borrower hereunder by an amount deemed
material by such Lender,
then, and in each such case, such Lender or the Administrative Agent may notify
Borrower of such fact. Borrower and such Lender or (as the case may be) the
Administrative Agent shall thereafter attempt to negotiate in good faith, within
fifteen (15) days of the day on which Borrower receive such notice, an
adjustment payable hereunder that will adequately compensate such Lender or the
Administrative Agent in light of these circumstances. Notice from such Lender
or Administrative Agent shall include a certificate or statement as to such
increased cost incurred as a result of any of the above mentioned events in
clauses (a), (b), (c), or (d) prepared in reasonable detail, which shall include
the method employed by such Lender or Administrative Agent in determining the
allocation of such costs to the Borrower. If Borrower and such Lender or the
Administrative Agent are unable to agree to such adjustment within fifteen (15)
days of the date on which Borrower receive such notice, then commencing on the
date of such notice (but not earlier than the effective date of any such
additional cost, reduction, payment or foregone interest or other sum), the fees
payable hereunder shall increase by an amount that will, in such Lender's or the
Administrative Agent's reasonable determination, provide adequate compensation
for the portion of the affected Lender's additional costs determined in
accordance with this (S)4.6. Each Lender and the Administrative Agent shall
allocate such cost increases in good faith and on an equitable basis.
Each Lender that is organized under the laws of any jurisdiction other
than the United States shall deliver to the Administrative Agent for
transmission to the Borrower, on or prior to the Closing Date (in the case of
each Lender listed on the signature pages hereof) or on the effective date of
the Assignment and Acceptance Agreement pursuant to which it becomes a Lender
(in the case of each other Lender), and at such other times as may be necessary
in the determination of the Borrower or the
40
<PAGE>
Administrative Agent (each in the reasonable exercise of its discretion
including, without limitation, if at any time such Lender shall change its then
current lending office or select an additional lending office), such
certificates, documents or other evidence, properly completed and duly executed
by such Lender (including, without limitation, Internal Revenue Service Form
1001 or Form 4224 or any other certificate or statement of exemption required by
Treasury Regulations Section 1.1441(a) or Section 1.1441-6(c) or any successor
thereto) to establish that such Lender is not subject to deduction or
withholding of United States federal income tax under Section 1441 or 1442 of
the Code or otherwise (or under any comparable provisions of any successor
statute) with respect to any payments to such Lender of principal, interest,
fees or other amounts payable under any of the Loan Documents. Borrower shall
not be required to pay any additional amount to any such Lender under this
(S)4.6 if such Lender shall have failed to satisfy the requirements of the
immediately preceding sentence; provided that if such Lender shall have
satisfied such requirements on the Closing Date (in the case of each Lender
listed on the signature pages hereof) or on the effective date of the Assignment
and Acceptance Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection shall relieve Borrower of its
obligation to pay any additional amounts pursuant to this (S)4.6 in the event
that, as a result of any change in applicable law, such Lender is no longer
properly entitled to deliver certificates, documents or other evidence at a
subsequent date establishing the fact that such Lender is not subject to
withholding as described in the immediately preceding sentence.
e. The agreements in this (S)4.6 shall survive the termination of the
Commitments and the payment of all amounts payable under the Loan Documents.
(S)G. CAPITAL ADEQUACY.
----------------
If any present or future law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) or the
interpretation thereof by a court or governmental authority with appropriate
jurisdiction affects the amount of capital required or expected to be maintained
by any Lender or the Administrative Agent or any corporation controlling such
Lender or the Administrative Agent and such Lender or the Administrative Agent
determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of such Lender's or the Administrative
Agent's commitment with respect to any Loans, which has or would have the effect
of reducing the return on the Lender's or Administrative Agent's capital to a
level below that which the Lender or Administrative Agent could have achieved
(taking into consideration the Lender's or Administrative Agent's then existing
policies with respect to capital adequacy and assuming full utilization of the
Lender's or Administrative Agent's capital) but for such adoption, change or
41
<PAGE>
compliance, by an amount deemed by the Lender to be material, then such Lender
or the Administrative Agent shall promptly notify Borrower of such fact. Such a
notice shall be accompanied by a certificate which will set forth in reasonable
detail the nature of the occurrence giving rise to such compensation and the
additional amount or amounts to be paid to it hereunder. To the extent that the
costs of such increased capital requirements are not reflected in the Base Rate
or LIBOR Rate, as the case may be, (if relating to Loans), Borrower and such
Lender or (as the case may be) the Administrative Agent shall thereafter attempt
to negotiate in good faith, within fifteen (15) days of the day on which
Borrower receives such notice, an adjustment payable hereunder that will
adequately compensate such Lender or the Administrative Agent in light of these
circumstances. If Borrower and such Lender or the Administrative Agent are
unable to agree to such adjustment within fifteen (15) days of the date on which
Borrower receive such notice, then commencing on the date of such notice (but
not earlier than the effective date of any such increased capital requirement),
the fees payable hereunder shall increase by an amount that will, in such
Lender's or the Administrative Agent's reasonable determination, provide
adequate compensation. Each Lender and the Administrative Agent shall allocate
such cost increases in good faith and on an equitable basis.
(S)H. CERTIFICATE.
-----------
The Administrative Agent or any Lender will promptly notify Borrower
of the amounts it seeks to recover as indemnification from Borrower pursuant to
(S)4.9 hereof. Such a notice will set forth in reasonable detail the amount and
nature of the occurrence giving rise to indemnification thereof. The
aforementioned certificates setting forth any additional amounts payable
pursuant to this (S)4.8, (S)4.6 or (S)4.7, submitted by any Lender or the
Administrative Agent to Borrower, shall be conclusive, absent manifest error,
that such amounts are due and owing. Borrower shall pay to Administrative Agent
the amounts set forth in such certificates within fifteen (15) days of receiving
the same. By making such payments, Borrower is not waiving its right to
contest that the amounts set forth in the certificates are based on manifest
error.
(S)I. INDEMNITY.
---------
Borrower agrees to indemnify each Lender and the Administrative Agent
and to hold each Lender and the Administrative Agent harmless from and against
any loss, cost or expense (including loss of anticipated profits) that such
Lender or the Administrative Agent may sustain or incur as a consequence of (a)
a default by Borrower in making a borrowing after Borrower has given (or is
deemed to have given) a Draw Request relating thereto in accordance with
(S)(S)2.8A, B or C, or (b) the incurrence of Breakage Costs.
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(S)J. INTEREST AFTER DEFAULT.
----------------------
Overdue principal and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts payable hereunder or under
any of the other Loan Documents shall bear interest compounded monthly and
payable on demand at a rate per annum equal to four percent (4%) above the then
applicable Base Rate or LIBOR Rate, until such amount shall be paid in full
(after as well as before judgment), provided that, in no event shall the
-------- ----
interest payable in respect hereof exceed the Highest Lawful Rate.
(S)K. NO FORCE MAJEURE, DISPUTES.
--------------------------
Borrower's obligation to pay all amounts due under the Loans shall not
be affected by any circumstance whatsoever, including, without limitation: (i)
any set-off, counterclaim, recoupment, deduction, abatement, suspension,
diminution, reduction, defense or other right which Borrower may have against
Supplier for any reason whatsoever arising under or pursuant to the Supply
Agreement or otherwise relating to the purchase of goods and services from the
Supplier, (ii) any defect in the condition, design, operation or fitness for use
of, or any damage to or loss or destruction of, any equipment or material
provided by Supplier, (iii) any insolvency, bankruptcy, reorganization or
similar proceedings by or against Borrower or Parent, or affecting any of the
assets of any of the foregoing, (iv) any action of any governmental authority or
any damage to or destruction of or any taking of Borrower's property or any part
thereof, (v) any change, waiver, extension, indulgence or failure to perform or
comply with, or other action or omission herein or in the Loan Documents (except
for express written modifications to this Loan Agreement or other Loan Documents
as and in the manner permitted under this Loan Agreement or the other Loan
Documents), (vi) any dissolution of Borrower or Parent, (vii) any inability or
illegality with respect to the use or ownership of Borrower's property, (viii)
any failure to obtain, or expiration, suspension or other termination of, or
interruption to, any required licenses, permits, consents, authorizations,
approvals or other legal requirements, (ix) the invalidity or unenforceability
of the Loan Documents or any other infirmity therein or any lack of power or
authority of Lender or Borrower, or (x) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing and whether or not
Borrower shall have notice or knowledge of any of the foregoing, it being the
intention of the Lender and Borrower that the obligations of Borrower shall be
absolute and unconditional and shall be separate and independent covenants and
agreements and shall continue unaffected unless the requirements to pay or
perform the same shall have been terminated pursuant to an express provision
hereof or of the Loan Documents.
(S)V. COLLATERAL SECURITY.
-------------------
The Borrower's Obligations shall be secured pursuant to the Borrower
Security Agreement and the Pledge Agreement.
43
<PAGE>
(S)VI. REPRESENTATIONS AND WARRANTIES.
------------------------------
Borrower represents and warrants to the Lenders and the Administrative
Agent as follows:
(S)A. CORPORATE AUTHORITY.
-------------------
1. INCORPORATION; GOOD STANDING.
----------------------------
Borrower (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, (ii) has all
requisite corporate power to own its Property and conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary in order to conduct its business as now
conducted except where a failure to be so qualified would not have a Material
Adverse Effect.
2. AUTHORIZATION.
-------------
The execution, delivery and performance of this Loan Agreement and the
other Loan Documents to which Borrower is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of Borrower, (ii) have been duly authorized by all necessary corporate
proceedings, (iii) do not conflict with or result in any breach or contravention
of any provision of law, statute, rule or regulation to which Borrower is
subject or any judgment, order, writ, injunction, license or permit applicable
to Borrower or its Property, and (iv) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument binding
upon, Borrower or its Property.
3. ENFORCEABILITY.
--------------
The execution and delivery of this Loan Agreement and the other Loan
Documents to which Borrower is or is to become a party will result in valid and
legally binding obligations of Borrower enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that availability of the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(S)B. GOVERNMENTAL APPROVALS.
----------------------
The execution, delivery and performance by Borrower of this Loan
Agreement and the other Loan Documents to which Borrower
44
<PAGE>
is or is to become a party and the transactions contemplated hereby and thereby
do not require the approval or consent of, or filing with (other than UCC-1
financing statements required to be filed in the appropriate public records with
respect thereto), any governmental agency or authority other than those already
obtained.
(S)C. TITLE TO PROPERTIES; LEASES.
---------------------------
Except as indicated on Schedule 6.3 hereto, Borrower owns all of the
------------
assets reflected in the balance sheet of Borrower as at the Balance Sheet Date
or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date), subject to no
rights of others, including any mortgages, leases, conditional sales agreements,
title retention agreements, liens or other encumbrances except Permitted Liens.
(S)D. FINANCIAL STATEMENTS.
--------------------
There has been furnished the Administrative Agent the audited balance
sheet of Borrower, as at the Balance Sheet Date, and the audited statement of
income and cash flow statement of Borrower for the fiscal year then ended, and
such balance sheet and statement of income and cash flow have been certified by
Borrower's independent certified public accountants and accompanied by an
unqualified opinion of such accountants. Such balance sheet and statement of
income and cash flow have been prepared in accordance with generally accepted
accounting principles and fairly present the financial condition of Borrower as
at the close of business on the date thereof and the results of operations for
the fiscal year then ended. There are no Contingent Obligations of Borrower as
of such date involving material amounts, known to the officers of Borrower,
which were not disclosed in such balance sheet and the notes related thereto.
(S)E. NO MATERIAL ADVERSE EFFECT, ETC.
-------------------------------
Since the Balance Sheet Date there has occurred no Material Adverse
Effect. Since the Balance Sheet Date, except as permitted hereunder Borrower
has not made any Distribution.
(S)F. FRANCHISES, PATENTS, COPYRIGHTS, ETC.
------------------------------------
Borrower possesses all franchises, patents, copyrights, trademarks,
trade names, and rights in respect of the foregoing shown on Schedule 6.6,
------------
adequate for the conduct of its business as now conducted or as presently
contemplated without known conflict with any rights of others.
(S)G. LICENSES, ETC.
--------------
Except as set forth on Schedule 6.7 attached hereto, Borrower has
------------
secured (a) with respect to the construction,
45
<PAGE>
installation and development of facilities for the New York PCS Network, all
Licenses and material Necessary Authorizations appropriate to the level of
development theretofore achieved and sufficient to avoid noncompliance with the
then applicable minimum build-out requirements under the FCC License, and (b)
with respect to the operation of those portions of the New York PCS Network the
development of which has theretofore been completed, all Licenses and material
Necessary Authorizations sufficient to operate such completed portions. Neither
any License nor any material Necessary Authorization needed to comply with the
foregoing provisions of this (S)6.7 is the subject of any pending or, to the
best of Borrower's knowledge, threatened revocation.
(S)H. LITIGATION.
----------
Except as set forth in Schedule 6.8 hereto, there are no actions,
------------
suits, proceedings or investigations of any kind pending or, to the best of
Borrower's knowledge, threatened against Borrower before any court, tribunal or
administrative agency or board (including the FCC) that, if adversely
determined, might, either in any case or in the aggregate, have a Material
Adverse Effect or materially impair the right of Borrower, to carry on business
substantially as now conducted, or result in any substantial and material
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the balance sheet of Borrower, or which questions the
validity of this Loan Agreement or any of the other Loan Documents, or any
action taken or to be taken pursuant hereto or thereto.
(S)I. NO MATERIALLY ADVERSE CONTRACTS, ETC.
------------------------------------
Borrower is not subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a Material Adverse Effect. Borrower is not a
party to any contract or agreement that has or is expected, in the judgment of
such Borrower's officers, to have any Material Adverse Effect.
(S)J. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.
---------------------------------------------
Borrower is not in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its Properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or have a
Material Adverse Effect.
(S)K. TAX STATUS.
----------
Borrower (a) has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject or filed extensions
46
<PAGE>
therefor, (b) has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings, and (c) has
set aside on its books provisions reasonably adequate for the payment of all
taxes for all elapsed periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of Borrower know of no basis for any such claim.
(S)L. NO EVENT OF DEFAULT.
-------------------
No event or circumstance which constitutes a Default or Event of
Default has occurred under the Loan Documents and is continuing.
(S)M. HOLDING COMPANY AND INVESTMENT COMPANY ACTS.
-------------------------------------------
Borrower is not a "holding company", or a "subsidiary company" of a
"holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
(S)N. ABSENCE OF FINANCING STATEMENTS, ETC.
-------------------------------------
Except with respect to Permitted Liens, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry or other public
office, that purports to cover, affect or give notice of any present or possible
future lien on, or security interest in, any assets or Property of Borrower or
any rights relating thereto.
(S)O. FCC MATTERS.
-----------
Except for the filing of tariffs with the FCC, the Borrower has duly
and timely filed all filings which are required to be filed by it under the
Communications Act, the failure to file which could reasonably be expected to
have a Material Adverse Effect and is in all material respects in compliance
with the Communications Act, including, without limitation, the rules and
regulations of the FCC applicable to it, the failure to be in compliance with
which could reasonably be expected to have a Material Adverse Effect.
(S)P. TARIFFS.
-------
No action to change, alter, rescind or otherwise terminate the tariffs
containing service regulations or any rates
47
<PAGE>
and charges for commercial mobile radio services which, if adversely determined,
would have a Material Adverse Effect, is pending or known by Borrower to be
under consideration.
(S)Q. DISCLOSURE.
----------
This Loan Agreement and the statements and documents referred to
herein or delivered to the Administrative Agent and/or the Lenders by or on
behalf of Borrower pursuant hereto taken together, contain no untrue statement
of a material fact or fail to state a material fact which would be necessary to
make the statements (taken as a whole) herein and therein not misleading at such
time.
(S)R. BURDENSOME OBLIGATIONS.
----------------------
Borrower is not a party to or bound by any franchise, agreement, deed,
lease or other instrument, or subject to any legal restriction which, in the
opinion of the management of Borrower, is so unusual or burdensome, in the
context of its business, as in the foreseeable future might materially and
adversely affect or impair the revenue of the Borrower, or Operating Cash Flow,
or the ability of the Borrower to perform obligations under the Loan Documents.
Borrower does not presently anticipate that future expenditures by Borrower
needed to meet the provisions of federal or state statutes, orders, rules or
regulations will be so burdensome as to affect or impair, in a materially
adverse manner, the business or condition, financial or otherwise, of Borrower.
(S)S. SOLVENCY.
--------
Borrower is, and after giving effect to the incurrence of all
Indebtedness as and when contemplated by the Loan Documents will be, Solvent.
(S)T. SECURITY INTERESTS.
------------------
Subject to (i) the possession by the Collateral Agent of the Pledged
Collateral, (ii) the filing of UCC-1 financing statements with respect to Parent
and Borrower in the applicable filing offices, the payment of the fees in
respect thereof and the filing of continuation statements when required by
applicable law, (iii) the filing of the Grants of Security Interests in the
United States Patent and Trademark Office with respect to trademarks and
patents, and (iv) the execution and filing of an assignment of copyrights for
filing with the Copyright Office with respect to copyrights, the security
interests granted under the Collateral Documents will constitute valid, binding
and continuing duly perfected first priority Liens in and to the Collateral,
except for Permitted Liens, in favor of the Collateral Agent, for its benefit
and for the ratable benefit of the lenders and agents parties to the
Intercreditor Agreement.
48
<PAGE>
(S)U. CERTAIN TRANSACTIONS.
--------------------
Except as set forth in Schedule 6.21 hereto, none of the officers,
-------------
directors, or employees of Borrower is presently a party to any transaction with
Borrower (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of such Borrower, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner. Borrower, Parent and Grand Parent have entered into an
Expense Allocation Agreement that has been previously delivered to
Administrative Agent on behalf of the Lenders. To the extent Intellectual
Property of Parent or Grand Parent is licensed to Borrower, the terms of such
license(s) and the fee charged to Borrower relating thereto shall be subject to
the Required Lenders' reasonable approval.
(S)V. BUSINESS PLANS.
--------------
The Approved Full-Term Operating Business Plan and each Approved
Annual Operating Business Plan have been prepared in all material respects in
accordance with GAAP concepts, consistently applied to projections.
(S)W. EMPLOYEE BENEFIT PLANS.
----------------------
1. IN GENERAL.
----------
Each Employee Benefit Plan and each Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the IRC, including but not limited to the
provisions thereunder respecting prohibited transactions. Borrower has made all
required contributions to each Employee Benefit Plan and each Multiemployer
Plan. To the extent applicable, Borrower has heretofore delivered to the
Administrative Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be submitted under
(S)103(d) of ERISA, with respect to each Guaranteed Pension Plan.
2. TERMINABILITY OF WELFARE PLANS.
------------------------------
Under each Employee Benefit Plan which is an employee welfare benefit
plan within the meaning of (S)3(1) or (S)3(2)(b) of ERISA, no benefits are due
unless the event giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Subtitle B, Part 6 of ERISA). A
Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at
any time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of any of Borrower or such ERISA
Affiliate without liability to any Person.
49
<PAGE>
3. GUARANTEED PENSION PLANS.
------------------------
Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice or lien provisions of (S)302(f) of ERISA, or otherwise,
has been timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by Borrower
or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event, or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Neither Borrower nor any ERISA Affiliate has instituted or intends to
institute proceedings to terminate a Guaranteed Pension Plan. No event requiring
notice to the PGBC under Section 302(f)(4)(A) of ERISA has occurred with respect
to any Guaranteed Pension Plan and no amendment with respect to which security
is required under Section 307 of ERISA has been made or is reasonably expected
to be made to any Guaranteed Pension Plan. Based on the latest valuation of
each Guaranteed Pension Plan (which in each case occurred within twelve months
of the date of this representation), and on the actuarial methods and
assumptions employed for that valuation, the aggregate benefit liabilities of
all such Guaranteed Pension Plans within the meaning of (S)4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
4. MULTIEMPLOYER PLANS.
-------------------
Neither Borrower nor any ERISA Affiliate has incurred or expects to
incur any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under (S)4201 of ERISA or as a result of a sale of assets
described in (S)4204 of ERISA. Neither Borrower nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of (S)4241 or (S)4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under (S)4041A of
ERISA.
(S)X. REGULATIONS U AND X.
-------------------
No portion of any Loan shall be used or obtained for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such terms are
used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224.
50
<PAGE>
(S)Y. ENVIRONMENTAL COMPLIANCE.
------------------------
Borrower has taken all necessary steps to investigate the past and
present condition and usage of its Real Estate and the operations conducted
thereon and, based upon such diligent investigation, makes the following
representations to its best knowledge:
a. Borrower has complied with all applicable Environmental Laws
relating to the operation of its business and the use and occupancy of any Real
Estate. There is no pending or threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any governmental entity relating to any Environmental
Law involving the Borrower.
b. Except as set forth in Schedule 6.25 hereto, there have been no
-------------
releases of any Materials of Environmental Concern into the environment at any
parcel of Real Estate or any facility formerly or currently owned, operated or
controlled by the Borrower. With respect to any such releases of any Materials
of Environmental Concern, the Borrower has given all required notices to
government entities. The Borrower is not aware of any releases of Materials of
Environmental Concern at parcels of Real Estate or facilities other than those
owned, operated or controlled by the Borrower that could reasonably be expected
to have an impact on the Real Estate or facilities owned, operated or controlled
by the Borrower.
c. Set forth in Schedule 6.25 is a list of all environmental reports,
-------------
investigations and audits relating to premises currently or previously owned or
operated by the Borrower (whether conducted by or on behalf of the Borrower or a
third party, and whether done at the initiative of the Borrower or directed by a
governmental entity or other third party) which the Borrower has in its
possession or to which it has access, complete and accurate copies of each such
report, or the results of each such investigation or audit, have been provided
to the Administrative Agent on behalf of the Lenders.
d. Borrower has filed all reports and returns required to be filed by
the Borrower under any Environmental Laws. The business of the Borrower is being
conducted in compliance with all Environmental Laws applicable to the Borrower
or its business or Properties. The Borrower is in compliance with all licenses,
permits, registrations, certificates, consents, approvals or authorizations
(collectively, "Environmental Permits") required by all applicable Environmental
Laws. No event has occurred and is continuing which permits, or after notice or
lapse of time or both would permit, any modification or termination of any
Environmental Permit. Borrower (i) has not received any notice asserting the
absence of any Environmental Permit and (ii) has no knowledge of any
environmental law proposed or under consideration, which, if effective, could
have a Material Adverse Effect.
51
<PAGE>
e. Neither Borrower nor any of the Real Estate is subject to any
applicable Environmental Laws requiring the performance of site assessments for
Materials of Environmental Concern, or the removal or remediation of Materials
of Environmental Concern, or the giving of notice to any governmental agency or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any transactions
contemplated hereby.
(S)A. SUBSIDIARIES, ETC.
------------------
Borrower has no Subsidiaries. Except as set forth on Schedule 6.26
-------------
hereto, Borrower is not engaged in any joint venture or partnership with any
other Person.
(S)AA. MANAGERIAL PERSONNEL.
---------------------
Borrower has and shall maintain adequate managerial personnel to
implement and execute Borrower's business operations as set forth in the
Approved Full Term Operating Business Plan.
(S)VII. AFFIRMATIVE COVENANTS OF BORROWER.
---------------------------------
Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Lender has any obligation to make any Loans:
(S)A. PUNCTUAL PAYMENT.
----------------
Borrower shall duly and punctually pay or cause to be paid as and when
due the principal of and interest on the Loans, the Origination Fee and all
other amounts and expenses provided for in this Loan Agreement and the other
Loan Documents to which Borrower is a party, all in accordance with the terms of
this Loan Agreement and such other Loan Documents.
(S)B. MAINTENANCE OF OFFICE.
---------------------
Borrower shall maintain its chief executive office set forth in the
recitals of this Loan Agreement or at such other place in the United States of
America as Borrower shall designate upon written notice to (1) the
Administrative Agent, and (2) the Collateral Agent in accordance with the terms
of the Borrower Security Agreement, where notices, presentations and demands to
or upon Borrower in respect of the Loan Documents to which Borrower is a party
may be given or made.
52
<PAGE>
(S)C. RECORDS AND ACCOUNTS.
--------------------
Borrower shall (a) keep true and accurate records and books of account
in which full, true and correct entries shall be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its Properties, contingencies, and other
reserves.
(S)D. CORPORATE EXISTENCE; MAINTENANCE OF LICENSES.
--------------------------------------------
Borrower shall do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence. Borrower shall
maintain in full force and effect, (a) with respect to the construction,
installation and development of facilities for the New York PCS Network, all
Licenses and material Necessary Authorizations appropriate to the level of
development theretofore achieved and sufficient to avoid noncompliance with the
then applicable minimum build-out requirements under the FCC License, and (b)
with respect to the operation of those portions of the New York PCS Network the
development of which has theretofore been completed, all material Licenses,
copyrights, patents, franchises, Necessary Authorizations and other rights as
are necessary and sufficient to operate such completed portions. Upon securing
each of the additional Licenses and Necessary Authorizations listed on Schedule
--------
6.7 attached hereto, Borrower shall maintain them in full force and effect,
- ----
where the failure to do so would have a Material Adverse Effect.
(S)E. MAINTENANCE OF PROPERTIES.
-------------------------
Borrower shall do or cause to be done all things necessary to preserve
and keep in full force and effect its franchises, employment contracts and
permits. The Borrower (a) shall cause all of its Properties used or useful in
the conduct of its business to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment, (b) shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, (c) shall
continue to engage primarily in the businesses now conducted by it and in
related businesses, and (d) shall continue in full force and effect all
authorizations and approvals required to conduct its business as appropriate to
the then level of construction, development and operation of the New York PCS
Network; provided that nothing in this (S)7.5 shall prevent Borrower from
--------
discontinuing the operation and maintenance of any of its Properties (other than
its FCC Licenses and Licenses) if such discontinuance is, in the judgment of
Borrower, desirable in the conduct of its business and that does not have a
Material Adverse Effect.
53
<PAGE>
(S)F. INSURANCE.
---------
Borrower shall maintain with financially sound and reputable insurers
insurance with respect to its Properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms customarily required by institutional lenders,
including, without limitation, naming Collateral Agent as an additional insured
and loss payee as its interests may appear, and providing for at least thirty
(30) days' written notice to Collateral Agent of cancellation or diminishment in
such forms and for such periods as may be reasonable and prudent and in
accordance with the terms of the Borrower Security Agreement.
(S)G. TAXES.
-----
Borrower shall duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it (including, without limitation, all
amounts due and owing to the FCC under Borrower's pioneer License) and its Real
Estate, sales and activities, or any part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies that if
unpaid might by law become a lien or charge upon any of its Property; provided
--------
that any such tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if Borrower has set aside on its books adequate
reserves with respect thereto; and provided further that Borrower will pay all
-----------------
such taxes, assessments, charges, levies or claims forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor.
(S)H. INSPECTION OF PROPERTIES AND BOOKS.
----------------------------------
a. Borrower shall permit the Lenders, through the Administrative
Agent or any of the Lenders' other designated representatives, to visit and
inspect any of the Properties of Borrower, to examine the books of account of
Borrower (and to make copies thereof and extracts therefrom), and to discuss the
affairs, finances and accounts of Borrower with, and to be advised as to the
same by, its officers, all at such reasonable times and intervals as the
Administrative Agent or any Lender may reasonably request provided that the
-------------
Administrative Agent and each Lender shall use reasonable commercial efforts not
to interfere with Borrower's business.
b. Borrower authorizes the Administrative Agent and, if accompanied
by the Administrative Agent, the Lenders to communicate directly with such
Borrower's independent certified public accountants and authorizes such
accountants to disclose to the Administrative Agent and the Lenders any and all
financial statements and other supporting financial documents and schedules
54
<PAGE>
including copies of any management letter with respect to the business,
financial condition and other affairs of Borrower. At the reasonable request of
the Administrative Agent, Borrower shall deliver a letter addressed to such
accountants instructing them to comply with the provisions of this (S)7.8(b).
The Administrative Agent agrees to use commercially reasonable efforts to
coordinate the communications and disclosures to and from the accountants and
the Lenders.
(S)I. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
------------------------------------------------------
Borrower shall comply in all material respects with (a) the applicable
laws and regulations wherever its business is conducted, including, without
limitation, all Environmental Laws, all Environmental Permits, all ERISA laws,
the IRC, the Communications Act, and all FCC rules and regulations, (b) the
provisions of its charter documents and by-laws, (c) all material agreements and
instruments to which it is a party and by which it or any of its Properties may
be bound, including, without limitation all those agreements listed on Schedule
--------
1.3 hereto, (d) all obligations with respect to any Employee Benefit Plan or
- ---
Multiemployer Plan, and (e) all applicable decrees, orders, and judgments. If
any authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in order
that Borrower may fulfill any of its Obligations hereunder or any of the other
Loan Documents to which Borrower is a party, Borrower shall immediately take or
cause to be taken all reasonable steps within the power of Borrower to obtain
such authorization, consent, approval, permit or license and furnish the
Administrative Agent on behalf of the Lenders with evidence thereof.
(S)J. FURTHER ASSURANCES.
------------------
Borrower shall cooperate with the Lenders, the Collateral Agent and
the Administrative Agent and shall execute and pay for the filing of all such
further instruments and documents, including without limitation, UCC financing
statements and other security documents, as the Lenders, the Collateral Agent or
the Administrative Agent shall reasonably deem appropriate at such time in order
to effectuate the security interests to Collateral Agent and the Lenders and to
carry out to their satisfaction the transactions contemplated by the Loan
Documents.
(S)K. TRANCHE B BALANCE REQUIREMENT.
-----------------------------
Borrower shall satisfy the Tranche B Balance Requirement.
(S)L. ADDITIONAL COMMITMENTS.
----------------------
1. Borrower shall obtain and deliver to Administrative Agent original
counterparts (or copies thereof certified as true and correct by the Chief
Financial Officer of Borrower) of the Additional Commitments on the following
dates ("measuring dates"):
55
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a. June 30, 1997; and
b. each December 31 and June 30 thereafter until (i) the payment
in full of all principal and interest due with respect to Indebtedness owing on
the purchase price for the New York PCS Network License and (ii) Borrower's
EBTDA exceeds zero.
2. Borrower shall provide to the Administrative Agent on or before
March 31, 1997 a statement, certified as true and correct by the Chief Financial
Officer of Borrower, as to the total amount of principal and interest due and
payable to the FCC on account of the Indebtedness owing on the purchase price
for the New York PCS Network License for the period December 14, 1994 through
June 30, 1998.
(S)M. AUTHORIZATION FROM LANDLORD/MORTGAGEE, ETC.
------------------------------------------
Borrower shall request that any landlord, mortgagee and easement
grantor of Borrower agree to give the Administrative Agent and Collateral Agent,
on a best efforts basis, notice of any default by Borrower under the terms or
conditions of any agreement between Borrower and any landlord, mortgagee of any
such landlord or easement grantor, and allow Collateral Agent to inspect or
remove after the occurrence and continuance thereof of an Event of Default
hereunder or under any of the Collateral Documents.
(S)N. ATTORNMENT AND RECOGNITION AGREEMENTS.
-------------------------------------
Borrower shall obtain all attornment and recognition agreements from
any landlord or landlord's mortgagee of Real Estate leased or owned by Borrower
upon which any Collateral (with a fair value in excess of $50,000) is stored or
located, in form and substance reasonably satisfactory to Collateral Agent.
Borrower shall use its best efforts to obtain all attornment and
recognition agreements from any landlord or landlord's mortgagee of Real Estate
leased or owned by Borrower upon which all other Collateral not covered by the
immediately preceding paragraph is stored or located, in form and substance
reasonably satisfactory to Collateral Agent.
(S)O. EXPENSE ALLOCATION AGREEMENT.
----------------------------
Borrower shall comply with the terms of the Expense Allocation
Agreement and not consent to any waiver, modification or amendment thereto.
(S)P. TRANCHE A DRAW REQUEST.
----------------------
Borrower shall submit Tranche A Draw Requests to the Administrative
Agent at such times and in such amounts so that payments to Supplier will timely
occur pursuant to the terms of the Supply Agreement.
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<PAGE>
(S)Q. RESERVED.
--------
(S)R. REPORTING REQUIREMENTS; NOTICES.
-------------------------------
Borrower shall deliver or cause to be delivered to the Administrative
Agent on behalf of the Lenders (and if specifically required below, to the
Collateral Agent) the following:
1. APPROVED FULL TERM OPERATING BUSINESS PLAN.
------------------------------------------
a. Prior to the Closing Date, Borrower shall submit to the
Administrative Agent on behalf of the Lenders for the Administrative Agent's
review and approval a proposed operating business plan for its business and
operations for the term of the Loan Agreement, such operating business plan (and
all line items thereof) (x) to be consistent with the financial covenants in
(S)7.19 hereof and (y) to be prepared on a month by month basis through calendar
year 1996, quarterly through calendar year 1999, and annually thereafter (the
"Full Term Operating Business Plan"). The Full Term Operating Business Plan
shall be based on assumptions and expectations which are reasonable and prudent
under the circumstances. (Administrative Agent acknowledges satisfaction of the
requirements of this clause (a) prior to the date hereof).
b. The Full Term Operating Business Plan shall contain (i)
internally prepared statements of income and expense of Borrower in reasonable
detail for the term of the Loan Agreement prepared in accordance with generally
accepted accounting principles (except for the absence of footnotes) (ii) a
schedule of all Capital Expenditures estimated to be made during the term of the
Loan Agreement, (iii) a statement of the amounts and times by which Borrower
needs to raise additional capital to meet its obligations when due during the
term of the Loan Agreement, (iv) a projected balance sheet of Borrower, (v) a
projected cash flow statement of Borrower, and (vi) a statement listing all
assumptions which formed the basis for (i) through (v), each together with
supporting schedules in sufficient detail as needed and in all material aspects
in accordance with GAAP applied on a consistent basis. Upon approval at the
Closing Date by Administrative Agent, the proposed Full Term Operating Business
Plan shall become the Approved Full Term Operating Business Plan of Borrower
(the "Approved Full Term Operating Business Plan"). Borrower may deliver, from
time to time, to Administrative Agent an updated proposed full term operating
business plan which the Administrative Agent, in its sole discretion, may or may
not approve. If Administrative Agent approves such proposed plan, the plan
shall thereafter constitute the "Approved Full Term Operating Business Plan."
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c. If as and when the proposed plan required to be
delivered to the Administrative Agent pursuant to this (S)7.18A hereunder is
approved by Administrative Agent, said plan shall be deemed to be in compliance
with this (S)7.18A.
2. APPROVED ANNUAL OPERATING BUSINESS PLAN.
---------------------------------------
a. Prior to the Closing Date, Borrower shall also submit to the
Administrative Agent on behalf of the Lenders for the Administrative Agent's
approval a proposed operating business plan for the period from January 1, 1995,
through calendar year 1996, such operating business plan to be prepared on a
month by month basis and based on assumptions and expectations which are
reasonable and prudent under the circumstances. (Administrative Agent
acknowledges satisfaction of the requirements of this clause (a) prior to the
date hereof).
b. The proposed annual operating business plan shall contain (i)
internally prepared statements of income and expense of Borrower in reasonable
detail for the applicable period prepared in all material aspects in accordance
with generally accepted accounting principles (except for the absence of
footnotes), (ii) a schedule of all Capital Expenditures estimated to be made
during the period, (iii) a statement of the amounts and times by which Borrower
needs to raise additional capital to meet its obligations when due during the
period, (iv) a projected balance sheet of Borrower, (v) a projected cash flow
statement of Borrower, and (vi) a statement listing all assumptions which formed
the basis for (i) through (v), each together with supporting schedules in
sufficient detail as needed and in all material aspects in accordance (x) in the
case of the proposed initial approved operating business plan, with GAAP (except
for the absence of footnotes) and (y) thereafter, with the Initial Approved
Annual Operating Business Plan, and on a consistent basis. Upon approval at the
Closing Date by the Administrative Agent, the proposed initial annual operating
business plan shall become the initial approved operating business plan of
Borrower (the "Initial Approved Annual Operating Business Plan" and, so long as
it is in effect, the "Approved Annual Operating Business Plan").
c. Commencing in 1996, prior to December 1 of each calendar year
until the later of (x) the Tranche A and B Commitment Termination Date, and (y)
the date on which Borrower's EBTDA is greater than zero for two successive
fiscal quarters, Borrower shall submit to the Administrative Agent on behalf of
the Lenders for Administrative Agent's review and approval a proposed annual
operating business plan containing the statements listed in (b)(i) through (vi)
and all exhibits required thereto as set forth in (S)7.18B(b) for the next
succeeding calendar year which the Administrative Agent, in its sole discretion,
may or may not approve. If the Administrative Agent approves the proposed new
annual operating business plan, the plan shall thereafter constitute the
"Approved Annual Operating Business Plan."
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d. Commencing in 1996, on or prior to August 14 of each calendar
year, Borrower shall submit to Administrative Agent on behalf of the Lenders a
report certified as true and correct by the Chief Financial Officer of Borrower
which shows in reasonable detail, variances, if any, between the actual
operating performance of Borrower and what was estimated for the first six
months of the calendar year in the Approved Annual Operating Business Plan (or
the Approved Full Term Operating Business Plan if the Administrative Agent
refuses to approve a plan delivered pursuant to (S)7.18B(c) hereof) and explains
in reasonable detail in form satisfactory to Administrative Agent the reasons
for the discrepancies between the two, if any.
e. If as and when the proposed plan required to be delivered to
the Administrative Agent under this (S)7.18B hereunder is approved by
Administrative Agent, said plan shall be deemed to be in compliance with this
(S)7.18B.
3. QUARTERLY FINANCIAL STATEMENTS.
------------------------------
As soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three (3) fiscal quarters of each
fiscal year of Borrower, copies of the internally prepared unaudited balance
sheet of Borrower, as at the end of such quarter, and the related statement of
income and statement of cash flow for the portion of Borrower's fiscal year then
elapsed, all in reasonable detail and each setting forth in comparative form (x)
the figures for the prior year's corresponding fiscal quarter and (y) so long as
Borrower is required to deliver an Approved Annual Operating Business Plan
pursuant to (S)7.18B hereof, any variances from the Approved Annual Operating
Business Plan (or the Approved Full Term Operating Business Plan, if
applicable), if any, prepared in all material aspects in accordance with
generally accepted accounting principles, together with a certification by the
principal financial or accounting officer of Borrower that the information
contained in such financial statements fairly presents the financial position of
Borrower on the date thereof (subject to year-end adjustments).
4. ANNUAL FINANCIAL STATEMENTS.
---------------------------
As soon as practicable, but in any event no later than one hundred
twenty (120) days after the end of each fiscal year of Borrower, the audited
balance sheet of Borrower as at the end of such year, and the related audited
statement of income and audited statement of cash flow for such year prepared in
accordance with GAAP, and so long as Borrower is required to deliver an Approved
Annual Operating Business Plan pursuant to (S)7.18B hereof, a separate variance
analysis setting forth in comparative form the figures for the previous fiscal
year and any variances from the applicable period of the Approved Annual
Operating Business Plan in reasonable detail. Such balance sheet, statement of
income and statement of cash flow shall contain a certified audit report of a
nationally recognized independent certified public accounting firm
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satisfactory to Administrative Agent, which report shall contain an unqualified
opinion of such accounting firm, and an "agreed upon procedures" report pursuant
to which the accountants (aa) review Borrower's statement that Borrower is in
compliance with the provisions of the Expense Allocation Agreement, (bb) perform
the agreed upon review procedures applicable thereto and (cc) confirm that in
examining the financial statements of Borrower they have not become aware of any
Default or Event of Default with respect to the Expense Allocation Agreement,
or, if such accountants shall have obtained knowledge of any then existing
Default or Event of Default they shall disclose in such report any such Default
or Event of Default; provided that such accountants shall not be liable to the
--------
Lenders for failure to obtain knowledge of any Default or Event of Default. The
annual financial statements shall also be accompanied by a management letter of
Borrower's accountants (only to the extent otherwise obtained by Borrower).
Notwithstanding the above, if NTI or an Affiliate of NTI has assigned all or a
part of its rights and obligations under the Loan Documents in accordance with
the terms hereof, then all annual financial statements, variance reports,
officer's certificates and accompanying documentation shall thereafter be due
within ninety (90) days from the end of each fiscal year;
5. COMPLIANCE CERTIFICATE.
----------------------
Simultaneously with the delivery of the financial statements referred
to in subsections (C) and (D) above, a statement certified by the principal
financial or accounting officer of Borrower (the "Compliance Certificate") in
substantially the form of Exhibit C hereto and setting forth in reasonable
---------
detail computations evidencing compliance with the financial covenants contained
in (S)7.19 and (if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
6. QUARTERLY KEY BAROMETER REPORT.
------------------------------
Until such time as Borrower's EBTDA has exceeded zero for two
successive fiscal quarters, forty-five (45) days after each quarter, Borrower
shall deliver to Administrative Agent on behalf of the Lenders, a report of Key
Barometers dated as of the last day of the previous quarter, together with a
report showing variances from the estimates previously provided to
Administrative Agent and each Lender in the Annual Approved Operating Business
Plan, along with an explanation of discrepancies between the actual numbers and
the estimated numbers.
7. SECURITIES AND EXCHANGE COMMISSION REPORTS.
------------------------------------------
Within three (3) Business Days after the filing or mailing
thereof, copies of all materials of a financial nature (x) filed with the
Securities and Exchange Commission by Borrower, Parent or Grand Parent, (y)
information sent to the stockholders of
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Borrower or to banks and other lenders of Borrower (exclusive of proprietary
information) and (z) information and reports directly and materially related to
the Borrower or the New York PCS Network which Parent or Grand Parent would be
required to file with the Securities and Exchange Commission ("SEC") pursuant to
the Securities Exchange Act of 1934, if Parent or Grand Parent were public
companies subject to the reporting requirements of such Act; provided that, if
--------
the information or reports covered by this clause (z) contain proprietary
information, Borrower shall not be obligated to provide the proprietary
information hereunder unless (a) the Person (i.e., Parent or Grand Parent) that
is the source of the information or reports is a public company and (b) such
Person would then be required to file such proprietary information with the SEC.
8. ACCOUNTS RECEIVABLE AGING REPORT.
--------------------------------
Within forty-five (45) days after the end of each fiscal quarter
an Accounts Receivable aging report;
9. OTHER FINANCIAL INFORMATION.
---------------------------
From time to time such other financial data and information as
the Administrative Agent may reasonably request.
10. DEFAULTS.
--------
Written notice within three (3) Business Days thereof of the
occurrence and continuance of an event or circumstance that constitutes a
Default or the occurrence and continuance of an Event of Default under the Loan
Documents or of the Borrower first becoming aware of such occurrence, whichever
date is later. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of Default)
under this Loan Agreement or any other note, evidence of indebtedness, indenture
or other obligation to which or with respect to which Borrower is a party or
obligor, whether as principal, guarantor, surety or otherwise, which could
result in the party to whom such indebtedness is owed having the right under its
governing documents to accelerate such indebtedness, and such acceleration would
have a Material Adverse Effect, Borrower shall forthwith give written notice
thereof to the Administrative Agent, describing the notice or action and the
nature of the claimed default.
11. ENVIRONMENTAL EVENTS.
--------------------
As soon as possible, and in any event within ten (10) Business
Days, written notice to the Administrative Agent on behalf of the Lenders (i) of
any violation of any Environmental Law that Borrower reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency
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and (ii) upon becoming aware thereof, of any inquiry, proceeding, investigation,
or other action, including a notice from any agency of potential environmental
liability, or any federal, state or local environmental agency or board, that,
has the potential to materially affect the assets, liabilities, financial
conditions or operations of Borrower or the security interests for the benefit
of the Lenders pursuant to the Borrower Security Agreement.
12. ERISA EVENTS.
------------
As soon as possible, and in any event within ten (10) days after
Borrower or any ERISA Affiliate knows or has reason to know or believes that any
ERISA Affiliate knows or has reason to know or believes that any ERISA Event has
occurred, Borrower shall and shall cause such ERISA Affiliate to deliver to the
Administrative Agent a statement of the chief financial officer of Borrower or
such ERISA Affiliate describing such ERISA Event, together with any
correspondence with, or filings made with, the PBGC or Department of Labor, and
the action, if any, which Borrower or such ERISA Affiliate proposes to take with
respect thereto.
13. EMPLOYEE BENEFIT PLANS.
----------------------
Borrower shall (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to the Administrative
Agent (x) a copy of its initial actuarial statement required to be submitted
under (S)103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan, and (y) a notice of all
subsequent filings (with copies to be provided upon request of the
Administrative Agent), (ii) promptly upon receipt or dispatch, furnish to the
Administrative Agent any notice, report or demand sent or received in respect of
a Guaranteed Pension Plan under (S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066
and 4068 of ERISA, or in respect of a Multiemployer Plan, under (S)(S)4041A,
4202, 4219, 4242, or 4245 of ERISA, and (iii) promptly upon becoming aware of
the occurrence thereof, furnish notice to the Administrative Agent of: (a) any
transaction which could result in the imposition of a penalty under Section
502(i) of ERISA or an excise tax under Section 4975 against Borrower or an ERISA
Affiliate; (b) any partial or complete withdrawal from a Multiemployer Plan by
any of Borrower or an ERISA Affiliate; (c) a failure by any of Borrower or an
ERISA Affiliate to make a payment to a Plan required to avoid imposition of a
lien under Section 302(f) of ERISA; (d) the adoption of an amendment to a
Guaranteed Pension Plan requiring the provision of security under Section 307 of
ERISA; and (e) any change in the actuarial assumptions funding methods used for
any Guaranteed Pension Plan, where the effect of such change is to materially
increase the unfunded benefit liability or materially reduce the obligation to
make periodic contributions.
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14. NOTIFICATION OF CLAIMS AGAINST COLLATERAL.
-----------------------------------------
Written notice to the Administrative Agent and the Collateral
Agent, within three (3) Business Days of becoming aware of any setoff, claims
(including, with respect to the Real Estate, environmental claims), withholdings
or other defenses to which any of the Collateral, or the Collateral Agent's and
Lenders' rights with respect to the Collateral, are subject.
15. NOTICE OF LITIGATION AND JUDGMENTS.
----------------------------------
Written notice within ten (10) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting Borrower or to which Borrower is or becomes a party that
could reasonably be expected to have a Material Adverse Effect and stating the
nature and status of the proceedings. Borrower shall give notice to the
Administrative Agent, in writing, in form and detail satisfactory to the
Administrative Agent, within ten (10) days of any judgment not covered by
insurance, final or otherwise, against Borrower in an amount in excess of
$1,000,000.
16. CALCULATION OF NET FUNDS PAYMENT.
--------------------------------
Annually, commencing in the year 2001, and for so long as
Tranche B Loans remain outstanding, a report of Borrower that includes true and
accurate calculations of Borrower's Net Funds Payment for that year, if any,
within one hundred twenty (120) days from the end of the fiscal year, certified
as true and correct by Borrower's Chief Financial Officer.
17. FCC NOTICES.
-----------
Within three (3) Business Days thereof, submit copies of all
material notices and correspondence received from or sent to the FCC relating to
the New York PCS Network License.
18. CHANGE IN CORPORATE NAME; LOCATION OF COLLATERAL.
------------------------------------------------
Not later than thirty (30) days prior thereto, written notice to
the Collateral Agent and the Administrative Agent of a change in (i) the
business or corporate name of Borrower or Parent, (ii) the location of the
Collateral of Borrower (subject to (S)6(a) of the Borrower Security Agreement)
or (iii) Borrower's chief executive office or other locations or the location
where Borrower's books and records are kept.
19. OTHER INFORMATION.
-----------------
Borrower shall provide the Administrative Agent on behalf of the
Lenders such other information concerning its business, operations or financial
condition as shall be reasonably requested. Upon the Administrative Agent's
receipt of any and all financial and other information furnished by the Borrower
pursuant to this (S)7.18 the Administrative Agent shall promptly deliver copies
thereof to each Lender.
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(S)S. FINANCIAL COVENANTS OF BORROWER.
-------------------------------
Borrower covenants and agrees that, so long as any Loan, Note or other
of Borrower's Obligations are outstanding or any Lender has any obligation to
make any Loans, Borrower shall:
1. REVENUE COVENANT:
----------------
Have earned for each fiscal quarter during the periods set forth on
Schedule 7.19A, Revenue of not less than the applicable amount shown on Schedule
- -------------- --------
7.19A.
- -----
Notwithstanding the requirement set forth above, Borrower will not be
required to meet the Revenue Test in this Section 7.19A for any fiscal quarter
ending after the Borrower's EBTDA has exceeded zero for two successive fiscal
quarters.
2. MINIMUM CASH TEST:
-----------------
Maintain or cause to be maintained as of the last day of each fiscal
quarter, a ratio of Cash to EBTDA (for the quarter then ending) of not less than
1.25:1. For purposes of calculating the ratio in this (S)7.19B, negative EBTDA
shall be treated as if it were a positive number.
Notwithstanding the requirement set forth above, Borrower will not be
required to meet the Minimum Cash Test in this (S)7.19B (x) for any quarter in
which EBTDA is positive or (y) for any fiscal quarter ending after Borrower's
EBTDA has exceeded zero for two successive quarters.
3. INDEBTEDNESS TEST:
-----------------
Have as of the last day of each fiscal quarter during the term of this
Loan Agreement, Adjusted Indebtedness of not more than the Indebtedness Cap.
4. RATIO OF ADJUSTED TOTAL DEBT TO ADJUSTED BORROWER'S
---------------------------------------------------
EQUITY:
- ------
Beginning with the first quarter of calendar year 1996, maintain or
cause to be maintained as of the last day of each fiscal quarter through the
Tranche A and B Maturity Date, a ratio of Adjusted Total Debt to Adjusted
Borrower's Equity of not more than (a) beginning on the Closing Date through
December 31, 1996, 4:1, and (b) thereafter, 3:1.
5. ADJUSTED EBITDA TEST:
--------------------
Have for each fiscal quarter during the periods set forth on Schedule
7.19E, Adjusted EBITDA of not less than the amounts shown on such Schedule 7.19E
--------------
for the applicable period.
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(S)T. MORTGAGE LIENS:
--------------
If the Borrower shall use the proceeds of any loan under any Permitted
Loan Agreement to acquire any Real Estate at the time of such acquisition it
will grant to the Collateral Agent a first-mortgage lien in form and substance
satisfactory to the Required Lenders on such Real Estate. Such Lien shall
provide that it shall be released upon the refinancing of any such loan.
(S)VIII. CERTAIN NEGATIVE COVENANTS OF BORROWER.
--------------------------------------
Borrower covenants and agrees that, so long as any Loan or Note or other
fees or expenses are outstanding or any Lender has any obligation to make any
Loans:
(S)A. RESTRICTIONS ON INDEBTEDNESS.
----------------------------
Borrower shall not create, incur, assume, guarantee or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other than:
a. Subject to the Indebtedness Cap, Indebtedness to the
Lenders and the Administrative Agent arising under any of the Loan Documents;
b. Subject to the Indebtedness Cap, Indebtedness to the
Parent or Grand Parent, provided that such Indebtedness is on terms which are no
-------------
better than those available on arm's length terms and, provided that, any such
-------------
Indebtedness shall be subordinated to the prior payment in full in cash of the
Outstanding Amount of Loans and all other Indebtedness permitted and owing to
any Person hereunder pursuant to a Subordination Agreement except that, so long
as no Default has occurred and is continuing under any of the Loan Documents,
Borrower is allowed (I) to pay interest only (but not principal) to Parent or
Grand Parent on such Indebtedness at market rates and (II) to pay an amount to
Parent or Grand Parent equal to that which Borrower would otherwise be permitted
to distribute to Parent in accordance with the terms of (S)8.5 hereof in lieu of
making such Distribution. Borrower shall also be allowed to pay Parent or Grand
Parent prior to paying the Borrower's Obligations hereunder for Indebtedness
which:
(i) (v) was incurred by Borrower to pay (and was in fact used to pay)
(I) expenses for which a Tranche A borrowing is permitted under this Loan
Agreement, or (II) a Tranche B Eligible Expense or (III) a Tranche C Eligible
Expense, or
(w) is to be paid out of the proceeds of Indebtedness to a non-
affiliated third party (other than the Lenders), and such non-affiliated third
party has executed a Subordination Agreement, or
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(x) was incurred to pay for permitted Capital
Expenditures relating to the New York PCS Network and will be paid out of the
proceeds of Indebtedness to be borrowed from an Other Lender lending on a pari
passu basis in accordance with an Intercreditor Agreement, or
(y) was incurred to pay for costs for which Liens are
permitted under clauses (a), (b) and (c) of (S)8.2 below, and is to be paid to
Parent or Grand Parent out of the proceeds of such Indebtedness to an Other
Lender which has executed an Intercreditor Agreement permitted pursuant to
(S)8.1(e) below, or
(z) was incurred to pay for Borrower's cash flow/working
capital requirements pursuant to a revolving loan agreement which [as long as it
remains in place] allows Borrower to borrow and reborrow amounts from time to
time (up to, at any one time in the aggregate, $5,000,000), and is to be paid
out of the proceeds of Indebtedness to a non-affiliated third party (other than
the Lenders) which is permitted pursuant to (S)8.1(g) below; and
(ii) no Default has occurred and is continuing under any of
the Loan Documents.
c. Subject to the Indebtedness Cap, (i) purchase money
Indebtedness, (ii) Capital Lease obligations, and (iii) Indebtedness incurred in
the acquisition of Real Estate (w) in an amount not to exceed at any one time
outstanding in the aggregate Ten Million Dollars ($10,000,000), (x) in amounts
not to exceed the fair value of the property being acquired, and (y) in the case
of purchase money Indebtedness and Capital Lease obligations (considered
together) in an aggregate amount outstanding at any one time not to exceed Five
Million Dollars ($5,000,000) and in each case a refinancing of such Indebtedness
or Capital Lease Obligation in an amount not to exceed the amount to be
refinanced and such refinancing is provided by a nonaffiliated Lender and the
amount of such refinancing shall be counted in the $10,000,000 cap;
d. Subject to the Indebtedness Cap, additional unsecured
Indebtedness, provided that, any such Indebtedness shall be subordinated to the
-------------
prior payment in full in cash of the Outstanding Amount of Loans pursuant to a
Subordination Agreement;
e. Subject to the Indebtedness Cap, Indebtedness secured by
Liens permitted pursuant to clauses (a) and (c) of Section 8.2 below including
Indebtedness owing with respect to the Ericsson Loan Agreement;
f. Indebtedness the proceeds of which are used solely for
working-capital purposes, so long as, with respect to each of the two most
recent complete fiscal quarters of the Borrower, preceding the date on which
such Indebtedness is to be incurred
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(i) the amount equal to
(A) the Borrower's EBTDA for such fiscal quarter minus
(B) the amount of interest that would have accrued on
such Indebtedness during such fiscal quarter if such
Indebtedness had been outstanding for all of such
fiscal quarter and such interest had accrued at the
rate per annum applicable at the time of incurrence,
shall have exceeded zero, and
(ii) the ratio of
(A) the aggregate principal amount of all Indebtedness
of the Borrower outstanding on such date, after giving
effect to such Indebtedness, to
(B) EBITDA for each such fiscal quarter,
shall not exceed 7.5:1;
g. Subject to the Indebtedness Cap, Indebtedness to a
nonaffiliated working capital lender for cash flow/working capital secured by
Accounts Receivable not to exceed in the aggregate, Five Million Dollars
($5,000,000.00);
h. Indebtedness owing to the FCC in an amount not greater than
the purchase price payable for the FCC License for the New York PCS Network;
i. Indebtedness owing under the Ericsson Loan Agreement.
j. Subject to the Indebtedness Cap, Purchase Money Indebtedness
(in addition to any purchase money Indebtedness described in (S)8.1(c) above)
incurred in order to acquire inventory (other than in respect of handsets and
accessories thereto manufactured or supplied by Ericsson or Orbitel or their
respective Affiliates).
Indebtedness of Borrower to the Parent or Grand Parent shall only be
permitted hereunder pursuant to (S)8.1(b), above.
(S)B. RESTRICTIONS ON LIENS.
---------------------
Borrower shall not (A) create or incur or suffer to be
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created or incurred or to exist any Lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its Property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (B) transfer any of such Property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (C) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (D) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (E) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; provided that Borrower may create or
--------
incur or suffer to be created or incurred or to exist (collectively "Permitted
Liens"):
a. Liens securing any and all other vendor financing for the
supply and installation of equipment to be used in the New York PCS Network to
be supplied by third party nonaffiliated suppliers for amounts not in excess of
the fair value of the property being acquired and related services associated
with the equipment (and the refinancing and refunding of such Indebtedness, so
long as such refinancing and refunding is done through nonaffiliated third
parties) provided that, with respect to any nonaffiliated Person who has not
-------------
signed an Intercreditor Agreement prior to obtaining such Lien, the amount
secured by such Liens by all such nonaffiliated Persons pursuant to (S)(S)8.2(a)
and (b) hereof shall not exceed in the aggregate at any one time $5,000,000;
b. Liens securing purchase money Indebtedness permitted under
(S)8.1(c) above, provided that such Liens cover only the property so acquired
-------------
and for amounts not in excess of the fair value of the property being acquired
(and the refinancing and refunding of such Indebtedness, so long as such
refinancing and refunding is done through nonaffiliated third parties) provided
--------
that, with respect to any nonaffiliated Person who has not signed an
- ----
Intercreditor Agreement prior to obtaining such Lien, the amount secured by such
Liens by all such nonaffiliated Persons pursuant to (S)(S)8.2(a) and (b) hereof
shall not exceed in the aggregate at any one time $5,000,000;
c. Liens securing Indebtedness incurred, and the proceeds of
which are used to pay (i) Tranche C Loans, in whole or in part, (ii) up to
$15,000,000 of Tranche C Loans due under the Ericsson Loan Agreement and (iii)
the portion of Tranche A Loans drawn under the Ericsson Loan Agreement, the
proceeds of which were used to pay interest due under the Ericsson Loan
Agreement provided
--------
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<PAGE>
that, the maturity date of any such Indebtedness shall not occur earlier
- -----
than the Tranche A and B Commitment Termination Date (and the refinancing and
refunding of such Indebtedness, so long as such refinancing and refunding is
done through nonaffiliated third parties);
d. Liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or Liens on Properties to secure
claims for labor, material or supplies in respect of obligations not overdue;
e. deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance;
f. Liens of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties, in existence less than 120 days from the
date of creation thereof in respect of obligations not overdue;
g. encumbrances on Real Estate consisting of:
(I) easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which such Borrower is a party, and
other minor liens or encumbrances none of which in the opinion of Borrower
interferes materially with the use of the property affected in the ordinary
conduct of the business of Borrower, which defects do not individually or in the
aggregate have a Material Adverse Effect on the business of Borrower; and
(II) mortgage (or deed of trust) liens (collectively "Mortgage
Liens") to secure the payment of borrowed money to acquire Real Estate, provided
(i) the amount secured by any Mortgage Lien shall not exceed the sum of (w) the
acquisition cost of the Real Estate acquired by Borrower and (x) the cost of any
improvements constructed thereon; and (ii) Borrower shall simultaneously with
the acquisition of the Real Estate in question either (A) if the amount of the
Mortgage Lien has been advanced from funds of Borrower or under one or more
Permitted Loan Agreements, grant to the Collateral Agent a first mortgage or
deed of trust or (B) otherwise (y) grant to the Collateral Agent a second
mortgage (or deed of trust) in form and substance satisfactory to the Required
Lenders subordinate only to the Mortgage Lien, and securing the obligations of
the Borrower owing to lenders that are parties to the Intercreditor Agreement or
(z) cause the lender in whose favor the Mortgage Lien is to be made to execute
and deliver to the Collateral Agent an option to purchase the Mortgage Lien,
substantially in the form of Exhibit K attached hereto; provided that if
------- -
Borrower proceeds under Clause (ii)(A) of this Section 8.2(g)(II), Borrower
shall have the right to refinance the Mortgage Lien with a different lender in
which event Borrower
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<PAGE>
shall deliver to the Collateral Agent, simultaneously with
such financing, the documentation required under clause (B) hereof;
h. Liens existing on the date hereof and listed on Schedule 8.2
------------
hereto;
i. Liens in favor of the Collateral Agent for the benefit of
the lenders and agents parties to the Intercreditor Agreement securing the
obligations permitted to be secured under the Intercreditor Agreement;
j. Liens to secure Indebtedness permitted under (S)8.1(f),
above;
k. Liens on Accounts Receivable to secure Indebtedness
permitted under (S)8.1(g), above;
l. Deposits to secure the performance of bids, trade contracts
(other than for Guaranteed money, leases, statutory obligations, surety and
appeal bonds, performance bonds, and other obligations of a like nature incurred
in the ordinary course of business not to exceed in the aggregate at any one
time $5,000,000; and
m. liens on inventory other than handsets and accessories
thereto manufactured by Ericsson, Inc., Orbitel and their respective Affiliates.
The Lenders will consent to and permit a pari passu sharing of
----------
collateral with one or more lenders who (i) have Indebtedness secured by liens
permitted by (a), (b), (c) and (f) and (i) of this (S)8.2, (ii) are eligible to
join in the Intercreditor Agreement (the "Intercreditor Agreement")dated August
7, 1996, by and among the Collateral Agent, the Ericsson Administrative Agent
and the Nortel Administrative Agent , and (iii) are not Affiliates of Borrower
(the "Other Lender"). The collateral pool that will be shared pari passu
----------
between Lender and the Other Lender shall consist of the collateral pledged to
(i) the Lender and (ii) the Other Lender.
All expenses of the Collateral Agent and all expenses, including legal
fees, incurred in connection with the preparation and negotiation of appropriate
collateral agent documentation shall be paid by the Borrower.
(S)C. NO CONTINGENT OBLIGATIONS.
-------------------------
Borrower shall not create, incur, assume, guarantee or remain liable
on any Contingent Obligations other than (i) guarantees in favor of the Lenders
or their Affiliates and assigns, and (ii) those Contingent Obligations existing
on the date hereof and noted on Schedule 8.3 hereto.
------------
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<PAGE>
(S)D. RESTRICTIONS ON INVESTMENTS.
---------------------------
Borrower shall not make or permit to exist or to remain outstanding
any Investment except:
a. Investments in Rate Hedging Agreements in a notional
principal amount on any date not to exceed the aggregate principal amount of
Indebtedness of the Borrower accruing interest at a floating rate, and only so
long as the purpose of such Investments shall be to hedge such floating-rate
interest and shall not be to speculate on interest rates;
b. Investments in commercial paper maturing in ninety (90) days
or less from the date of issuance which, at the time of acquisition by Borrower,
is accorded a rating of A1 or better by Standard & Poor's Corporation, or P1 or
better by Moody's Investors Service, Inc. or an equivalent rating by another
nationally recognized credit rating agency of similar standing;
c. Investments in (i) direct obligations of the United States
of America or any agency or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case, maturing in
twelve months or less from the date of acquisition thereof, and (ii) repurchase
agreements fully secured by underlying securities of the type described in
clause (i) and issued by a bank or trust company meeting the requirements of
paragraph (d) of this 8.4;
d. Investments in certificates of deposit maturing within six
months from the date of issuance thereof (i) issued by a bank or trust company
organized under the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating at least $500,000,000 and
whose long-term certificates of deposit are, at the time of acquisition thereof
by Borrower, rated AA or better by Standard & Poor's Corporation or Aa or better
by Moody's Investors Service, Inc., (ii) issued by any Lender, and (iii) issued
by a bank or trust company organized under law other than those of the United
States or any state thereof, having capital, surplus and undivided profits
aggregating at least $500,000,000 and having a credit rating of B/C or better
and a "legal rating" of 3 or better by IBCA Lendering Analysis Ltd.
e. Investments in money market funds (other than single state
funds) that make investments in accordance with the regulations of the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended; and
f. Loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of
Borrower;
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<PAGE>
(S)E. DISTRIBUTIONS.
-------------
Except as permitted by the Expense Allocation Agreement, Borrower
shall not make any Distributions (other than a dividend or other distribution of
any shares of capital stock of Borrower subject to the Parent's pledge to the
Lenders pursuant to the Pledge Agreement) without the prior written consent of
the Administrative Agent and the Required Lenders or make any payment on account
of allocated corporate charges or overhead which is not a Tranche C Eligible
Expense unless at the time of and after giving effect to such Distribution:
(i) no Default shall have occurred and be continuing;
(ii) the Borrower shall have had EBTDA in excess of zero for each of
its four consecutive fiscal quarters ending with its fiscal quarter most
recently ended prior to the date of such Distribution (the "Preceding Fiscal
----------------
Quarter") and
- -------
(iii) the aggregate amount for all Distributions by the Borrower
during the fiscal year of the Borrower in which the date of such Distribution
occurs shall not exceed:
(A) Working Capital of the Borrower as of the last day of
the Preceding Fiscal Quarter, minus
(B) the aggregate amount of Debt Service payable by the
Borrower during the 12 calendar months next-following the
Preceding Fiscal Quarter, minus
(C) while any Tranche B Advance is outstanding, (1) 50%,
multiplied by (2) 25%, multiplied by (3) the number of Borrower's
fiscal quarters that have begun on or before the date of such
Distribution during the Borrower's then-current fiscal year,
multiplied by (4) the Net Funds Amount in respect of the
Borrower's immediately preceding complete fiscal year, minus
(D) the aggregate amount of any prepayment of Indebtedness
required to be made pursuant to (S)3.02(b) of the Ericsson Loan
Agreement and pursuant to (S)3.2C hereunder during the Borrower's
then-current fiscal year and that has not theretofore been made.
(S)F. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
-----------------------------------------------
a. Borrower shall not become a party to any merger or consolidation,
shall not create any Subsidiaries or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary course
of business consistent with sound and prudent practices) and shall not make any
other fundamental changes in its business, operations or corporate
72
<PAGE>
structure, including, but not limited to, changing its name or any trade name
used in its business, making non-ordinary course asset disposals or transfers,
including transactions with Affiliates, restructurings, issuing additional
capital stock, or changing the allocation of intercompany expenses among
Borrower and its corporate Affiliates from that set forth in the Expense
Allocation Agreement.
b. Borrower shall not become a party to or agree to or effect any
disposition of assets, other than (i) the disposition of assets in the ordinary
course of business, (ii) the disposition of obsolete assets or equipment no
longer necessary to the operation of the Borrower's business, consistent with
sound and prudent practices, and (iii) the disposition of asset not covered by
either of the foregoing exceptions in an amount not to exceed $10,000,000 in the
aggregate during the term of this Agreement.
(S)G. SALE AND LEASEBACK.
------------------
Borrower shall not enter into any arrangement, directly or indirectly,
whereby Borrower shall sell or transfer any Property owned by it in order then
or thereafter to lease such Property or lease other property that Borrower
intends to use for substantially the same purpose as the Property being sold or
transferred.
(S)H. COMPLIANCE WITH ENVIRONMENTAL LAWS.
----------------------------------
Borrower shall not (a) use any of the Real Estate or any portion
thereof for the handling, processing, storage or disposal of Materials of
Environmental Concern, except in compliance with Environmental Laws, (b) cause
or permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Materials of Environmental Concern, except in
compliance with Environmental Laws, (c) generate any Materials of Environmental
Concern on any of the Real Estate, except in compliance with Environmental Laws,
(d) conduct any activity at any Real Estate or use any Real Estate in any manner
so as to cause a release (i.e., releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Materials of Environmental Concern on, upon or
into the Real Estate except in compliance with Environmental Laws or (e)
otherwise conduct any activity at any Real Estate, except in compliance with
Environmental Laws, or use any Real Estate in any manner that would violate any
Environmental Law or bring such Real Estate in violation of any Environmental
Law.
(S)I. EMPLOYEE BENEFIT PLANS.
----------------------
Neither Borrower nor any ERISA Affiliate shall
a. engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for Borrower; or
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<PAGE>
b. permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, whether or not
such deficiency is or may be waived; or
c. fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of Borrower
pursuant to (S)302(f) or (S)4068 of ERISA; or
d. permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities.
e. fail to make when due any required contributions to a
Multiemployer Plan;
f. withdraw (completely or partially) from any Multiemployer
Plan where such withdrawal is likely to result in a material liability to
Borrower or an ERISA Affiliate;
g. terminate or institute proceedings to terminate, any
Guaranteed Pension Plan, where such termination is likely to result in a
material liability to any of Borrower or an ERISA Affiliate;
h. make any amendment to any Guaranteed Pension Plan with
respect to which security is required under Section 307 of ERISA; or
i. fail to give any and all notices and make all disclosures
and governmental filings required under ERISA or the IRC where such failure is
likely to result in material liability to Borrower or an ERISA Affiliate.
(S)J. KEY MANAGEMENT PERSONNEL COMPENSATION.
-------------------------------------
Until such time as Borrower's EBTDA has exceeded zero for two
successive fiscal quarters, Borrower's compensation program for the categories
its key management personnel listed on Schedule 8.10 attached hereto shall not
-------------
provide for incentive-based cash compensation which is in excess of three (3)
times the applicable base salary.
(S)K. RESERVED.
--------
(S)L. TRANSACTIONS WITH AFFILIATES.
----------------------------
The Borrower shall not enter into
74
<PAGE>
a. any agreement or arrangement providing for the payment of any
amounts to any of its Affiliates, other than
I. (x) the Expense Allocation Agreement, and (y) only if the
Administrative Agent issues a formal approval in writing subsequent to
the date hereof, the Servicing Agreement dated as of the date hereof
between the Borrower and the Grand Parent,
II. a tax-sharing agreement or arrangement pursuant to which
the Borrower shall not make any payments or agree to make any payments
in lieu of income taxes unless the cumulative sum of such payments
does not exceed the cumulative sum of income taxes that the Borrower
would have paid if the Borrower had always filed income-tax returns as
a separate entity and
III. a management, consulting or other agreement, but only if
such agreement either
(A) relates to providing management, consulting or other
services to an Affiliate operating BTA markets and
(1) is on terms that are fair and reasonable and no
less favorable to the Borrower than it would obtain in a
comparable arm's-length transaction with a Person not an
Affiliate;
(2) does not provide for payments by the Borrower under
such agreement; and
(3) does not provide for the performance of services or
purchase or delivery of property by the Borrower in a manner
that, individually or together with all other such
agreements with Affiliates operating BTA markets, would have
a material adverse effect on the ability of the Borrower to
build-out or operate the New York MTA, or
(B) is approved in writing by the Required Lenders, or
(b) any other agreement, arrangement or transaction with any of its
Affiliates (whether or not providing for the payment of any amounts to any of
its Affiliates), except in the ordinary course of business and on terms that are
fair and reasonable and no less favorable to the Borrower than it would obtain
in a comparable arm's-length transaction with a Person not an Affiliate.
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<PAGE>
(S)M. CHANGE IN NATURE OF BUSINESS.
----------------------------
The Borrower shall not make any fundamental change in its business as
carried on and as proposed to be carried on at the date hereof.
(S)N. CHARTER AMENDMENTS.
------------------
The Borrower shall not amend its certificate of incorporation or
bylaws.
(S)O. ACCOUNTING CHANGES.
------------------
The Borrower shall not make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or reporting
practices, except as required by GAAP, or change its fiscal year.
(S)P. PREPAYMENTS, ETC., OF INDEBTEDNESS.
----------------------------------
The Borrower
a. shall not, and shall not permit any Affiliate to, prepay,
redeem, purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any
subordination terms of, any Indebtedness owing by the Borrower, other than
the prepayment of the Loan in accordance with the terms of this Agreement
or as the Required Lenders may otherwise agree, except for prepayments,
redemptions, purchases or other satisfactions by the Borrower as to which
lenders under Section 5.02 of the Intercreditor Agreement are not required
to pay any amount to other lenders party thereto or Indebtedness owing to
the FCC, and
b. shall not amend, modify or change in any manner any term or
condition of any Subordinated Debt or any other Indebtedness secured by
Liens in favor of the Collateral Agent, except for amendments,
modifications and changes that the lenders party to the Intercreditor
Agreement are permitted to enter into thereunder.
If on any date any amount shall be due and owing hereunder and under any other
Indebtedness of the Borrower and the Borrower shall not pay in full all such
amounts as are then due and owing, the Borrower shall not pay any such amounts
except ratably, in accordance with the respective amounts then due and owing
thereunder. If the Borrower shall take any action in violation of this Section
8.16, it irrevocably authorizes each lender to it that is a party to the
Intercreditor Agreement on its behalf to make any payment required under Section
5.02 or 5.03 of the Intercreditor Agreement and acknowledges that any amount so
paid by any such lender shall be deemed not to have been paid by the Borrower to
such lender.
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(S)Q. AMENDMENT, ETC., OF MATERIAL CONTRACTS.
--------------------------------------
The Borrower shall not cancel or terminate any Material Contract or
consent to or accept any cancellation or termination thereof, amend or otherwise
modify any Material Contract or give any consent, waiver or approval thereunder,
waive any default under or breach of any Material Contract, agree in any manner
to any other amendment, modification or change of any term or condition of any
Material Contract, or take any other action in connection with any Material
Contract that, in any such case, could, at the time thereof, reasonably be
expected to have a material adverse effect on the Borrower's ability to perform
its obligations under this Agreement or any other Loan Document.
(S)R. NEGATIVE PLEDGE.
---------------
The Borrower shall not enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or
conditioning the creation or assumption of any Lien in favor of the Lenders or
the Collateral Agent upon any of its property or assets.
(S)S. PARTNERSHIPS.
------------
The Borrower shall not become a general partner in any general or
limited partnership.
(S)IX. CLOSING CONDITIONS.
------------------
The obligations of the Lenders to make Loans shall be subject to the
satisfaction of the following conditions precedent on or prior to the Closing
Date:
(S)A. LOAN DOCUMENTS.
--------------
Each of the Loan Documents shall have been duly executed and delivered
by the respective parties thereto, shall be in full force and effect and shall
be in form and substance satisfactory to Administrative Agent, each of the
Lenders and their counsel. Each Lender and the Administrative Agent shall have
received a fully executed copy of each such document.
(S)B. SECRETARY'S CERTIFICATE; EVIDENCE OF ACTION.
-------------------------------------------
Each of the Lenders and the Administrative Agent shall have received
from each of Borrower and Parent a Secretary's Certificate, dated as of the
Closing Date, signed by the Secretary or Assistant Secretary of Borrower and
Parent, (i) giving the name and bearing a specimen signature of each individual
officer who
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shall be authorized: (a) to sign, in the name and on behalf of Borrower or
Parent, each of the Loan Documents to which Borrower or Parent is or is to
become a party; (b) to make Tranche A, B or C Drawdown Requests (with respect to
Borrower only); and (c) to give notices and to take other action on its behalf
under the Loan Documents; (ii) attaching (a) its charter or other incorporation
documents (and all amendments thereto) as in effect on the Closing Date, (b) its
by-laws (and all amendments thereto) as in effect on the Closing Date, certified
by the Secretary or Assistant Secretary of Borrower and Parent as being true and
complete on the Closing Date, and (c) a certificate of good standing from the
Secretary of State of the jurisdiction of its incorporation and of each other
jurisdiction in which it is qualified to do business, and (iii) attaching a copy
of all corporate action necessary for the valid execution, delivery and
performance by Borrower and Parent of each of the Loan Documents to which it is
or is to become a party, certified as true and correct and in full force and
effect as of the Closing Date by the Secretary or Assistant Secretary of each of
Borrower and Parent, respectively.
(S)C. VALIDITY OF LIENS.
-----------------
The Borrower Security Agreement and the Pledge Agreement shall each be
effective to create in favor of the Collateral Agent for the benefit of the
Collateral Agent and the lenders and agents parties to the Intercreditor
Agreement a legal, valid and enforceable first (except for Permitted Liens
entitled to priority under applicable law) priority security interest in and
Lien upon the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Collateral Agent
to protect and preserve such security interests shall have been duly effected
and all such documents shall have been duly executed by Borrower and Parent.
The Collateral Agent shall have received evidence thereof in form and substance
satisfactory to the Collateral Agent.
(S)D. SEARCH REPORTS AND RELATED DOCUMENTS.
------------------------------------
The Administrative Agent shall have received (i) such UCC, tax,
patent, trademark and judgment lien search reports with respect to such
applicable public offices where Liens are filed, as shall be acceptable to the
Administrative Agent, disclosing that there are no Liens of record in such
official's office covering any Collateral or showing Borrower or Parent as a
debtor thereunder other than those Liens listed on Schedule 8.2, (ii) a
-------- ---
certificate of the Borrower and Parent signed by an authorized officer of each
thereof, dated the Closing Date, certifying that, as of the Closing Date, there
will exist no Liens on the Collateral other than Permitted Liens, and (iii) duly
executed UCC-1 financing statements with respect to the Collateral (other than
Pledged Collateral), to be filed in each office as determined by the
Administrative Agent.
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(S)E. CERTIFICATES OF INSURANCE.
-------------------------
The Collateral Agent shall have received on the Closing Date (a) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Borrower Security Agreement and (S)7.6 of this Loan
Agreement and (b) copies of all policies evidencing such insurance (with copies
certified by the applicable insurer(s) to be delivered to Collateral Agent
within thirty (30) days after the Closing Date) which shall contain provisions
naming the Collateral Agent as an additional insured and loss payee on behalf of
the lenders and agents parties to the Intercreditor Agreement as their
respective interests may appear, and providing for 30 days' prior written notice
to Administrative Agent of cancellation or diminishment.
(S)F. SOLVENCY CERTIFICATE.
--------------------
Each of the Lenders and the Administrative Agent shall have received
an officer's certificate of Borrower and Parent dated as of the Closing Date as
to the Solvency of Borrower and Parent following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the
Administrative Agent and Lenders.
(S)G. OPINIONS OF COUNSEL TO BORROWER.
-------------------------------
Each of the Lenders and the Administrative Agent shall have received a
favorable legal opinion of Borrower's counsel addressed to the Lenders and the
Administrative Agent, dated as of the Closing Date, in form and substance
satisfactory to the Lenders and the Administrative Agent and substantially in
the form of Exhibit G hereto, addressing such matters as, without limitation,
---------
corporate good standing, authority and capacity to enter into the Loan Documents
to which Borrower is or will become a party thereto, perfection of security
interests and pledges, and the validity, binding nature and enforceability of
the Loan Documents to which Borrower is or will become a party.
(S)H. OPINIONS OF COUNSEL TO PARENT.
-----------------------------
Each of the Lenders and the Administrative Agent shall have received a
favorable legal opinion of Parent's counsel addressed to the Lenders and
Administrative Agent, dated as of the Closing Date, in form and substance
satisfactory to the Lenders and Administrative Agent and substantially in the
form of Exhibit H hereto, addressing such matters as, without limitation,
---------
corporate good standing, authority and capacity to enter into the Loan Documents
to which Parent is or will become a party thereto, perfection of security
interests and pledges, and the validity, binding nature and enforceability of
the Loan Documents to which Parent is or will become a party.
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(S)I. OPINION OF FCC COUNSEL.
----------------------
Each of the Lenders and the Administrative Agent shall have received a
favorable legal opinion addressed to the Lenders and Administrative Agent from
FCC counsel to the Borrower and Parent, dated as of the Closing Date, in form
and substance satisfactory to the Lenders and the Administrative Agent, and
substantially in the form of Exhibit I hereto, addressing such matters as,
---------
without limitation, Necessary Authorizations and Licenses being in full force
and effect and being adequate at such time in order to meet Borrower's then
current objectives as set forth in the Approved Full Term Operating Business
Plan to allow Borrower to proceed with the construction, development and
operation of the New York PCS Network, and opining that execution and delivery
of the Loan Documents, including the Collateral Documents, will not violate the
Communications Act.
(S)J. PAYMENT OF FEES.
---------------
Borrower shall have paid all fees and expenses, including, without
limitation, the reasonable attorneys' fees of Administrative Agent's Special
Counsel on the Closing Date (which amounts shall be borrowed from the proceeds
of Tranche C).
(S)K. PAYMENT OF ORIGINATION FEE.
--------------------------
Borrower shall have paid the Origination Fee on the Closing Date
(which amount shall be borrowed from the proceeds of Tranche A as provided
above). (Administrative Agent acknowledges receipt of such payment prior to the
date hereof)
(S)L. GOVERNMENTAL APPROVALS, PERMITS.
-------------------------------
The Borrower shall have obtained all federal, state and local
governmental and regulatory consents, approvals, Licenses and permits as
required or necessary for Borrower to commence with the construction and
development of the New York PCS Network as contemplated for the current stage of
construction and development on the Closing Date and operate its business
pursuant to the Approved Full Term Operating Business Plan and the
Administrative Agent and each of the Lenders shall receive a certificate of an
authorized officer of Borrower to that effect dated the Closing Date.
Notwithstanding the above, if Borrower is unable to obtain all such consents,
approvals, Licenses and permits prior to the Closing Date, it shall deliver a
list disclosing those material consents, approvals, Licenses and permits it was
unable to obtain which Administrative Agent and the Required Lenders in their
discretion may or may not approve.
(S)M. PAID IN CAPITAL.
---------------
The Borrower shall have paid in capital of at least Twenty Million
Dollars ($20,000,000) as of the Closing Date.
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(S)N. NO MATERIAL ADVERSE EFFECT.
--------------------------
No Material Adverse Effect shall have occurred, or could be reasonably
anticipated to occur with respect to Borrower and Parent since (a) the Balance
Sheet Date and (b) from that described in the Information, and the
Administrative Agent and each of the Lenders shall receive a certificate of the
Chief Financial Officer of Borrower and Parent dated the Closing Date to that
effect.
(S)O. DELIVERY OF APPROVED OPERATING BUSINESS PLANS.
---------------------------------------------
Borrower shall have delivered to Administrative Agent and each Lender
each of its (i) Initial Approved Annual Operating Business Plan and its (ii)
Approved Full Term Operating Business Plan, along with a certificate of its
Chief Financial Officer dated the Closing Date certifying as to the
reasonableness of the assumptions and expectations contained in each of (i) and
(ii) when made, and as of the Closing Date, and certifying that there are
presently no known facts which would make (i) and (ii) misleading in any
material respect, and attaching a copy of resolutions of the Board of Directors
of Borrower approving each of (i) and (ii), certified as true and correct and in
full force and effect as of the Closing Date by the Secretary of Borrower.
(Administrative Agent acknowledges satisfaction of the requirements of this
(S)9.15 prior to the date hereof)
(S)P. REPRESENTATIONS AND WARRANTIES.
------------------------------
All representations and warranties shall be true and correct as of the
Closing Date in all material respects and Administrative Agent and each Lender
shall have received a certificate of the Chief Financial Officer of Borrower
dated the Closing Date to that effect.
(S)Q. NO CONFLICTS.
------------
The Administrative Agent and each of the Lenders shall have received a
certificate of an authorized officer of Borrower and Parent to the effect that
the execution, delivery or carrying out of the terms of the Loan Documents to
which they are a party or the Supply Agreement or any other agreement between
the parties will not constitute a Default under, conflict with, require any
consent under (other than consents which have been obtained) or result in the
creation or imposition of, or obligation to create, any Lien upon the Collateral
of the Borrower or the Parent pursuant to the terms of any mortgage, indenture,
contract, agreement, judgment, decree or order, which defaults, conflicts and
consents, if not obtained, separately or taken as a whole, could reasonably be
expected to have a Material Adverse Effect.
(S)R. DELIVERY OF PLEDGED SHARES.
--------------------------
The Parent shall have delivered to the Collateral Agent under the
Intercreditor Agreement all pledged stock certificates representing all of the
issued and outstanding Stock of
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the Borrower owned by Parent, which shall not be less than 95.6% of all of
Borrower's issued and outstanding shares, together with stock powers executed in
blank.
(S)S. MATERIAL AGREEMENTS.
-------------------
The Administrative Agent and each of the Lenders shall have received a
copy of each agreement set forth on Schedule 9.19 attached hereto, and all other
-------------
Material Employment Agreements set forth on Schedule 1.3 attached hereto, and
------------
similar contracts and agreements, including, without limitation, those with the
key management personnel and categories of key officers or employees to be hired
listed on Schedule 8.10, hereto, including all amendments thereto.
-------------
(S)T. NO CHANGE IN CONTROL.
--------------------
No Change in Control shall have occurred from the Closing Date.
(S)U. SUPPLY AGREEMENT.
----------------
All representations and warranties contained in the Supply Agreement
shall be true and correct in all material respects and no Event of Default,
Default or breach shall have occurred or be continuing thereunder, and the
Administrative Agent and each Lender shall have received a certificate of the
Borrower's Chief Financial Officer to that effect dated the Closing Date.
(S)V. ASSIGNMENT OF INTELLECTUAL PROPERTY.
-----------------------------------
Borrower shall provide Collateral Agent with evidence reasonably
satisfactory to Collateral Agent that all material Intellectual Property
required for Borrower to operate its business is assignable to Collateral Agent
on behalf of the lenders and agents party to the Intercreditor Agreement
(subject to customary fees and charges);
(S)W. OTHER DOCUMENTS.
---------------
The Administrative Agent, Collateral Agent and each Lender shall
receive all other documents, instruments and opinions from Borrower and Parent
(including opinions of counsel for Borrower and Parent) as Administrative Agent,
Collateral Agent and each Lender may reasonably request, in form and substance
satisfactory to Administrative Agent, Collateral Agent and each Lender and their
counsel, and which shall be in full force and effect on the date of the initial
disbursement under this Loan Agreement.
(S)X. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Lenders to make any Loan, including the initial
Loan, whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
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(S)A. DRAW REQUEST.
------------
The Administrative Agent shall have received a properly completed Draw
Request.
(S)B. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT.
-----------------------------------------
Each of the representations and warranties of Borrower contained in
this Loan Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Loan Agreement shall be true as
of the date as of which they were made and shall also be true at and as of the
time of the making of such Loan with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Loan Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The
Administrative Agent shall have received a certificate of an authorized officer
of Borrower to such effect.
(S)C. NO LEGAL IMPEDIMENT.
-------------------
No change shall have occurred in any law or regulations thereunder or
interpretations thereof that in the reasonable opinion of any Lender would make
it illegal for such Lender to make such Loan and no order of any court or
Governmental Body has been entered prohibiting the consummation of the
transactions contemplated by the Loan Documents.
(S)D. GOVERNMENTAL REGULATION.
-----------------------
Each Lender shall have received such statements in substance and form
reasonably satisfactory to such Lender as such Lender shall require for the
purpose of compliance with any applicable regulations of the Comptroller of the
Currency or the Board of Governors of the Federal Reserve System.
(S)E. PROCEEDINGS AND DOCUMENTS.
-------------------------
All proceedings in connection with the transactions contemplated by
this Loan Agreement, the other Loan Documents and all other documents incident
thereto shall be satisfactory in substance and in form to the Lenders, the
Collateral Agent, the Administrative Agent and the Administrative Agent's
Special Counsel, and the Lenders, the Collateral Agent, the Administrative Agent
and such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Administrative
Agent or the Collateral Agent may reasonably request.
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(S)XI. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
(S)A. EVENTS OF DEFAULT AND ACCELERATION.
----------------------------------
Upon the occurrence and during the continuance of any of the following
events after any applicable cure period, if any:
a. Borrower shall fail to pay (i) any principal of the Loans or
the Origination Fee when the same shall become due and payable, (ii) any
interest on the Loans or other sums hereunder or under any of the other Loan
Documents to which it is a party as and when due, or (iii) any mandatory
prepayment of the principal required under (S)3.2 hereof as and when due,
whether at the stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment if such failure continues for three (3)
consecutive days;
b. Borrower shall fail to comply with any of the covenants
contained in (S)(S)7.6, 7.15, 7.16, 7.18J, 7.18K, 7.18L, 7.18M, 7.18O, 7.19,
7.20 and (S)(S)8.1-8.10 of the Loan Agreement;
c. Borrower shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified elsewhere in this (S)11.1) and such failure shall continue for a
period of thirty (30) days;
d. any representation or warranty under the Loan Agreement or
any of the other Loan Documents or in any other document or instrument delivered
pursuant to or in connection with this Loan Agreement or any Loan Document shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;
e. Borrower shall commit a breach or Default under the Supply
Agreement which would entitle the Supplier thereunder to exercise its remedies
under Section 12 thereunder and which is not cured within ten (10) Business Days
thereunder;
f. Borrower shall (i) make an assignment for the benefit of
creditors, or (ii) admit in writing its inability to generally pay or generally
fail to pay its debts as they mature or become due, or (iii) petition or apply
for the appointment of a trustee or other custodian, liquidator or receiver of
Borrower or of any substantial part of the assets of Borrower or (iv) shall
commence any case or other proceeding relating to Borrower under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction providing for the relief of
debtors, now or hereafter in effect, or (v) shall take any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against Borrower and the Borrower shall indicate
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its approval thereof, consent thereto or acquiescence therein or shall not be
able to have such proceeding dismissed within thirty (30) days thereof;
g. a default or an event or circumstance which with notice or
lapse of time or both would become a default shall have occurred or an event or
circumstance which with notice of lapse of time or both would become a default
shall have occurred under any other obligation of Borrower for borrowed money
permitted hereunder for an amount in excess of $5 million, the result of which
is that the holder or holders to whom such Indebtedness is owed has the right
under the governing documents to accelerate such Indebtedness;
h. there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) consecutive days, any judgment against
Borrower that, exceeds $1,000,000 net of insurance proceeds, if any, or any such
judgment shall not have been bonded pending appeal within thirty (30) days of
the entry thereof;
i. any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of the Lenders, or any
action at law, suit or in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of the
Borrower or any of its stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, any one or more of the Loan Documents is illegal, invalid or unenforceable
in accordance with the terms thereof;
j. with respect to any Guaranteed Pension Plan, an ERISA Event
shall have occurred and the Required Lenders shall have determined in their
reasonable discretion that such event reasonably could be expected to result in
liability of Borrower to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $250,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan; or a trustee shall have been appointed by the United States District Court
to administer such Plan; or the PBGC shall have instituted proceedings to
terminate such Guaranteed Pension Plan; or appointed a trustee to administer or
liquidate any plan;
k. the Borrower shall be the subject of writs of attachment or
garnishment and the like that might have a Material Adverse Effect and that are
unstayed for a period of thirty (30) consecutive days or any such attachment
shall not have been bonded over within thirty (30) days of the entry thereof;
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l. the Insolvency of Borrower or Parent;
m. the FCC or any other Governmental Body cancels, revokes or
suspends any of Borrower's material Licenses for the New York PCS Network or
fails to renew any such License or Licenses;
n. the FCC or any other Governmental Body commences any
proceeding to cancel, revoke or suspend any of Borrower's material Licenses for
the New York PCS Network which proceeding for the cancellation, revocation or
suspension (i) could reasonably be expected to have a Material Adverse Effect
and (ii) has not been stayed or enjoined by Borrower within five (5) business
days of the commencement of any such proceeding;
o. Borrower shall fail to pay when due amounts owing the FCC
unless (i) Borrower's failure to pay can reasonably be expected, in the sole
judgment of Administrative Agent, not to result in any cancellation, revocation
or suspension of Borrower's License for the New York PCS Network or (ii)
Borrower has obtained a stay or injunction against any action by the FCC to
cancel, revoke or suspend such License notwithstanding Borrower's failure to
pay;
p. an Event of Default shall have occurred under the Notes, the
Security Agreement, the Pledge Agreement or any other Loan Document;
q. a Change in Control has occurred;
Then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice in writing to Borrower (i) declare the obligation of each Lender to make
Loans to be terminated, whereupon the same shall forthwith terminate and/or (ii)
declare all amounts owing with respect to this Loan Agreement, the Notes and the
other Loan Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by Borrower; provided that
--------
in the event of any Event of Default specified in (S)11.1(f) all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Administrative Agent or any Lender.
(S)B. REMEDIES.
--------
Upon the occurrence of an Event of Default under the Loan Documents,
the Collateral Agent, subject to the provisions of the Intercreditor Agreement
shall have the right to exercise its remedies under the Borrower Security
Agreement, the Pledge Agreement and the Guaranty Agreement, and/or as allowed
under applicable law.
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In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Required Lenders shall have
accelerated the maturity of the Loans pursuant to (S)11.1, each Lender, if owed
any amount with respect to the Loans may, with the consent of the Required
Lenders but not otherwise, proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Loan Agreement and
the other Loan Documents or any instrument pursuant to which the Borrower's
Obligations to such Lender are evidenced, including as permitted by applicable
law the obtaining of the ex parte appointment of a receiver, and, if such amount
--------
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of such Lender. No remedy
herein conferred upon any Lender or the Administrative Agent or the Collateral
Agent or the holder of any Note is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or any other provision of law.
(S)C. DISTRIBUTION OF COLLATERAL PROCEEDS.
-----------------------------------
In the event that, following the occurrence or during the continuance
of any Default or Event of Default and subject to the provisions of any
applicable Intercreditor Agreement, the Administrative Agent or any Lender, as
the case may be, receives any monies in connection with the enforcement of the
Borrower Security Agreement, the Pledge Agreement and the Guaranty Agreement or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:
a. First, to the payment of, or (as the case may be) the
reimbursement of the Administrative Agent for or in respect of all reasonable
costs, expenses, disbursements and losses which shall have been incurred or
sustained by the Administrative Agent in connection with the collection of such
monies by the Administrative Agent, for the exercise, protection or enforcement
by the Administrative Agent of all or any of the rights, remedies, powers and
privileges of the Administrative Agent under this Loan Agreement or any of the
other Loan Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Administrative Agent against any taxes or
liens which by law shall have, or may have, priority over the rights of the
Administrative Agent to such monies;
b. Second, to all other Borrower Obligations in such order or
preference as the Required Lenders may determine; provided, however, that
-------- -------
distributions in respect of such Borrower Obligations to the Lenders with
respect to each type of Borrower Obligation such as interest, principal, fees
and expenses, shall be
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made among the Lenders pro rata; and provided, further, that the Administrative
-------- -------- -------
Agent may in its discretion make proper allowance to take into account any
Borrower Obligations not then due and payable;
c. Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Lenders and the
Administrative Agent of all of the Borrower Obligations, to the payment of any
obligations required to be paid pursuant to (S)9-504(1)(c) of the Uniform
Commercial Code of the State of New York; and
d. Fourth, the excess, if any, shall be returned to Borrower or
to such other Persons as are entitled thereto.
(S)XII. SETOFF.
------
Regardless of the adequacy of any Collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Lenders to Borrower and any securities or other property of Borrower in the
possession of such Lender may be applied to or set off by such Lender against
the payment of Borrower's Obligations and any and all other liabilities, direct,
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of such Borrower to such Lender. Each of the Lenders agrees
with each other Lender that (a) if an amount to be set off is to be applied to
Indebtedness of Borrower to such Lender, other than Indebtedness evidenced by
the Notes held by such Lender, such amount shall be applied ratably to such
other Indebtedness and to the Indebtedness evidenced by all such Notes held by
such Lender, and (b) if such Lender shall receive from Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by such Lender by
proceedings against Borrower at law or in equity or by proof thereof in
bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by such Lender any amount in excess of its ratable portion of the payments
received by all of the Lenders with respect to the Notes held by such Lender
will make such disposition and arrangements with the other Lenders with respect
to such excess, either by way of distribution, pro tanto assignment of claims,
---------
subrogation or otherwise as shall result in each Lender receiving in respect of
the Notes held by it, its proportionate payment as contemplated by this Loan
Agreement; provided that if all or any part of such excess payment is thereafter
--------
recovered from such Lender, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
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(S)XIII. THE ADMINISTRATIVE AGENT.
------------------------
(S)A. AUTHORIZATION.
-------------
The Administrative Agent is authorized to take such action on behalf
of each of the Lenders and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated to the
Administrative Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
--------
herein or therein shall be implied to have been assumed by the Administrative
Agent and provided further that wherever the determination, consent or approval
-------- -------
(and the like) of the Administrative Agent is required by any of the Loan
Documents, the Administrative Agent may agree with the Lenders (which agreement
shall not modify the terms of this Loan Agreement or the other Loan Documents)
that Administrative Agent will make determinations or grant or deny such
consents or approvals as directed by the Required Lenders. The relationship
between the Administrative Agent and the Lenders is and shall be that of agent
and principal only, and nothing contained in this Loan Agreement or any of the
other Loan Documents shall be construed to constitute the Administrative Agent
as a trustee for any Lender.
(S)B. EMPLOYEES AND ADMINISTRATIVE AGENTS.
-----------------------------------
The Administrative Agent may exercise its powers and execute its
duties by or through employees or agents and shall be entitled to take, and to
rely on, advice of counsel concerning all matters pertaining to its rights and
duties under this Loan Agreement and the other Loan Documents. The
Administrative Agent may utilize the services of such Persons as the
Administrative Agent in its sole discretion may reasonably determine and all
reasonable fees and expenses of any such Persons shall be paid by Borrower.
(S)C. NO LIABILITY.
------------
Neither the Administrative Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Administrative Agent
or such other Person, as the case may be, may be liable for losses due to its
willful misconduct or gross negligence.
(S)D. NO REPRESENTATIONS.
------------------
The Administrative Agent shall not be responsible for the execution or
validity or enforceability of this Loan Agreement, the Notes, any of the other
Loan Documents or any instrument at any time constituting, or intended to
constitute, collateral security for the Notes, or for the value of any such
collateral security or
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for the validity, enforceability or collectability of any such amounts owing
with respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of Borrower
or be bound to ascertain or inquire as to the performance or observance of any
of the terms, conditions, covenants or agreements herein or in any instrument at
any time constituting, or intended to constitute, collateral security for the
Notes or to inspect any of the properties, books or records of Borrower. The
Administrative Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by Borrower or any holder of any of
the Notes shall have been duly authorized or is true, accurate and complete. The
Administrative Agent has not made nor does it now make any representations or
warranties, express or implied, nor does it assume any liability to the Lenders,
with respect to the creditworthiness or financial conditions of Borrower. Each
Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Loan Agreement.
(S)E. PAYMENTS.
--------
a. A payment by Borrower to the Administrative Agent hereunder
or any of the other Loan Documents for the account of any Lender shall
constitute a payment to such Lender. The Administrative Agent agrees promptly
to distribute to each Lender such Lender's pro rata share of payments received
--------
by the Administrative Agent for the account of the Lenders except as otherwise
expressly provided herein or in any of the other Loan Documents.
b. If in the reasonable opinion of the Administrative Agent the
distribution of any amount received by it in such capacity hereunder, under the
Notes or under any of the other Loan Documents might involve it in liability, it
may refrain from making distribution until its right to make distribution shall
have been adjudicated by a court of competent jurisdiction, or until the
Administrative Agent in its sole opinion determines that it is not subject to
liability. If a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Administrative Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay to
the Administrative Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as shall be
determined by such court. The Administrative Agent shall pay to the Lenders
interest at the rate calculated in accordance with (S)2.6 on such amounts that
were withheld promptly after the Administrative Agent receives payment in full
of such amounts.
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c. Notwithstanding anything to the contrary contained in this Loan
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to the Administrative Agent its pro rata share of any Loan or (ii) to
--------
comply with the provisions of (S)12 with respect to making dispositions and
arrangements with the other Lenders, where such Lender's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata share of
--------
such payments due and payable to all of the Lenders, in each case as, when and
to the full extent required by the provisions of this Loan Agreement, shall be
deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent
Lender until such time as such delinquency is satisfied. A Delinquent Lender
shall be deemed to have assigned any and all payments due to it from Borrower,
whether on account of outstanding Loans, interest, fees or otherwise, to the
remaining nondelinquent Lenders for application to, and reduction of, their
respective pro rata shares of all outstanding Loans. The Delinquent Lender
--------
hereby authorizes the Administrative Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of all
--------
outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full
a delinquency when and if, as a result of application of the assigned payments
to all outstanding Loans of the nondelinquent Lenders, the Lenders' respective
pro rata shares of all outstanding Loans have returned to those in effect
- --------
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
(S)F. HOLDERS OF NOTES.
----------------
The Administrative Agent may deem and treat the payee of any Note as
the absolute owner or purchaser thereof for all purposes hereof until it shall
have been furnished in writing with a different name by such payee or by a
subsequent holder, assignee or transferee.
(S)G. INDEMNITY.
---------
The Lenders ratably agree hereby to indemnify and hold harmless the
Administrative Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Administrative Agent has not been reimbursed by
Borrower as required by (S)14), and liabilities of every nature and character
arising out of or related to this Loan Agreement, the Notes, or any of the other
Loan Documents or the transactions contemplated or evidenced hereby or thereby,
or the Administrative Agent's actions taken hereunder or thereunder, except to
the extent that any of the same shall be directly caused by the Administrative
Agent's willful misconduct or gross negligence.
(S)H. ADMINISTRATIVE AGENT AS LENDER.
------------------------------
In its individual capacity, NTI shall have the same
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obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes, as
it would have were it not also the Administrative Agent.
(S)I. RESIGNATION OR REMOVAL.
----------------------
The Administrative Agent may resign at any time by giving sixty (60)
days' prior written notice thereof to the Lenders and Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Administrative Agent. Unless a Default or Event of Default shall have occurred
and be continuing, such successor Administrative Agent shall be reasonably
acceptable to Borrower. If no successor Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Administrative Agent's giving of
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
financial institution having a rating of not less than A-1 or its equivalent by
Standard & Poor's Corporation or P-1 Moody's Investors Services, Inc. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation, the provisions of this Loan
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent. The Administrative Agent may be removed by the
Required Lenders for cause if the Administrative Agent shall fail in a material
way to perform its duties hereunder and the provisions of this (S)13.9 shall
apply to the appointment of a successor Administrative Agent.
(S)J. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.
----------------------------------------------
Each Lender hereby agrees that, upon learning of the existence of a
Default or an Event of Default, it shall promptly notify the Administrative
Agent and the Collateral Agent thereof. The Administrative Agent hereby agrees
that upon receipt of any notice under this (S)13.10 it shall promptly notify the
other Lenders and the Collateral Agent of the existence of such Default or Event
of Default.
(S)K. DUTIES IN THE CASE OF ENFORCEMENT.
---------------------------------
Except to the extent otherwise provided for in the Intercreditor
Agreement, in case one of more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Borrower's Obligations shall
have occurred, the
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Administrative Agent shall, subject to the provisions of the Intercreditor
Agreement, the Borrower Security Agreement, the Pledge Agreement and the
Guaranty Agreement if (a) so requested by the Required Lenders and (b) the
Lenders have provided to the Administrative Agent such additional indemnities
and assurances against expenses and liabilities as the Administrative Agent may
reasonably request, proceed to enforce the provisions of the Borrower Security
Agreement, the Pledge Agreement or the Guaranty Agreement authorizing the sale
or other disposition of all or any part of the Collateral and exercise all or
any such other legal and equitable and other rights or remedies as it may have
in respect of such Collateral. Subject to the Intercreditor Agreement, the
Required Lenders may direct the Administrative Agent in writing as to the method
and the extent of any such sale or other disposition, the Lenders hereby
agreeing to indemnify and hold the Administrative Agent harmless from all
liabilities incurred in respect of all actions taken or omitted in accordance
with such directions, provided that the Administrative Agent need not comply
--------
with any such direction to the extent that the Administrative Agent reasonably
believes the Administrative Agent's compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction.
(S)XIV. EXPENSES.
--------
Borrower agrees to pay (a) the costs of producing and reproducing this Loan
Agreement, the other Loan Documents and the other agreements and instruments
mentioned herein, (b) any taxes (including any interest and penalties in respect
thereto) payable by the Administrative Agent or any of the Lenders (other than
taxes based upon the Administrative Agent's or any Lender's net income) on or
with respect to the transactions contemplated by this Loan Agreement (Borrower
hereby agreeing to indemnify the Administrative Agent and each Lender with
respect thereto), (c) the reasonable fees, expenses and disbursements of the
Administrative Agent's Special Counsel or any counsel to the Administrative
Agent incurred in connection with the structuring, negotiation, drafting,
preparation, execution, delivery, administration and/or interpretation of the
Loan Documents and other instruments mentioned herein, each closing hereunder,
and all amendments, modifications, approvals, consents, waivers and other post-
closing matters or in the enforcement or protection of rights hereto or
hereunder, (d) the fees, expenses and disbursements of the Administrative Agent
incurred in connection with the structuring, negotiation, drafting, preparation,
execution, delivery, administration or interpretation of the Loan Documents and
other instruments mentioned herein, and all amendments, modifications,
approvals, consents, waivers and other post-closing matters, or in the
enforcement or protection of its rights, (e) all out-of-pocket expenses
(including without limitation reasonable attorneys' fees and costs, which
attorneys may be employees of any Lender or the Administrative Agent (provided
--------
that, such fees are reasonably comparable to fees customarily charged by outside
- ----
counsel) and
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reasonable consulting, accounting, appraisal, investment banking
and similar professional fees and charges) incurred by any Lender or the
Administrative Agent in connection with (i) the enforcement of or preservation
of rights under any of the Loan Documents against Borrower or the administration
thereof after the occurrence of a Default or Event of Default (including
engineering, appraiser and investment banking charges) and (ii) any litigation,
proceeding or dispute whether arising hereunder or otherwise, in any way related
to any Lender's or the Administrative Agent's relationship with Borrower,
provided, however, that the Borrower will not be obligated to reimburse Lender
- -------- -------
or the Administrative Agent under this subparagraph (e)(ii) to this (S)14, if
and only if, a court of competent jurisdiction enters a final nonappealable
judgment determining that the litigation, proceeding or dispute commenced by the
Lender or the Administrative Agent was not warranted by existing law or by a
nonfrivolous argument for the extension, modification or reversal of existing
law or the establishment of new law and that the factual allegations of the
Lender or the Administrative Agent did not and were not likely to have
evidentiary support after reasonable opportunity for further investigation or
discovery, and (f) all closing or signing costs, including stamp or registration
costs and related taxes and charges, and all fees, expenses and disbursements of
any Lender or the Administrative Agent incurred in connection with UCC and other
lien searches and UCC filings. The covenants of this (S)14 shall survive
payment or satisfaction of payment of amounts owing with respect to the Notes.
Borrower shall also pay all reasonable out-of-pocket costs and
expenses (including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent incurred by Administrative Agent and/or
each Lender in connection with (i) verification of the Information, and (ii) due
diligence with respect to Borrower and its Parent.
(S)XV. INDEMNIFICATION.
---------------
Borrower agrees to indemnify and hold harmless the Collateral Agent, the
Administrative Agent and the Lenders, the respective Affiliates of the
Collateral Agent, Administrative Agent and the Lenders, and the respective
officers, directors, employees, agents (including, without limitation each of
their counsel and with respect to the Collateral Agent, reasonable allocated
costs and expenses of in-house counsel and legal staff), and controlling persons
of the Collateral Agent, Administrative Agent and each Lender and each such
Affiliate (each, an "Indemnified Party") from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and costs and expenses (including, without
limitation, the reasonable fees and disbursements of counsel) of every nature
and character arising out of or in connection with any actual or threatened
claim, litigation, investigation or proceeding relating to this Loan Agreement
or any of the other Loan Documents or the transactions contemplated hereby
excluding, however, any such actions or expenses resulting from the gross
negligence or willful misconduct of the Collateral Agent, the Administrative
Agent or the Lenders, but including, without limitation, (a) any actual or
proposed use by Borrower of the proceeds of any of the Loans, (b) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of Borrower comprised in the Collateral, (c) Borrower entering
into or performing this Loan Agreement or any
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of the other Loan Documents or (d) with respect to Borrower and its properties
and assets, the violation of any Environmental Law, the presence, disposal,
escape, seepage, leakage, spillage, discharge, emission, release or threatened
release of any Materials of Environmental Concern or any action, suit,
proceeding or investigation brought or threatened with respect to any Materials
of Environmental Concern (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding whether or not such Indemnified
Party is a party thereto, and Borrower agrees to reimburse each Indemnified
Party, upon demand, for all out-of-pocket costs and expenses (including, without
limitation, the reasonable fees and disbursements of counsel) incurred in
connection with any of the foregoing. In litigation, or the preparation
therefor, the Collateral Agent, the Lenders and the Administrative Agent shall
be entitled to select their own counsel and, in addition to the foregoing
indemnity, Borrower agrees to pay promptly the reasonable fees and expenses of
such counsel. If, and to the extent that the obligations of Borrower under this
(S)15 are unenforceable for any reason, Borrower hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which is
permissible under applicable law.
Borrower shall not make any claim against any Indemnified Party for
any special, indirect or consequential damages in respect of any breach or
wrongful conduct (whether the claim therefor is based in contract, tort or duty
imposed by law) in connection with, arising out of or in any way related to the
transactions contemplated by, and the relationship established by, the Loan
Documents, or any act, omission or event occurring in connection therewith, and
Borrower and Parent hereby waive, release and agree not to sue upon any such
claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in Borrower's or Parent's favor.
The covenants contained in this (S)15 shall survive payment or
satisfaction in full of all other of the Borrower's Obligations.
(S)XVI. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any
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documents or other papers delivered by or on behalf of Borrower or Parent
pursuant hereto shall be deemed to have been relied upon by the Lenders and the
Administrative Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Lenders of any of the
Loans, as herein contemplated, and shall continue in full force and effect so
long as any amount due under this Loan Agreement or the Notes or any of the
other Loan Documents remains outstanding or any Lender has any obligation to
make any Loans and for such further time as may be otherwise expressly specified
in this Loan Agreement. All statements contained in any certificate or other
paper delivered to any Lender or the Administrative Agent at any time by or on
behalf of Borrower or pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by Borrower
or Parent hereunder.
(S)XVII. ASSIGNMENT AND PARTICIPATION.
----------------------------
(S)A. CONDITIONS TO ASSIGNMENT BY LENDERS.
-----------------------------------
Except as provided herein, each Lender may assign to one or more
assignees (each, an "Eligible Assignee") all or a portion of its interests,
rights and obligations under this Loan Agreement (including all or a portion of
its Commitment Percentage and its Lender's Commitment and the same portion of
the Loans at the time owing to it and the Notes held by it); provided that: (a)
--------
each such assignment shall be of a constant, and not a varying, percentage of
all the assigning Lender's rights and obligations under this Loan Agreement, (b)
the parties to such assignment shall execute and deliver to the Administrative
Agent, for recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit D hereto (an "Assignment and
---------
Acceptance"), together with any Notes subject to such assignment. At no time
shall Administrative Agent or any Lender assign any of their respective rights
to a competitor of the Borrower. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (i) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder, and (ii) the assigning Lender shall, to the
extent provided in such assignment and upon payment to the Administrative Agent
of the registration fee referred to in (S)17.3, be released from its obligations
under this Loan Agreement and under the Intercreditor Agreement accruing after
the date of such assignment.
(S)B. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
--------------------------------------------------------------
By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each
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other and the other parties hereto as follows: (a) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, the assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Loan Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Loan Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto; (b) the
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any other
Person primarily or secondarily liable in respect of any of the Borrower's
Obligations, or the performance or observance by Borrower or any other Person
primarily or secondarily liable in respect of any of the Borrower's Obligations
or any of their obligations under this Loan Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto; (c) such assignee confirms that it has received a copy of this Loan
Agreement and the Intercreditor Agreement, together with copies of the most
recent financial statements referred to in (S)6.4 and (S)7.18 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (d) such
assignee will, independently and without reliance upon the assigning Lender, the
Administrative Agent or any other Lender 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 this Loan Agreement; (e)
such assignee represents and warrants that it is an Eligible Assignee; (f) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Loan Agreement and
the other Loan Documents as are delegated to the Administrative Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto; (g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Loan Agreement and the
Intercreditor Agreement are required to be performed by it as a Lender; and (h)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance.
(S)C. REGISTER.
--------
The Administrative Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitment
Percentage of, and principal amount of the Loans owing to the Lenders from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Loan
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Agreement. The Register shall be available for inspection by Borrower and the
Lenders at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Lender agrees to pay to the
Administrative Agent a registration fee in the sum of $1,000.
(S)D. NEW NOTES.
---------
Upon its receipt of an Assignment and Acceptance executed by the
parties to such assignment, together with each Note subject to such assignment,
the Administrative Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to Borrower and the Lenders
(other than the assigning Lender). Within five (5) Business Days after receipt
of such notice, Borrower, at its own expense, shall execute and deliver to the
Administrative Agent, in exchange for each surrendered Note, a new Note to the
order of such Eligible Assignee in an amount equal to the amount assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Lender in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Note, shall be in an aggregate principal amount
equal to the aggregate principal amount of the surrendered Note, shall be dated
the effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes. Within five (5) days of issuance
of any new Notes pursuant to this (S)17.4 Borrower shall deliver an opinion of
counsel, addressed to the Lenders and the Administrative Agent, relating to the
due authorization, execution and delivery of such new Notes and the legality,
validity and binding effect thereof, in form and substance satisfactory to the
Lenders. The surrendered Notes shall be cancelled and returned to Borrower.
(S)E. PARTICIPATIONS.
--------------
Each Lender may sell participations to one or more banks or other
entities in all or a portion of such Lender's rights and obligations under this
Loan Agreement and the other Loan Documents; provided that (a) each such
---------
participation shall be in an amount of not less than $3,500,000, (b) any such
sale or participation shall not affect the rights and duties of the selling
Lender hereunder to Borrower, and (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or modifications of the Loan Documents shall be the rights to approve waivers,
amendments or modifications that would reduce the principal of or the interest
rate on any Loans, extend the term or increase the amount of the Commitment of
such Lender as it relates to such participant or extend any regularly scheduled
payment date for principal or interest.
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(S)F. DISCLOSURE.
----------
Borrower agrees that in addition to disclosures made in accordance
with standard and customary banking practices any Lender may disclose
information obtained by such Lender pursuant to this Loan Agreement to assignees
or participants and potential assignees or participants hereunder; provided that
--------
such assignees or participants or potential assignees or participants shall
agree (a) to treat in confidence such information, (b) not to disclose such
information to a third party, and (c) not to make use of such information for
purposes of transactions unrelated to such contemplated assignment or
participation.
(S)G. ASSIGNEE OR PARTICIPANT AFFILIATED WITH ANY OF BORROWER.
-------------------------------------------------------
If any assignee Lender is an Affiliate of Borrower, then any such
assignee Lender shall have no right to vote as a Lender hereunder or under any
of the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Administrative Agent
pursuant to (S)11.1 or (S)11.2, and the determination of the Required Lenders
shall for all purposes of this Agreement and the other Loan Documents be made
without regard to such assignee Lender's interest in any of the Loans. If any
Lender sells a participating interest in any of the Loans to a participant, and
such participant is a Borrower or an Affiliate of a Borrower, then such
transferor Lender shall promptly notify the Administrative Agent of the sale of
such participation. A transferor Lender shall have no right to vote as a Lender
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the
Administrative Agent pursuant to (S)11.1 or (S)11.2 to the extent that such
participation is beneficially owned by such Borrower or any Affiliate of such
Borrower, and the determination of the Required Lenders shall for all purposes
of this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Lender in the Loans to the extent of such
participation.
(S)H. MISCELLANEOUS ASSIGNMENT PROVISIONS.
-----------------------------------
If any assignee Lender is not incorporated under the laws of the
United States of America or any state thereof, it shall, prior to the date on
which any interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to Borrower and the Administrative Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. Anything contained in this (S)17 to the contrary
notwithstanding, any Lender may at any time pledge all or any portion of its
interest and rights under this Loan Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Lenders organized under (S)4 of
the Federal Reserve Act, 12 U.S.C. (S)341. No such pledge or the enforcement
thereof shall release the pledgor Lender from its obligations hereunder or under
any of the other Loan Documents.
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(S)I. NO ASSIGNMENT BY BORROWER.
-------------------------
Borrower shall not assign or transfer any of its rights or obligations
under any of the Loan Documents.
(S)XVIII. LENDER'S AND ADMINISTRATIVE AGENT'S RELATIONSHIP TO BORROWER.
------------------------------------------------------------
Borrower (and not the Administrative Agent or any Lender) has the sole
responsibility for the operation, control and management of the business of the
Borrower, and the Administrative Agent's and each Lender's rights under the Loan
Documents are only those of Administrative Agent to the Lenders and a secured
creditor, respectively. The relationship created between each Lender, on the
one hand, and Borrower, on the other, is that of creditor and debtor, and each
Lender is not, nor shall it be deemed to be or treated as, a partner, joint-
venturer or co-venturer, with Borrower.
(S)XIX. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Loan Agreement, all notices
and other communications made or required to be given pursuant to this Loan
Agreement or the Notes shall be in writing and shall be delivered in hand,
mailed by United States or Canadian registered or certified first class mail,
postage prepaid, sent by overnight courier, or sent by telegraph, telecopy,
facsimile or telex and confirmed by delivery via courier or postal service,
addressed as follows:
Borrower:
--------
Omnipoint Communications Inc.
49 Old Bloomfield Road
Mountain Lakes Corporate Center
Mountain Lakes, New Jersey 07046
Attn: Harry Plonskier
(fax no. (201) 257-2425)
with a copy to:
Piper & Marbury, L.L.P.
1200 19th Street, N.W.
Washington, DC 20036
Attn: Edwin Martin, Esq.
(fax no. (202) 861-6317)
Administrative Agent:
--------------------
Northern Telecom Inc.
200 Athens Way
100
<PAGE>
Nashville, Tennessee 37228
Attn: Roger A. Schechter, Esq.
(fax no. (615) 734-4067)
and
Northern Telecom Inc.
2221 Lakeside Blvd.
Richardson, Texas 75082
Attn: Adrian J. Donoghue
(fax no. (214) 684-3929); and
Attn: Paul Day
(fax no. (214) 684-3679)
with a copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attn: Andrew H. Cohn, Esq.
(fax no. (617) 526-5000)
Collateral Agent:
----------------
Mellon Bank, N.A.
as Collateral Agent
701 Market Street
Philadelphia, PA 19106
Parent Guarantor:
----------------
Omnipoint Corporation
2000 North 14th Street
Suite 550
Arlington, Virginia 22201
Attn. Bradley E. Sparks
(fax no. (703) 522-0288)
with a copy to:
Piper & Marbury, L.L.P.
1200 19th Street, N.W.
Washington, DC 20036
Attn: Edwin Martin, Esq.
(fax no. (202) 861-6317)
If a notice should be sent to any other Lender, it shall be sent to
such address for notice as such Lender shall have last furnished in writing to
the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of
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the party to which it is directed, at the time of the receipt thereof by such
officer or the sending of such facsimile and (ii) if sent by registered or
certified first-class mail, postage prepaid, on the third Business Day following
the mailing thereof. The parties hereby deem all notices sent by telecopy or
facsimile original documents and all signatures on such notices, originals.
(S)XX. PROCESS AGENT.
-------------
Borrower hereby appoints Piper & Marbury, 1200 19th Street, N.W.,
Washington, DC 20036, Attn: Edwin Martin, Esq., as its legally authorized
process agent to accept service on behalf of Borrower.
(S)XXI. GOVERNING LAW.
-------------
THIS LOAN AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN,
EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF
NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF STATE LAW). BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS LOAN
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON SUCH BORROWER BY MAIL TO PIPER & MARBURY AT THE ADDRESS
SPECIFIED IN (S)20. BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT COURT.
(S)XXII. CERTIFICATES OF OFFICERS OF BORROWER.
------------------------------------
With respect to all certificates of officers of Borrower which Borrower is
obligated to deliver to Administrative Agent under the Loan Documents, the
officers signing such certificates will have no personal liability therefor
except with respect to fraud, gross negligence and intentional misconduct.
(S)XXIII. CONFIDENTIALITY.
---------------
Prior to disclosure to any Eligible Assignee, the Administrative Agent will
obtain a written confidentiality agreement from such Eligible Assignee with
respect to the following items: (i) the Approved Full Term Operating Business
Plan, (ii) the Approved Annual Operating Business Plan, (iii) the terms of the
Material Employment Agreements, and (iv) detailed pricing information and
variance analyses previously provided to the Administrative Agent. The
confidentiality agreement will contain terms providing for the protection to the
Borrower having terms substantially as set forth in the following paragraph and
shall survive the execution by an Eligible Assignee of an Assignment and
Acceptance Agreement. Notwithstanding anything to the contrary herein, the
Administrative Agent shall be permitted to summarize generally basic business
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information relating to the Borrower and its Affiliates to nonaffiliated third
parties and Eligible Assignees, such as information that is or would be of
public knowledge by reason of a public offering or otherwise.
The Administrative Agent and each Lender agree to keep the type of
information listed in (i) through (iv), above furnished by Borrower confidential
except for disclosure (i) to legal counsel, accountants, and other professional
advisors to Administrative Agent and each Lender, (ii) to bank and financial
institution regulatory officials with regulatory control over Lender, (iii) as
requested pursuant to or as required by law, regulation, or legal process, (iv)
in connection with any legal proceeding to which that Administrative Agent or
any Lender is a party, or (v) in connection with any court order.
(S)XXIV. CHANGES IN FCC PAYMENT SCHEDULES.
--------------------------------
In the event the FCC modifies Borrower's payment requirements relating to
the Borrower's FCC License so that such payment requirements materially differ
from that which were in effect as set forth in the Approved Full Term Operating
Business Plan, Borrower and the Administrative Agent will endeavor in good faith
to renegotiate the covenants contained in (S)7.19 hereof in order to reflect
such change, it being understood that until the Administrative Agent and
Borrower shall reach agreements on such new covenants, the covenants contained
in (S)7.19 hereof continue to be effective.
(S)XXV. HEADINGS.
--------
The captions in this Loan Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
(S)XXVI. COUNTERPARTS.
------------
This Loan Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Loan Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
(S)XXVII. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
express the entire understanding of the parties with respect to the transactions
contemplated hereby. Neither this Loan Agreement nor any term hereof may be
changed, waived, discharged or terminated, except as provided in (S)29.
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(S)XXVIII. WAIVER OF JURY TRIAL.
--------------------
BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS LOAN AGREEMENT, THE
NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS
PROHIBITED BY LAW, BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE,
ADMINISTRATIVE AGENT OR ATTORNEY OF ANY LENDER OR THE ADMINISTRATIVE AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE ADMINISTRATIVE
AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (B) ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT AND THE LENDERS HAVE
BEEN INDUCED TO ENTER INTO THIS LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS TO
WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
(S)XXIX. CONSENTS, AMENDMENTS, WAIVERS, ETC.
-----------------------------------
Any consent or approval required or permitted by this Loan Agreement to be
given by the Lenders may be given, and any term of this Loan Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by Borrower of any terms of
this Loan Agreement, the other Loan Documents or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of Borrower and the written consent of the
Administrative Agent and the Required Lenders. Notwithstanding the foregoing,
the rate of interest on the Notes, the term of the Notes, the amount of the
Commitments of the Lenders, and the amount of the Origination Fee may not be
changed without the written consent of Borrower and the written consent of each
Lender affected thereby; the definition of Required Lenders may not be amended
without the written consent of all of the Lenders; and the amount of the
Administrative Agent's Fee payable for the Administrative Agent's account and
(S)13 may not be amended without the written consent of the Administrative
Agent. No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Administrative Agent or any Lender in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial thereto. No
notice to or demand upon Borrower shall entitle Borrower to other or further
notice or demand in similar or other circumstances.
The Lenders will consider in good faith amendments proposed by the Borrower
that are intended to reconcile any apparent conflicts between the provisions of
(S)(S)3.2B, 3.2C, 7.19 and 8.1 through 8.5 of this Agreement and the related
provisions of the Ericsson Loan Agreement, provided that nothing herein shall
obligate the Lenders to agree to any such amendments.
104
<PAGE>
(S)XXX. IMMUNITIES.
----------
The Borrower hereby waives any and all rights against immunity from
jurisdiction, attachment (both before and after judgment) and execution to which
it might be entitled.
(S)XXXI. MATTERS RELATING TO THE COLLATERAL AGENT.
-----------------------------------------
The Borrower will pay the Collateral Agent a fee in an amount, computed as
provided and payable at the times separately agreed to by the Collateral Agent
and the Borrower. In addition, the Borrower will pay on demand all costs and
expenses of the Collateral Agent (with respect to the Collateral Agent,
including reasonable allocated costs and expenses of in-house counsel and legal
staff)in connection with the preparation, execution, delivery, performance,
administration, enforcement, modification and amendment of this Intercreditor
Agreement, the Borrower Security Agreement, the Parent Pledge Agreement and/or
any other Loan Document at any time, including without limitation the reasonable
fees and expenses of counsel (with respect to the Collateral Agent, including
reasonable allocated costs and expenses of in-house counsel and legal staff)and
the costs and expenses incurred by the Collateral Agent in the course of
performing its duties and obligations as Collateral Agent.
(S)XXXII. AMENDMENTS, ETC. TO INTERCREDITOR AGREEMENT.
--------------------------------------------
Neither the Administrative Agent nor the Lenders shall consent to any
amendment or modification of, supplement to or replacement of or substitution
for the Intercreditor Agreement unless either
(a) the Borrower shall have consented thereto in writing, or
(b) at the time at which such amendment, modification or waiver is
entered into a Default, or any event that, with the passage of time or giving of
notice or both would constitute an event of default under any other Permitted
Loan Agreement, shall have occurred and be continuing.
(S)XXXIII. SEVERABILITY.
------------
The provisions of this Loan Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Loan Agreement in any jurisdiction.
105
<PAGE>
[Intentionally Left Blank]
106
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Loan Agreement
as a sealed instrument as of the date first set forth above.
BORROWER:
--------
OMNIPOINT COMMUNICATIONS INC.
By: /s/ Harry Plonskier
--------------------------------
Name: Harry Plonskier
Title: Vice President, Finance
ADMINISTRATIVE AGENT:
---------------------
NORTHERN TELECOM INC.
By: /s/ Robert H. Hunsberger
-------------------------------
Name: Robert H. Hunsberger
Title: Vice President, Sales and
Marketing
THE LENDERS:
------------
NORTHERN TELECOM INC.
By: /s/ Robert H. Hunsberger
--------------------------------
Name: Robert H. Hunsberger
Title: Vice President, Sales and
Marketing
107
<PAGE>
================================================================================
LOAN AGREEMENT
dated as of August 7, 1996
among
OMNIPOINT COMMUNICATIONS INC.,
Borrower,
--------
ERICSSON INC.,
as Administrative Agent,
-----------------------
and
THE LENDERS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND RULES OF INTERPRETATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.01. Definitions................................................. 1
1.02. Rules of Interpretation..................................... 22
1.03. Accounting Terms............................................ 23
ARTICLE II
THE LOANS
2.01. Commitment to Lend.......................................... 24
2.02. Making the Advances......................................... 26
2.03. Fees ....................................................... 28
2.04. Interest ................................................... 29
2.05. Interest Rate Determination................................. 30
2.06. Optional Conversion of Advances............................. 31
2.07. Payments and Computations................................... 32
2.08. Sharing of Payments, Etc.................................... 33
2.09. Use of Proceeds............................................. 34
2.10. The Notes................................................... 34
2.11. First LIBOR Method and Second LIBOR Method.................. 34
ARTICLE III
REPAYMENT AND PREPAYMENT OF THE LOANS
3.01. Term/Amortization........................................... 34
3.02. Mandatory Prepayments of Loans.............................. 36
3.03. Optional Prepayments of Loans............................... 38
3.04. Certain Matters relating to Repayments and Prepayments...... 38
</TABLE>
i
<PAGE>
ARTICLE IV
ILLEGALITY, INCREASED COSTS, CAPITAL ADEQUACY AND INDEMNITIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.01. Illegality.................................................. 39
4.02. Additional Costs and Capital Adequacy....................... 40
4.03. Taxes ...................................................... 41
4.04. Survival.................................................... 43
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Corporate Authority......................................... 43
5.02. Governmental Approvals...................................... 44
5.03. Title to Properties......................................... 44
5.04. Financial Statements........................................ 44
5.05. No Material Adverse Effect, Etc. ........................... 45
5.06. Franchises, Patents, Copyrights, Etc. ...................... 45
5.07. License, Etc. .............................................. 45
5.08. Litigation.................................................. 45
5.09. No Materially Adverse Contracts, Etc. ...................... 45
5.10. Compliance with Other Instruments, Laws, Etc. .............. 45
5.11. Tax Status.................................................. 46
5.12. No Default.................................................. 46
5.13. Holding Company and Investment Company Acts................. 46
5.14. Absence of Financing Statements, Etc........................ 46
5.15. FCC Matters................................................. 46
5.16. Tariffs .................................................... 47
5.17. Disclosure.................................................. 47
5.18. Burdensome Obligations...................................... 47
5.19. Solvency.................................................... 47
5.20. Security Interests.......................................... 47
5.21. Certain Transactions........................................ 47
5.22. Business Plans.............................................. 48
5.23. Employee Benefit Plans...................................... 48
5.24. Regulations U and X......................................... 49
5.25. Environmental Compliance.................................... 49
5.26. Subsidiaries, Etc........................................... 50
5.27. Material Contracts.......................................... 50
</TABLE>
ii
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.01. Maintenance of Office....................................... 50
6.02. Records and Accounts........................................ 51
6.03. Corporate Existence; Maintenance of Licenses................ 51
6.04. Maintenance of Properties................................... 51
6.05. Insurance................................................... 52
6.06. Taxes....................................................... 52
6.07. Inspection of Properties and Books.......................... 53
6.08. Compliance with Laws, Contracts, License, and Permits....... 53
6.09. Further Assurances.......................................... 54
6.10. Equity and Subordinated Debt................................ 54
6.11. Authorization from Landlord/Mortgagee, Etc. ................ 54
6.12. Attornment and Recognition Agreements....................... 54
6.13. Expense Allocation Agreement................................ 55
6.14. Reporting Requirements; Notices............................. 55
6.15. Financial Covenants of the Borrower......................... 60
6.16. Certified Copies of Insurance Policies...................... 62
6.17. Mortgage Liens.............................................. 62
ARTICLE VII
CERTAIN NEGATIVE COVENANTS OF THE BORROWER
7.01. Restrictions on Indebtedness................................ 63
7.02. Restrictions on Liens....................................... 65
7.03. No Contingent Obligations................................... 67
7.04. Restrictions on Investments................................. 67
7.05. Distributions............................................... 68
7.06. Merger, Consolidation, Disposition of Assets, Etc. ......... 71
7.07. Sale and Leaseback.......................................... 72
7.08. Compliance with Environmental Laws.......................... 72
7.09. Employee Benefit Plans...................................... 72
7.10. Key Management Personnel Compensation....................... 73
7.11. Transactions with Affiliates................................ 73
7.12. Change in Nature of Business................................ 74
7.13. Charter Amendments.......................................... 74
7.14. Accounting Changes.......................................... 74
7.15. Prepayments, Etc., of Indebtedness.......................... 74
7.16. Amendment, Etc., of Material Contracts...................... 75
7.17. Negative Pledge............................................. 75
7.18. Partnerships ............................................... 75
7.19. Default Under the Supply Agreement.......................... 76
</TABLE>
iii
<PAGE>
ARTICLE VIII
CONDITIONS TO THE INITIAL ADVANCE
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.01. Loan Documents.............................................. 76
8.02. Proceedings and Documents................................... 76
8.03. Validity of Liens........................................... 76
8.04. Search Reports and Related Documents........................ 76
8.05. Certificates of Insurance................................... 77
8.06. Solvency Certificate........................................ 77
8.07. Opinion of Counsel to the Borrower.......................... 77
8.08. Opinion of Counsel to Parent................................ 77
8.09. Opinion of FCC Counsel...................................... 77
8.10. Opinion of Counsel to Lenders and Administrative Agent...... 78
8.11. Payment of Fees............................................. 78
8.12. Approvals, Permits.......................................... 78
8.13. Delivery of Operating Business Plans........................ 78
8.14. Delivery of Pledged Shares.................................. 78
8.15. Material Agreements......................................... 78
8.16. Litigation.................................................. 79
8.17. Insurance Certificates...................................... 79
8.18. Other Documents............................................. 79
ARTICLE IX
ADDITIONAL CONDITIONS TO ADVANCES
9.01. Conditions to All Advances.................................. 79
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X
EVENTS OF DEFAULT; ACCELERATION; ETC.
10.01. Events of Default and Acceleration......................... 80
ARTICLE XI
THE ADMINISTRATIVE AGENT
11.01. Authorization and Action................................... 85
11.02. Administrative Agent's Reliance, Etc. ..................... 85
11.03. Ericsson and Affiliates.................................... 86
11.04. Lender Credit Decision..................................... 86
11.05. Indemnification............................................ 86
11.06. Successor Administrative Agents............................ 87
ARTICLE XII
MISCELLANEOUS
12.01. Amendments, Etc. .......................................... 88
12.02. Notices, Etc. ............................................. 89
12.03. No Waiver; Remedies........................................ 90
12.04. Costs, Expenses............................................ 90
12.05. Right of Set-off........................................... 92
12.06. Binding Effect............................................. 92
12.07. Assignments and Participations............................. 92
12.08. Governing Law.............................................. 96
12.09. Execution in Counterparts.................................. 96
12.10. Confidentiality............................................ 96
12.11. Consent to Jurisdiction.................................... 97
12.12. Matters Relating to the Collateral Agent................... 97
12.13. Amendments, etc. to Intercreditor Agreement................ 98
12.14. Waiver of Jury Trial....................................... 98
</TABLE>
v
<PAGE>
Exhibits
- --------
Exhibit A - Form of Note
Exhibit B - Form of Draw Request
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Borrower Security Agreement
Exhibit E - Form of Parent Pledge Agreement
Exhibit F - Form of Subordination Agreement
Exhibit G - Form of Compliance Certificate
Exhibit H - Form of Parent Guaranty
Exhibit I - Form of Real Estate Mortgage Option
Schedules
- ---------
Schedule 5.21 - Transactions with Officers, Directors and Employees
Schedule 5.25 - Environmental Matters
Schedule 5.27 - Material Contracts
Schedule 6.15(a) - Revenue
Schedule 6.15(d) - EBITDA
Schedule 7.04 - Investments
Schedule 7.10 - Compensation
vi
<PAGE>
LOAN AGREEMENT
--------------
This Agreement is made as of the 7th day of August, 1996, by and among (a)
OMNIPOINT COMMUNICATIONS INC. (the "Borrower"), a Delaware corporation, (b) the
--------
lenders listed on the signature pages hereof and (c) ERICSSON INC., a Delaware
corporation, as administrative agent for the Lenders (together with any
successor thereto appointed pursuant to (S)11.06, the "Administrative Agent").
--------------------
ARTICLE I
DEFINITIONS AND RULES OF INTERPRETATION
---------------------------------------
Section 1.01. Definitions.
-----------
The following terms shall have the meanings set forth in this (S)1.01 or
elsewhere in the provisions of this Agreement referred to below:
Adjusted EBITDA. For any period, the sum of
---------------
(a) EBITDA for such period, and
(b) Contributed Capital received by the Borrower during such period.
Administrative Agent. See the preamble hereto.
--------------------
Administrative Agent's Office. The Administrative Agent's office set forth
-----------------------------
in (S)12.02 and, upon the appointment of a successor Administrative Agent
pursuant to (S)11.06, such address as shall be provided by such successor
Administrative Agent, or in either case such office as the Administrative Agent
from time to time may designate.
Advances. See (S)2.01.
--------
Affiliate. As to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with
such Person. For purposes of this definition, control of a Person shall include
the power, direct or indirect, (a) to vote 50% or more of the securities or
other interests having ordinary voting power for the election of directors or
other managing Persons of such Person or (b) to direct or cause direction of the
management and policies of such Person whether by contract or otherwise.
1
<PAGE>
Applicable Lending Office. With respect to any Lender, for Base Rate
-------------------------
Loans, the office of such Lender specified as its domestic lending office and,
for LIBOR Rate Loans, the office of such Lender specified as its LIBOR lending
office, in either case on the signature pages hereof or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other offices of such
Lender as such Lender may from time to time specify to the Administrative Agent.
Applicable Margin. For
-----------------
(a) Tranche A Advances that are Base Rate Advances, *,
(b) Tranche A Advances that are LIBOR Rate Advances, *,
(c) Tranche B Advances or Tranche C Advances that are Base Rate
Advances, * and
(d) Tranche B Advances or Tranche C Advances that are LIBOR Rate
Advances, *.
Approved Annual Operating Business Plan. With respect to the Borrower's
---------------------------------------
fiscal year ending December 31, 1996, the annual operating business plan
delivered pursuant to (S)8.13(a) and, with respect to each subsequent fiscal
year of the Borrower, the annual business operating plan delivered by the
Borrower pursuant to (S)6.14(a) with respect to such fiscal year, but only if
the Required Lenders shall have approved such plan for such fiscal year.
Approved Full Term Operating Business Plan. Unless and until the Borrower
------------------------------------------
in its discretion shall have delivered to the Lenders a revised full-term
operating plan that the Required Lenders shall have approved, the full-term
operating plan delivered by the Borrower pursuant to (S)8.13(b), and thereafter
the most recent full-term operating plan delivered by the Borrower that the
Required Lenders shall have approved.
Assignment and Acceptance. An Assignment and Acceptance substantially in
-------------------------
the form of Exhibit C.
---------
Base Rate. A fluctuating interest rate per annum in effect from time to
---------
time, which rate per annum shall at any date of determination be to equal to the
higher of:
(a) (i) the rate of interest quoted as the * under the
heading "Money Rates" in The Wall Street Journal on such date (or, if
-----------------------
The Wall Street Journal is not published on such date, on the most
-----------------------
recent preceding date on which The Wall Street Journal was published),
-----------------------
or
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
2
<PAGE>
(ii) if such * cannot be determined, the rate of
interest announced publicly by Morgan Guaranty Trust Company of New
York as its base rate on such date, or
(b) * per annum above the Federal Funds Rate on such
date.
Base Rate Loans. Loans bearing interest calculated by reference to the
---------------
Base Rate.
Borrower. See the preamble hereto.
--------
Borrower Security Agreement. The Amended and Restated Borrower Security
---------------------------
Agreement among the Borrower, the Collateral Agent, the Administrative Agent and
the Nortel Administrative Agent, substantially in the form of Exhibit D, as
---------
amended from time to time in compliance with the Loan Documents.
Borrower's Obligations. All indebtedness, obligations and liabilities of
----------------------
the Borrower to the Administrative Agent, the Collateral Agent or any Lender,
arising or incurred under this Agreement or any of the other Loan Documents or
otherwise in respect of any of the Loans or any of the Notes or other
instruments at any time evidencing any thereof, existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, or whether arising by contract, operation of law or otherwise.
Business Day. Any day other than a Saturday, a Sunday or a day on which
------------
commercial banks located in New York City are authorized or required by law or
other governmental action to close.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
--------------------
Borrower in connection with the purchase or lease by the Borrower of assets that
would be required to be capitalized and shown on the balance sheet of such
Person in accordance with GAAP.
Capitalized Leases. Leases under which the Borrower is the lessee or
------------------
obligor, the discounted future rental-payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
Cash Maintenance Agreement. The Cash Maintenance Agreement dated as of
--------------------------
August 7, 1996 between the Administrative Agent and Grand Parent, as amended
from time to time.
CERCLA. The Comprehensive Environmental Response, Compensation and
------
Liability Act, as amended, 42 USCA (S)9601 et seq.
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
3
<PAGE>
Closing Date. The meaning specified in the introductory clause of Article
------------
VIII.
Collateral. All of the property, rights and interests of the Borrower and
----------
Parent that are or are intended to be subject to the security interests created
by the Borrower Security Agreement and Parent Pledge Agreement.
Collateral Agent. Mellon Bank, N.A. or any successor thereto appointed
----------------
pursuant to (S)6.1 of the Intercreditor Agreement.
Collateral Documents. The Borrower Security Agreement and the Parent
--------------------
Pledge Agreement.
Commitment. With respect to any Lender, either of its Tranche A Advance
----------
Commitment or its Tranche B and C Advance Commitment.
Communications Act. The Communications Act of 1934, as amended, and the
------------------
rules and regulations issued thereunder, as from time to time in effect.
Confidential Information. Information that the Borrower furnishes to the
------------------------
Administrative Agent or any Lender in a writing designated as confidential, but
Confidential Information does not include any such information that is or
becomes generally available to the public or that is or becomes available to the
Administrative Agent or such Lender from a source other than the Borrower.
Contingent Obligation. As to any Person, any obligation of such Person
---------------------
guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or
other obligation ("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner, whether directly or indirectly, including, without
- -------
limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any Property
constituting direct or indirect security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation,
or
(ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain net worth, solvency or other
financial statement condition of the primary obligor;
4
<PAGE>
(c) to purchase Property, securities or services primarily for the
purpose of assuring the beneficiary or holder of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation; or
(d) otherwise to assure, protect from loss, or hold harmless the
beneficiary or holder of such primary obligation against loss in respect
thereof;
provided that the term Contingent Obligation shall not include the indorsement
- --------
of instruments for deposit or collection in the ordinary course of business.
The term Contingent Obligation shall also include the liability of a general
partner in respect of the recourse liabilities of the partnership in which it is
a general partner. The amount of any Contingent Obligation of a Person shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
Contributed Capital. For any period,
-------------------
(i) proceeds from the sale of the Borrower's equity securities
received by the Borrower during such period, plus
(ii) Subordinated Debt incurred by the Borrower during such period,
together with accrued and unpaid interest thereon.
Convert, Conversion and Converted. A conversion of Advances of one Type
------- ---------- ---------
into Advances of the other Type pursuant to (S)2.05 or 2.06.
Cumulative Cash Flow Shortfall. With respect to any date of determination,
------------------------------
the cumulative amount of EBTDA for the period beginning on January 1, 1996 and
ending on the last day of the Borrower's fiscal quarter most recently ended
prior to such date of determination, minus (without duplication) the following:
(a) to the extent deducted in calculating Net Income for such period,
taxes actually paid during such period,
(b) Capital Expenditures, net of proceeds of any financing for all or
any portion of such Capital Expenditures, made during such period and
5
<PAGE>
(c) the aggregate amount of payments and prepayments of principal in
respect of Indebtedness of the Borrower during such period net of any
refunding or refinancing thereof from Persons other than an Affiliate of
the Borrower.
Debt Service. For any period, the aggregate scheduled amount of interest
------------
required to be paid and principal required to be repaid by the Borrower during
such period on all Indebtedness of the Borrower outstanding during all or any
part of such period (excluding (a) the amount of any prepayment pursuant to
(S)3.02(a) or (b) or (S)3.2.B or C of the Nortel Loan Agreement required to be
made during such period and (b) interest capitalized under loans where such
loans provide for the funding of interest costs), whether such interest and
principal were or are required to be reflected as an item of expense or
capitalized, including payments in respect of Capitalized Leases and including
scheduled payments of commitment fees, agency fees, facility fees, origination
fees, balance-deficiency fees and similar fees or expenses in connection with
Indebtedness.
Default. Any Event of Default and any event or condition that, with the
-------
giving of notice, the lapse of time, or both, would become an Event of Default.
Distribution. Any of the following:
------------
(a) the declaration or payment of any cash dividend, dividend in kind
or cash equity distributions on or in respect of any shares of any class of
capital Stock of the Borrower, other than dividends payable solely in
shares of common Stock of the Borrower;
(b) the purchase, redemption, or other retirement of any shares of any
class of capital Stock of the Borrower;
(c) the return of capital by the Borrower to its shareholders as such;
(d) any other distribution on or in respect of any shares of any class
of capital Stock of the Borrower; or
(e) any payment of principal, premium or interest, or any other
amount, in respect of Subordinated Debt of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
------------
Draw Request. See (S)2.02.
------------
EBITDA. For any period,
------
6
<PAGE>
(a) Net Income of the Borrower for such period, plus
(b) to the extent deducted in determining Net Income, the sum of each
of the following for such period:
(i) depreciation, amortization and other non-cash charges;
(ii) income-tax expense; and
(iii) Total Interest Expense.
EBTDA. For any period,
-----
(a) Net Income of the Borrower for such period, plus
(b) to the extent deducted in determining Net Income, the sum of each
of the following for such period:
(i) depreciation, amortization and other non-cash charges;
(ii) income-tax expense; and
(iii) interest not being paid as an express feature of the
related debt instrument.
Employee Benefit Plan. Any employee benefit plan within the meaning of
---------------------
(S)3(3) of ERISA maintained or contributed to by any of the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
Environmental Laws. Any federal, state or local law, statute, rule or
------------------
regulation or common law relating to the environment or occupational health and
safety, including any statute, regulation or order pertaining to
(a) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste;
(b) air, water or noise pollution;
(c) groundwater and soil contamination;
7
<PAGE>
(d) the release or threatened release into the environment of
industrial, toxic or hazardous substances, or solid or hazardous waste,
including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals;
(e) the protection of wildlife, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species;
(f) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed receptacles;
(g) health and safety of employees and other persons; and
(h) manufacture, processing, use, distribution, treatment, storage,
disposal, transportation or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or oil or petroleum products,
by-products or breakdown products or solid or hazardous waste,
including (i) CERCLA; (ii) RCRA; (iii) the Toxic Substance Control Act, as
amended, 15 USCA (S)2601 et seq.; (iv) the Water Pollution Control Act, as
amended, 33 USCA (S)1251 et seq.; (v) the Clean Air Act, as amended, 42 USCA
(S)7401 et seq.; (vi) the Hazardous Material Transportation Act, as amended, 49
USCA (S)1801 et seq.; (vii) the Superfund Amendments and Reauthorization Act of
1986 and (viii) all rules, regulations judgments decrees injunctions and
restrictions thereunder and any analogous state law. As used above, the terms
"release," "threatened release," "hazardous substance" and "environment" shall
have the meaning set forth in CERCLA, and the terms "solid waste" and "dispose"
(or "disposal") shall have the meaning set forth in the RCRA.
Environmental Permits. See (S)5.25(d).
---------------------
Ericsson. See the preamble hereto.
--------
ERISA. The Employee Retirement Income Security Act of 1974, as amended,
-----
and the rules and regulations issued thereunder as from time to time in effect.
ERISA Affiliate. Any Person that is treated as a single employer with the
---------------
Borrower under (S)414 of the IRC.
ERISA Event. With respect to the Borrower or any ERISA Affiliate,
-----------
(a) a Reportable Event,
8
<PAGE>
(b) the withdrawal of the Borrower or any ERISA Affiliate from a Plan
during a plan year in which it was a "substantial employer" as defined in
(S)4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Plan under a
distress termination of the Plan under (S)4041(c) of ERISA, or the
treatment of a Plan amendment as a termination under (S)4041 of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC
under (S)4042 of ERISA or
(e) the occurrence of any other event or condition which might
reasonably be expected to constitute grounds under (S)4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
to cause the imposition of any liability (other than PBGC premiums due but
not delinquent under (S)4007 of ERISA) in excess of $250,000 under Title IV
of ERISA.
Event of Default. Any of the events specified in (S)10.01.
----------------
Excess Cash Flow. With respect to any date of determination,
----------------
(a) EBTDA for the most recent complete fiscal year of the Borrower
preceding such date (the "Prior Fiscal Year"), plus
-----------------
(b) to the extent deducted in calculating Net Income for the Prior
Fiscal Year, the aggregate amount of interest payments made by the Borrower
in respect of Subordinated Debt owing to Parent or Grand Parent, minus
(c) the following, without duplication,
(i) to the extent added to Net Income in order to determine
EBTDA for the Prior Fiscal Year, income tax expense reflecting amounts
actually paid during the Prior Fiscal Year;
(ii) Capital Expenditures, net of proceeds of any new financing
for all or any portion of such Capital Expenditures, made during the
Prior Fiscal Year;
(iii) the aggregate amount of scheduled principal payments in
respect of Indebtedness outstanding under any Permitted Loan
Agreement, permitted
9
<PAGE>
under (S)7.1(e) or (g), or payable to the FCC with respect to the
License for the New York MTA during the Prior Fiscal Year, and during
the fiscal year of the Borrower in which such date of determination
falls;
(iv) the aggregate principal amount of mandatory prepayments made
during the Prior Fiscal Year under this Agreement and the Nortel Loan
Agreement and on Indebtedness of the Borrower owed to any other lender
that is a party to the Intercreditor Agreement (other than mandatory
prepayments under (S)3.02(b), (S)3.2.C of the Nortel Loan Agreement
and, to the extent, if any, permitted under the Intercreditor
Agreement, mandatory prepayments of loans under other Permitted Loan
Agreements, the proceeds of which may be used for purposes
substantially similar to the purposes described in the definition of
Tranche B Expenses or those permitted for Tranche B Loans (as defined
in the Nortel Loan Agreement as in effect on the date hereof), out of
Excess Cash Flow; and
(v) the difference between (A) the Working Capital of the last
day of the Prior Fiscal Year and (B) the Working Capital as of the day
before the first day of the Prior Fiscal Year; provided that in
--------
calculating Working Capital there shall be excluded from current
assets (1) all receivables outstanding more than 60 days past invoice
date and (2) all inventories that otherwise would be included as
current assets under such balance sheet and there shall be excluded
from current liabilities the current portion of long-term debt.
Expense Allocation Agreement. The Expense Allocation Agreement among the
----------------------------
Borrower, Parent and Grand Parent dated as of July 21, 1995, as amended from
time to time as permitted hereunder.
FCC. The Federal Communications Commission or any Governmental Body
---
succeeding to the functions thereof.
Federal Funds Rate. The fluctuating interest rate per annum equal for each
------------------
day during such period to the weighted average of the rates on overnight
federal-funds transactions with members of the Federal Reserve System arranged
by federal-funds brokers, as published for such day (or, if such day is not a
Business Day, for the next-preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Administrative Agent from three federal-funds brokers of recognized standing
selected by it.
10
<PAGE>
First LIBOR Method. The terms and provisions of this Agreement relating to
------------------
LIBOR Rate Advances specified as being applicable when the First LIBOR Method is
applicable under (S)2.11.
GAAP. See (S)1.03.
----
Governmental Body. Any nation or government, any state or other political
-----------------
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
court or arbitrator.
Grand Parent. Omnipoint Corporation, a Delaware corporation.
------------
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(2) of ERISA that is maintained or contributed to by any of the
Borrower or any ERISA Affiliate or that was so maintained or contributed to and
in respect of which the Borrower or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event that such plan has been or were
to be terminated the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Indebtedness. As to any Person, at a particular time, all items that
------------
constitute, without duplication,
(a) obligations of such Person in respect of borrowed money or for the
deferred purchase price of Property (other than trade payables incurred in
the ordinary course of business);
(b) obligations of such Person evidenced by notes, bonds, debentures
or similar instruments;
(c) obligations of such Person with respect to any conditional-sale or
title-retention agreement;
(d) obligations of such Person arising under acceptance facilities and
the amount available to be drawn under all letters of credit issued for the
account of such Person and, without duplication, all drafts drawn
thereunder to the extent such Person shall not have reimbursed the issuer
in respect of the issuer's payment of such drafts;
(e) all liabilities secured by any Lien on any Property owned by such
Person even though such Person has not assumed or otherwise become liable
for the payment
11
<PAGE>
thereof (other than carriers', warehousemen's, mechanics', repairmen's or
other like non-consensual Liens arising in the ordinary course of
business);
(f) obligations of such Person under Capitalized Leases;
(g) amounts owed by such Person to the FCC on the FCC License for the
New York PCS Network;
(h) all Contingent Obligations of such Person; and
(i) interest that is accreted or otherwise accrued and unpaid on
Subordinated Debt.
Intellectual Property. All copyrights, trademarks, service marks, patents,
---------------------
trade names and service names, Licenses and the like.
Intercreditor Agreement. The Intercreditor Agreement dated as of the date
-----------------------
hereof among the Collateral Agent, Ericsson, Nortel and the other administrative
agents and lenders parties thereto.
Interest Period. While the First LIBOR Method is applicable and Loans are
---------------
accruing interest at the LIBOR Rate, the period commencing on the date on which
interest on the Loans shall accrue at the LIBOR Rate as provided herein and
ending on the last day of such period, determined as provided below, and
thereafter each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period, determined
as provided below, or, if earlier, on the last day on which the Loans shall
accrue interest at the LIBOR Rate. While the Second LIBOR Method is applicable,
for each LIBOR Rate Advance comprising part of the same Loan, the period
commencing on the date of such LIBOR Rate Advance or the date of the Conversion
of any Base Rate Advance into such LIBOR Rate Advance and ending on the last day
of such period, determined as provided below, and, thereafter, each subsequent
period commencing on the last day of the immediately preceding Interest Period
and ending on the last day of such period, determined as provided below. The
duration of each such Interest Period shall be three months; provided that:
--------
(a) whenever the last day of any Interest Period would otherwise occur
on a day other than a LIBOR Business Day, the last day of such Interest
Period shall be extended to occur on the next-succeeding LIBOR Business
Day; provided that, if such extension would cause the last day of such
--------
Interest Period to occur in the next-following calendar month, the last day
of such Interest Period shall occur on the next-preceding LIBOR Business
Day, and
12
<PAGE>
(b) whenever the first day of any Interest Period occurs on a day of
an initial calendar month for which there is no numerically corresponding
day in the third-following calendar month, such Interest Period shall end
on the last LIBOR Business Day of such third-following calendar month.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of capital Stock or Indebtedness
of, or for loans, advances, capital contributions or transfers of property to,
or in respect of any guaranties (or other commitments as described under
Contingent Obligations), or obligations of, any Person. In determining the
aggregate amount of Investments outstanding at any particular time:
(a) the amount on any date of determination of any Investment
represented by a Contingent Obligation shall be taken at not less than the
principal amount of the obligations as to which such Contingent Obligation
exists and that are still outstanding on such date of determination;
(b) there shall be included as an Investment all interest accrued with
respect to Indebtedness constituting an Investment unless and until such
interest is paid;
(c) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution);
(d) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends,
interest or otherwise, except that accrued interest included as provided in
the foregoing clause (b) may be deducted when paid; and
(e) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
IRC. The Internal Revenue Code of 1986, as amended from time to time, and
---
the rules and regulations issued thereunder as from time to time in effect.
Lender. Ericsson, unless and until it shall have assigned to other Persons
------
all of its rights and obligations as a Lender hereunder, and any other Person
that becomes a Lender by reason of an Assignment and Acceptance in accordance
with the terms of this Agreement.
LIBOR Business Day. Any Business Day on which commercial banks are open
------------------
for international business (including dealings in Dollar deposits) in London.
13
<PAGE>
LIBOR Rate. For any applicable Interest Period, a simple per annum
----------
interest rate (rounded upward, if necessary, to the nearest 1/100th of one
percent) equal to
(a) (i) the rate per annum that appears on Page 3750 of the Dow Jones &
Company Telerate, screen or any successor page as the composite offered
rate for London interbank deposits, in an amount approximately equal to the
amount of the requested Loan for a three-month period, as shown under the
heading "USD" as of 11:00 a.m. (London time), two LIBOR Business Days
before the first day of such Interest Period, or
(ii) if the rate specified in clause (i) cannot be determined, the
rate per annum equal to the arithmetic mean of the rates shown on the LIBO
page of Reuters Money Service at approximately 11:00 a.m. (London time),
two LIBOR Business Days before the first day of such Interest Period in an
amount approximately equal to the amount of the requested Loan,
divided by
(b) one, minus the LIBOR Reserve Rate, stated as a decimal.
LIBOR Rate Advance. An Advance bearing interest calculated by reference to
------------------
the LIBOR Rate.
LIBOR Reserve Rate. For any Interest Period for all LIBOR Rate Advances
------------------
comprising part of the same Loan, the reserve percentage applicable two Business
Days before the first day of such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference to which
the interest rate on LIBOR Rate Advances is determined) having a term equal to
such Interest Period.
License. Any mobile telephone, cellular telephone, microwave, paging or
-------
other license, authorization, certificate of compliance, franchise, approval or
permit, whether for the construction or the operation of any PCS System, granted
or issued by the FCC and any other federal Governmental Bodies.
Lien. Any mortgage, pledge, hypothecation, assignment, deposit or
----
preferential arrangement, encumbrance, lien (statutory or other), or other
security agreement or security interest of any kind or nature whatsoever,
including any conditional sale or other title retention
14
<PAGE>
agreement and any Capitalized Lease or other financing lease having
substantially the same economic effect as any of the foregoing.
Loan Documents. This Agreement, the Notes, the Borrower Security
--------------
Agreement, the Parent Pledge Agreement, the Parent Guaranty, the respective
Subordination Agreements to be entered into by Parent and Grand Parent, the
Mortgage, the Intercreditor Agreement, the Cash Maintenance Agreement, the
Supply Agreement, any mortgage or deed of trust entered into pursuant to (S)6.17
or (S)7.02(e)(ii)(B)(1), any option entered into pursuant to
(S)7.02(e)(ii)(B)(2) and any other agreements or documents contemplated hereby
or thereby and all schedules, exhibits and annexes thereto.
Loans. Collectively, the Tranche A Loans, the Tranche B Loans and the
-----
Tranche C Loans.
Material Adverse Effect. An effect resulting from any circumstance or
-----------------------
event of whatever nature (including any adverse determination in any litigation)
which does, or could reasonably be expected to, materially and adversely
(a) impair the validity or enforceability of any of the Loan Documents
or the Administrative Agent's, the Collateral Agent's or any Lender's
rights or remedies with respect thereto;
(b) impair the ability of the Borrower to pay the Borrower's
Obligations in accordance with their terms;
(c) cause a Default;
(d) affect the business, property, prospects, operations, or financial
or other condition of the Borrower or Parent; or
(e) impair or affect the Collateral or Lender's Liens on the
Collateral or the priority of such Liens.
Material Contract: With respect to any Person, each contract to which such
-----------------
Person is a party involving aggregate consideration payable to or by such Person
of $5,000,000 or more in any 12-month period or otherwise material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
Materials of Environmental Concern. Any chemicals, pollutants or
----------------------------------
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the RCRA), toxic
materials, oil or petroleum and
15
<PAGE>
petroleum products, by products or breakdown products or any other material
subject to regulation under any Environmental Laws.
Mortgage. The Purchase Money Commercial Mortgage and Security Agreement
--------
dated as of November 1, 1995 in favor of the Nortel Administrative Agent, as
amended and assigned to the Collateral Agent as of August 7, 1996 and as further
amended from time to time in compliance with the Loan Documents.
MTA. Any "major trading area" as set forth on the Rand McNally 1992
---
Commercial Atlas & Marketing Guide, 123rd Edition, at pages 38-39 ("BTA/MTA
Map") and utilized by the FCC in dividing the 50 states, the District of
Columbia and United States territories into 51 MTAs for the purpose of licensing
PCS Systems.
Multiemployer Plan. A "multiemployer plan" as defined in Sections
------------------
4001(a)(3) and 3(37) of ERISA, and to which the Borrower or any ERISA Affiliate
is making, or is obligated to make, contributions or has made, or been obligated
to make, contributions.
Necessary Authorizations. All approvals and licenses from, and all filings
------------------------
and registrations with, any governmental or other regulatory authority,
including the License for the New York MTA and all grants, approvals, licenses,
filings and registrations under the Communications Act, necessary in order to
enable the Borrower to own, construct, maintain and operate PCS Systems.
Net Cash Proceeds. With respect to any transaction by any Person, the
-----------------
aggregate amount of cash received from time to time by or on behalf of such
Person in connection with such transaction, after deducting therefrom only
(a) reasonable and customary brokerage commissions, underwriting fees
and discounts, legal fees, finder's fees and other similar fees and
commissions, and
(b) the amount of taxes payable in connection with or as a result of
such transaction,
in each case to the extent, but only to the extent, that the amounts so deducted
are, at the time of receipt of such cash, actually paid to a Person that is not
an Affiliate of the Borrower and are properly attributable to such transaction
or to the asset that is the subject thereof.
Net Income. For any period, net income (or loss) of the Borrower
----------
determined in accordance with GAAP for such period.
16
<PAGE>
New York PCS Network. The PCS Network in the New York MTA to be
--------------------
constructed pursuant to the License for such MTA awarded to the Borrower.
Nortel Administrative Agent. At any time, the Person then acting as the
---------------------------
administrative agent under the Nortel Loan Agreement.
Nortel Loan Agreement. The Amended and Restated Loan Agreement dated as of
---------------------
August 7, 1996 among the Borrower, Northern Telecom Inc., as administrative
agent, and the lenders parties thereto, and as the same may be amended from time
to time in compliance with the Loan Documents.
Notes. The Notes substantially in the form of Exhibit A issued by the
----- ---------
Borrower hereunder.
Orbitel. Orbitel Mobile Communications, Ltd.
-------
Parent. Omnipoint PCS, Inc., a Delaware corporation.
------
Parent Guaranty. The limited-recourse guaranty of Parent in favor of the
---------------
Administrative Agent and the Lenders, substantially in the form of Exhibit I, as
---------
amended from time to time in compliance with the Loan Documents.
Parent Pledge Agreement. The Amended and Restated Pledge Agreement among
-----------------------
Parent, the Collateral Agent, the Administrative Agent and Nortel Administrative
Agent, substantially in the form of Exhibit E, as amended from time to time in
---------
compliance with the Loan Documents.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of
----
ERISA, or any Governmental Body succeeding to the functions thereof.
PCS. The business of providing mobile communications services through the
---
use of microcells on microwave broadband frequencies with numerous low-power
transmitters, each serving a small area, but excluding cellular telephone
services.
PCS System. A PCS radio telephone system constructed and operated pursuant
----------
to a License therefor.
Permitted Liens. Liens, security interests and other encumbrances
---------------
permitted by (S)7.02.
Permitted Loan Agreement. The meaning specified in the Intercreditor
------------------------
Agreement.
17
<PAGE>
Person. Any natural person, corporation, firm, joint venture, limited
------
liability company, partnership, association, enterprise, trust or other entity
or organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
Plan. With respect to the Borrower or any ERISA Affiliate, at any time, an
----
employee pension benefit plan as defined in (S)3(2) of ERISA (other than a
Multiemployer Plan) that is covered by Title IV of ERISA or subject to the
minimum funding standards under (S)412 of the IRC and
(a) is maintained for the employees of the Borrower or any ERISA
Affiliate, or
(b) was so maintained and in respect of which the borrower or any
ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event that such plan has been or were to be terminated.
Pledged Collateral. As defined in the Parent Pledge Agreement.
------------------
Pledged Shares. As defined in the Parent Pledge Agreement.
--------------
Property. All types of real, personal, tangible, intangible or mixed
--------
property, including the License for the New York MTA.
Qualified Commitment. A binding written commitment to contribute equity
--------------------
capital or loan Subordinated Debt to the Borrower that
(a) is from either
(i) a Person (including Affiliates of the Borrower other than
Parent or Grand Parent) that, in the sole judgment of the Required
Lenders, has the financial resources and capability of performing the
commitment and making such investment, or
(ii) Parent or Grand Parent, if and to the extent that such
Person is holding cash, securities for which there is a readily
available market on an established stock exchange (including over-
the-counter exchanges) or other permitted investments under (S)7.04(a)
through (e), inclusive, equal to or in excess of the amount of such
commitment;
(b) is in a form customarily utilized by institutional venture-capital
firms for binding written commitments that have passed all internal credit
reviews;
18
<PAGE>
(c) has been executed by and is binding on such Person and the
Borrower; and
(d) (i) if the Person providing such commitment is Parent or Grand
Parent or another Affiliate of the Borrower, as to which all
conditions precedent to the making of such investment shall have been
satisfied, and
(ii) in all other cases, is subject only to verification that
there has occurred no material adverse change in the financial
condition of the Borrower since the date of the credit review on which
such commitment was predicated and completion, execution and delivery
of definitive loan documentation and customary closing documents
required by such investor or lender.
Rate Hedging Agreements. (a) Any and all agreements, devices or
-----------------------
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to dollar-denominated or cross-currency interest-rate exchange
agreements, forward-currency-exchange agreements, interest-rate-cap or dollar-
protection agreements, forward-rate-currency or interest-rate options, puts and
warrants, and (b) any and all cancellations, buy backs, reversals, terminations
or assignments of any of the foregoing.
RCRA. The Resource Conservation and Recovery Act of 1976, as amended, 42
----
USCA (S)6901 et seq.
Real Estate. Any parcel of real property or any facility currently (or for
-----------
purposes of compliance with Environmental Laws, formerly) owned, operated or
controlled by the Borrower.
Register. See (S)12.07(c).
--------
Reportable Event. The occurrence of any of the events set forth in
----------------
(S)4043(c) of ERISA or the regulations thereunder with respect to a Plan.
Required Lenders. At any time Lenders owed at least a majority in interest
----------------
of the sum of
(a) the then-outstanding aggregate unpaid principal amount of the
Advances owing to the Lenders, and
19
<PAGE>
(b) the then-outstanding undrawn Commitments.
Revenue. For any period,
-------
(a) the sum, without duplication, of
(i) gross billings to subscribers, net of taxes and other
direct pass-through charges,
(ii) revenue from the sale of equipment in the ordinary course
of business, net of the cost of such equipment,
(iii) so-called "roamer revenue", net of direct pass-through
charges, and
(iv) other revenue of the Borrower (in the case of resales net
of associated direct costs),
in each case as determined in accordance with GAAP, minus
(b) all revenue arising from payments by Affiliates (except where
the Affiliate is acting as a reseller of goods or services for the
Borrower),
in each case as determined with respect to such period.
Royalty Agreement. The Acquisition Supply and License Agreement for
-----------------
Omnipoint Personal Communications System (PCS) Infrastructure Products dated as
of April 16, 1996 between Ericsson and Omnipoint Corporation, as amended from
time to time.
Second LIBOR Method. The terms and provisions of this Agreement relating
-------------------
to LIBOR Rate Advances specified as being applicable when the Second LIBOR
Method is applicable under (S)2.11.
Solvent. With respect to any Person on a particular date, the condition
-------
that on such date,
(a) the present fair salable value of the assets of such Person is
greater than the total amount that will be required to pay the probable
liabilities of such Person as and when they become due, including
Contingent Obligations, of such Person;
20
<PAGE>
(b) such Person is paying, and believes that it will be able to pay in
the future, its debts generally as and when they become due; and
(c) such Person is not engaged in business or a transaction, or is not
about to engage in business or a transaction, for which such Person's
Property would constitute an unreasonably small amount of capital.
With respect to the determination referred to in clause (a) above, the fair
salable value of the License for the New York MTA during the initial three-year
period in which transfers are restricted by the FCC, the effect of such a
transfer restriction shall be ignored.
Stock. With respect to any Person, any and all shares of capital stock of
-----
such Person and interests, participations, warrants or other equivalents
(however designated) therein or with respect thereto.
Subordinated Debt. Indebtedness of the Borrower as to which the holder
-----------------
thereof has executed a Subordination Agreement.
Subordination Agreement. The Subordination Agreement in substantially the
-----------------------
form of Exhibit F.
---------
Subsidiary. As to any Person, any corporation, association, partnership,
----------
joint venture or other business entity of which such Person and/or any
Subsidiary of such Person, directly or indirectly, either
(a) in respect of a corporation, owns or controls more than 50% of the
outstanding capital Stock having ordinary voting power to elect a majority
of the board of directors or similar managing body, irrespective of whether
a class or classes shall or might have voting power by reason of the
happening of any contingency, or
(b) in respect of an association, partnership, joint venture or other
business entity, is entitled to share in more than 50% of the profits and
losses, however determined.
Supply Agreement. The Acquisition Agreement for Ericsson CMS 40 Personal
----------------
Communications Systems (PCS) Infrastructure Equipment dated as of April 16, 1996
between Ericsson and the Borrower, as amended from time to time.
Total Interest Expense. For any period, the aggregate amount of interest
----------------------
required to be accrued by the Borrower during such period on all Indebtedness of
the Borrower outstanding during all or any part of such period, whether such
interest was or is required to be reflected
21
<PAGE>
as an item of expense or capitalized, including payments consisting of interest
in respect of Capitalized Leases and including arrangement fees, commitment
fees, agency fees, facility fees, origination fees, balance-deficiency fees and
similar fees or expenses in connection with the borrowing of money, all as
determined in accordance with GAAP; provided that (a) any origination fee
--------
paid from the proceeds of a financing shall be treated as being amortized evenly
over the term of such financing for purposes of determining Total Interest
Expense for any period and (b) notwithstanding clause (a) above, fees payable to
Ericsson pursuant to (S)2.03 under all circumstances shall be treated as accrued
on the date when payable.
Tranche A Advance Commitment. See (S)2.01(a).
----------------------------
Tranche A Advances. See (S)2.01(a).
------------------
Tranche A Advance Maturity Date. The earlier of
-------------------------------
(a) *, and
(b) the date of the acceleration of the Advances pursuant to (S)10.01.
Tranche A Expenses. With respect to any date of determination, amounts due
------------------
and payable or previously paid by the Borrower on or before such date of
determination for or in respect of:
(a) the purchase of equipment and services (other than IS661 base
station controllers) from Ericsson under the Supply Agreement (whether
manufactured or provided by Ericsson or purchased by Ericsson from other
sources and resold to the Borrower under the Supply Agreement) for use by
the Borrower in the build-out of the New York MTA;
(b) the purchase from the Grand Parent or one of its Subsidiaries of
IS661 base transceiver stations that are manufactured by the Grand Parent
or one of its Subsidiaries, or the purchase from Ericsson under the Supply
Agreement of IS661 base station controllers manufactured by Ericsson, for
use by the Borrower in the build-out of the New York MTA; and
(c) interest accruing on Advances through *.
Tranche A Loans. A loan consisting of simultaneous Tranche A Advances of
---------------
the same Type made by the Lenders.
Tranche B and C Advance Commitment. See (S)2.01(b).
----------------------------------
- ---------------
* Confidential information has been omitted and filed separately
with the Commission
22
<PAGE>
Tranche B Advances. See (S)2.01(b).
------------------
Tranche B Advance Maturity Date. The earlier of
-------------------------------
(a) *, and
(b) the date of the acceleration of the Advances pursuant to (S)10.01.
Tranche B Expenses. With respect to any date of determination, amounts due
------------------
and payable or previously paid by the Borrower on or before such date of
determination for or in respect of:
(a) costs incurred by the Borrower in connection with construction,
engineering, design and site acquisition for the New York PCS Network;
(b) the actual costs incurred by the Borrower of physically relocating
existing microwave installations which are incompatible with the New York
PCS Network; and
(c) amounts payable to vendors of equipment to build the New York PCS
Network from Persons other than Ericsson.
Tranche B Loans. A loan consisting of simultaneous Tranche B Advances of
---------------
the same Type made by the Lenders.
Tranche C Advances. See (S)2.01(c).
------------------
Tranche C Advance Maturity Date. The earlier of
-------------------------------
(a) *, and
(b) the date of the acceleration of the Advances pursuant to (S)10.01.
Tranche C Expenses. With respect to any date of determination, amounts due
------------------
and payable or paid by the Borrower on or before such date of determination for
the purchase from Ericsson or Orbitel of PCS handsets and accessories
manufactured or supplied by Ericsson or Orbitel or their respective Affiliates
for sale in connection with the Borrower's business.
Tranche C Loans. A loan consisting of simultaneous Tranche C Advances of
---------------
the same Type made by the Lenders.
- ---------------------
* Confidential information has been omitted and filed separately
with the Commission.
23
<PAGE>
Type. As to any Loan, its nature as a Base Rate Loan, or a LIBOR Rate
----
Loan.
Voting Stock. Capital Stock or similar interests, of any class or classes
------------
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
Working Capital. With respect to any date of determination, the difference
---------------
between the Borrower's "current assets" and "current liabilities" as of such
date of determination in accordance with GAAP.
Working Capital Loan Agreement. The meaning specified in the Intercreditor
------------------------------
Agreement.
Section 1.02. Rules of Interpretation. (a) A reference to any document
-----------------------
or agreement shall include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and the terms of
this Agreement.
(b) The singular includes the plural and the plural includes the singular.
(c) A reference to any law includes any amendment or modification to such
law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting entity
to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by GAAP, which terms are
defined in the Uniform Commercial Code as in effect in the State of New York,
have the meanings assigned to them therein.
(h) Reference to a particular "(S)" or Exhibit refers to that section or
that exhibit to this Agreement, unless otherwise indicated.
24
<PAGE>
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
Section 1.03. Accounting Terms. Except as otherwise expressly provided
----------------
herein, all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Administrative Agent shall be prepared in accordance with the
following ("GAAP"):
----
(a) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors in
effect at December 31, 1995, and
(b) to the extent consistent with such principles, the accounting
practice of the Borrower reflected in its financial statements for the year
ended at the date referred to in clause (a) above,
provided that, if such Board after the date hereof shall promulgate or adopt
- --------
principles that are materially different from those in effect at December 31,
1995, the Borrower and the Lenders will endeavor in good faith to amend this
Agreement in order to amend (i) the definition of GAAP to include such different
principles, and (ii) the other provisions of this Agreement so as to reflect in
substance the same limitations and restrictions as in effect prior to such
amendment to the definition of GAAP. Prior to the effective date, if any, of
any such amendment, GAAP shall, however, continue to include only the principles
specified in clause (a) of the preceding sentence.
ARTICLE II
THE LOANS
---------
Section 2.01. Commitment to Lend. Each Lender severally agrees, on
------------------
the terms and conditions hereinafter set forth, to make
(a) until the earlier of (i) the date on which the purchase price for
the last equipment delivered under the Supply Agreement is payable (but not
later than the day before the last repayment date for Tranche A Advances
under (S)3.01(a)) and (ii) the termination of the Commitments pursuant to
(S)10.01, advances ("Tranche A Advances") up to an aggregate principal
------------------
amount for all Tranche A Advances (whether or not repaid or prepaid, except
as otherwise provided in (S)3.04(c)) set forth opposite such Lender's name
on the signature pages hereof under the heading Tranche A Advance
25
<PAGE>
Commitment or, if such Lender has entered into any Assignment and
Acceptance, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to (S)12.07(c) (such Lender's "Tranche A
---------
Advance Commitment");
------------------
(b) until the date on which the Lenders shall no longer be required to
make Tranche A Advances, advances ("Tranche B Advances") up to an aggregate
------------------
principal amount for all Tranche B Advances and Tranche C Advances (whether
or not repaid or prepaid, except as otherwise provided in (S)3.04(c)) set
forth opposite such Lender's name on the signature pages hereof under the
heading Tranche B and Tranche C Advance Commitment or, if such Lender has
entered into any Assignment and Acceptance, set forth for such Lender in
the Register maintained by the Administrative Agent pursuant to (S)12.07(c)
(such Lender's "Tranche B and C Advance Commitment"); and
----------------------------------
(c) until the earlier of June 30, 1998 and (ii) the termination of the
Commitments pursuant to (S)10.01, advances ("Tranche C Advances" and,
------------------
together with the Tranche A Advances and the Tranche B Advances, the
"Advances") up to an aggregate principal amount for all Tranche C Advances
---------
and Tranche B Advances (whether or not repaid or prepaid, except as
otherwise provided in (S)3.04(c)) equal to such Lender's Tranche B and C
Advance Commitment.
In no event shall any Lender make
(i) any Advance if, on the date of such Advance and after giving
effect thereto, the aggregate principal amount of all Advances would exceed
(A) * , prior to the date on which the Lender shall have
delivered to the Administrative Agent evidence reasonably satisfactory
to the Administrative Agent that the Borrower has at least *
activated PCS handsets on which telephone calls are billable to
Persons other than the Borrower and its Affiliates, and
(B) * , plus the aggregate purchase price of equipment
delivered to the Borrower or its Affiliates under the Royalty
Agreement, thereafter;
(ii) any Tranche A Advance if, on the date of such Tranche A Advance
and after giving effect thereto, the aggregate principal amount of all
Tranche A Advances would exceed the lesser of:
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
26
<PAGE>
(A) * , plus the aggregate purchase price of equipment
delivered to the Borrower or its Affiliates in lieu of cash payments
under the Royalty Agreement prior to such date, and
(B) the sum of
(1) the lesser of (I) * and (II) the aggregate
amount of all Tranche A Expenses incurred by the Borrower on or
before such date with respect to equipment described in clause
(b) of the definition thereof, and
(2) the aggregate amount of all other Tranche A Expenses
incurred by the Borrower on or before such date, minus, after
June 30, 1998, Tranche A Expenses with respect to accrued
interest described in clause (c) of the definition thereof;
(iii) any Tranche B Advance if, on the date of such Tranche B Advance
and after giving effect thereto, the aggregate principal amount of all
Tranche B Advances then outstanding would exceed the lesser of:
(A) * , and
(B) the aggregate amount of all Tranche B Expenses incurred by
the Borrower on or before such date; or
(iv) any Tranche C Advance if, on the date of such Tranche C Advance
and after giving effect thereto, the aggregate principal amount of all
Tranche C Advances, the proceeds of which shall have been used for such
purpose, shall exceed the lesser of:
(A) * , multiplied by the number of handsets manufactured by
Ericsson or Orbitel theretofore purchased by the Borrower and to be
purchased by the Borrower with the proceeds of such Tranche C Advance,
or
(B) *** of the aggregate purchase price for all such handsets
theretofore paid by the Borrower and to be paid by the Borrower with
the proceeds of such Tranche C Advance.
Each Tranche A Loan shall consist of Tranche A Advances of the same Type made on
the same day by the Lenders ratably according to their respective Tranche A
Advance Commitments and shall be in an aggregate principal amount of $2,500,000
or in an integral multiple of $100,000 in excess thereof (or, if less, the
aggregate remaining unused amounts of
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
27
<PAGE>
all Lenders' Tranche A Advance Commitments) if the proceeds of such Tranche A
Loan are used to pay any Person other than Ericsson. Each Tranche B Loan shall
consist of Tranche B Advances of the same Type made on the same day by the
Lenders ratably according to their respective Tranche B and C Advance
Commitments and shall be in an aggregate principal amount of $1,000,000 or in an
integral multiple of $100,000 in excess thereof (or, if less, the aggregate
remaining unused amounts of all Lenders' Tranche B and C Advance Commitments) if
the proceeds of such Tranche B Loan are used to pay any Person other than
Ericsson. Each Tranche C Loan shall consist of Tranche C Advances of the same
Type made on the same day by the Lenders ratably according to their respective
Tranche B and C Advance Commitments and shall be in an aggregate principal
amount of $1,000,000 or in an integral multiple of $100,000 (or, if less, the
aggregate remaining unused amounts of all Lenders' Tranche B and C Advance
Commitments) in excess thereof if the proceeds of such Tranche C Loan are used
to pay any Person other than Ericsson or Orbitel.
Section 2.02. Making the Advances. (a) Each Loan shall be made on
-------------------
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Loan in the case of a Loan
consisting of LIBOR Rate Advances (or, while the First LIBOR Method is
applicable, such shorter period to which the Administrative Agent may consent),
or the first Business Day prior to the date of the proposed Loan in the case of
a Loan consisting of Base Rate Advances, by the Borrower to the Administrative
Agent, which shall give to each Lender prompt notice thereof by telecopier or
telex. Each such notice of a Loan (a "Draw Request") shall be by telecopier or
------------
telex, confirmed immediately in writing, substantially in the form of Exhibit B,
---------
specifying therein
(i) the requested date of such Loan (which shall be a Business Day);
(ii) the requested Type of Advances comprising such Loan; provided
that
(A) while the First LIBOR Method is applicable, the Borrower may
not request Advances of one Type while there are Advances of the other
Type outstanding, and
(B) while the Second LIBOR Method is applicable, the Borrower may
not request that Advances be LIBOR Rate Advances if, after giving
effect to such Advances, there would be more than three different
Interest Periods then in effect;
(iii) whether such Loan is a Tranche A Loan, a Tranche B Loan or a
Tranche C Loan;
28
<PAGE>
(iv) in the case of a Tranche A Loan, whether the proceeds thereof
are to be used to pay interest that is due and owing hereunder or for other
permitted purposes and, if for other permitted purposes, the aggregate
principal amount of such Tranche A Loan that is to be used for such other
permitted purposes;
(v) a reasonably detailed description of the use of the proceeds of
such Loan;
(vi) the requested aggregate principal amount of such Loan (except in
the case of a Tranche A Loan the proceeds of which are to be used to pay
interest that is due and owing hereunder); and
(vii) the account to which the proceeds of such Loan shall be paid,
which shall be to an account specified by Ericsson in the case of any Loan
the proceeds of which are to be used to pay Tranche A Expenses, Tranche B
Expenses or Tranche C Expenses then owing by the Borrower to Ericsson or
Orbitel.
Each Draw Request shall be accompanied by the certification of Grand Parent
pursuant to the Cash Maintenance Agreement, if then required to be delivered by
Grand Parent to the Borrower for delivery to the Administrative Agent, and such
additional documents as may be required by Article IX. The Borrower shall
submit no more than
(x) one Draw Request for a Tranche A Loan for any purpose other than
the payment of interest that is due and owing hereunder,
(y) one Draw Request for a Tranche B Loan and
(z) one Draw Request for a Tranche C Loan
in any calendar month. Each Lender shall, before 11:00 A.M. (New York City
time) on the date of such Loan, make available for the account of its Applicable
Lending Office to the Administrative Agent at the following account: Morgan
Guaranty Trust Company of New York, 60 Wall Street, New York, New York 10260,
*, * (or to such other account as the Administrative Agent from time to time
may specify), in same-day funds, such Lender's ratable portion of such Loan.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Articles VIII and IX, the Administrative
Agent will wire transfer same-day funds in the aggregate principal amount of
such Loan to such account as the Borrower shall have specified in its Draw
Request. If the Administrative Agent shall receive such funds and if such
applicable conditions shall be fulfilled prior to 11:00 A.M. (Central Time) on
the date of any
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
29
<PAGE>
proposed Loan, the Administrative Agent shall commence the wire transfer (or
direct its bank to commence the wire transfer) of such funds to such account by
1:00 P.M. (Central Time).
(b) Anything in subsection (a) above to the contrary notwithstanding, (i)
the Borrower may not select LIBOR Rate Advances for any Loan if the aggregate
amount of such Loan is less than $5,000,000 or if the obligation of the Lenders
to make LIBOR Rate Advances shall then be suspended pursuant to (S)2.05 or 4.01
and (ii) there shall be no more than three Interest Periods for LIBOR Rate
Advances at any one time in effect.
(c) Each Draw Request shall be irrevocable and binding on the Borrower. In
the case of any Loan that the related Draw Request specifies is to be comprised
of LIBOR Rate Advances and while the Second LIBOR Method is applicable, the
Borrower shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the date
specified in such Draw Request for such Loan the applicable conditions set forth
in Article VIII and IX, including any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Advance to be
made by such Lender as part of such Loan when such Advance, as a result of such
failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Loan that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Loan, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Loan in accordance with
subsection (a) of this (S)2.02 and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally will repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to Advances comprising such
Loan and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall repay to the Administrative Agent such corresponding amount, such
amount so repaid shall constitute such Lender's Advance as part of such Loan for
purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as part
of any Loan shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Loan, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be made
by such other Lender on the date of any Loan.
30
<PAGE>
Section 2.03. Fees. (a) The Borrower will to pay to the Administrative
----
Agent for the account of each Lender a cash origination fee on the aggregate
principal amount of each Advance made by such Lender hereunder equal * of
the principal amount of such Advance. Such fee, with respect to each Advance
made on or before * shall be payable on * and, with respect to each Advance
made after *, shall be payable on the date of such Advance.
(b) The Borrower shall pay to the Administrative Agent, if it is other than
Ericsson, such reasonable and customary fees as the Administrative Agent from
time to time may request.
Section 2.04. Interest. (a) The Borrower shall pay interest on the
--------
unpaid principal amount of each Advance owing to each Lender from the date of
such Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) During such periods as such Advance is a Base Rate Advance, a rate
per annum equal at all times to the sum of (A) the Base Rate in effect from
time to time, plus (B) the Applicable Margin in effect from time to time
and applicable to such Advance, payable in arrears quarterly on the last
day of each June, September, December and March during such periods and on
the date such Base Rate Advance shall be Converted or paid in full.
(ii) During such periods as such Advance is a LIBOR Rate Advance, a
rate per annum equal at all times during each Interest Period for such
Advance (or, if the First LIBOR Method is applicable, during each Interest
Period while such Advance is outstanding as a LIBOR Rate Advance) to the
sum of (A) the LIBOR Rate for such Interest Period for such Advance, plus
(B) the Applicable Margin in effect from time to time and applicable to
such Advance, payable in arrears on the last day of such Interest Period
and on the date such LIBOR Rate Advance shall be Converted or paid in full.
(b) Upon the occurrence and during the continuance of an Event of Default
under (S)10.01(a), the Borrower shall pay interest on
(i) the unpaid principal amount of each Advance owing to each Lender,
payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to * per annum above the
rate per annum then required to be paid on such Advance pursuant to clause
(a)(i) or (a)(ii) above, and
(ii) the amount of any interest, fee or other amount payable hereunder
that is not paid when due, from the date such amount shall be due until
such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
31
<PAGE>
demand, at a rate per annum equal at all times to * per annum above the
rate per annum required to be paid on Base Rate Advances pursuant to clause
(a)(i) above.
Section 2.05. Interest Rate Determination. (a) If, with respect to any
---------------------------
LIBOR Rate Advances, the Required Lenders notify the Administrative Agent that
the LIBOR Rate for any Interest Period for such Advances will not adequately
reflect the cost to such Required Lenders of making, funding or maintaining
their respective LIBOR Rate Advances for such Interest Period, the
Administrative Agent shall forthwith so notify the Borrower and the Lenders,
whereupon
(i) each LIBOR Rate Advance will automatically, on the last day of the
then-existing Interest Period therefor, Convert into a Base Rate Advance,
and
(ii) (A) while the First LIBOR Method is applicable, the obligation
of the Lenders to make or to Convert Advances into, LIBOR Rate
Advances shall be suspended as of the last day of the then-existing
Interest Period therefor, and
(B) while the Second LIBOR Method is applicable, the obligation
of the Lenders to make, or to Convert Advances into, LIBOR Rate
Advances shall be suspended immediately,
until the Administrative Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
(b) On the date on which the aggregate unpaid principal amount of all LIBOR
Rate Advances shall be reduced, by payment or prepayment or otherwise, to less
than $5,000,000, such Advances shall automatically Convert into Base Rate
Advances.
(c) Upon the occurrence and during the continuance of any Event of Default
under (S)10.01(a),
(i) each LIBOR Rate Advance will automatically, on the last day of the
then-existing Interest Period therefor, Convert into a Base Rate Advance
and
(ii) (A) while the First LIBOR Method is applicable, the obligation
of the Lenders to make, or to Convert Advances into, LIBOR Rate
Advances shall be suspended as of the last day of the then-existing
Interest Period therefor, and
(B) while the Second LIBOR Method is applicable, the obligation
of the Lenders to make, or to Convert Advances into, LIBOR Rate
Advances shall be suspended immediately.
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
32
<PAGE>
(d) If the Administrative Agent cannot determine the LIBOR Rate for any
LIBOR Rate Advances,
(i) the Administrative Agent shall forthwith notify the Borrower and
the Lenders that the interest rate cannot be determined for such LIBOR Rate
Advances,
(ii) each such Advance will automatically, on the last day of the
then-existing Interest Period therefor, Convert into a Base Rate Advance,
and
(iii) (A) while the First LIBOR Method is applicable, the obligation
of the Lenders to make, or to Convert Advances into, LIBOR Rate
Advances shall be suspended as of the last day of the then-existing
Interest Period therefor, and
(B) while the Second LIBOR Method is applicable, the obligation
of the Lenders to make, or to Convert Advances into, LIBOR Rate
Advances shall be suspended immediately,
until the Administrative Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
Section 2.06. Optional Conversion of Advances. The Borrower may on any
-------------------------------
Business Day, upon notice given to the Administrative Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the date of the
proposed Conversion and subject to the provisions of (S)(S)2.07 and 2.09,
Convert all Advances of one Type comprising the same Loan into Advances of the
other Type; provided that,
--------
(a) while the Second LIBOR Method is applicable,
(i) any Conversion of LIBOR Rate Advances into Base Rate
Advances shall be made only on the last day of an Interest Period for
such LIBOR Rate Advances, and
(ii) the Borrower may not Convert Base Rate Advances into LIBOR
Rate Advances if, after giving effect thereto there would be more than
three Interest Periods in effect or if the Advances to be Converted
would be less than the minimum amount specified in (S)2.02(b), and
(b) while the First LIBOR Method is applicable, the Borrower may not
convert any Advances of one Type into Advances of the other Type unless it
converts all Advances of one Type into Advances of the other Type.
33
<PAGE>
Each such notice of a Conversion shall, within the restrictions specified above,
specify (a) the date of such Conversion, and (b) the Advances to be Converted.
Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section 2.07. Payments and Computations. (a) The Borrower shall make
-------------------------
each payment hereunder and under the Notes not later than 11:00 A.M. (New York
City time) on the day when due in U.S. dollars to the Administrative Agent at
the Administrative Agent's Account in same-day funds. The Administrative Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or arrangement fees and other amounts ratably
(other than amounts payable pursuant to (S)4.02, 4.03 or 12.04(c)) to the
Lenders for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Lender to such
Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon the Administrative
Agent's acceptance of an Assignment and Acceptance and recording of the
information contained therein in the Register pursuant to (S)12.07(d), from and
after the effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.
(b) All computations of interest shall be made by the Administrative Agent
on the basis of a year of 360 days, for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the Administrative
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next-
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided that, if such extension would cause payment of interest on or
--------
principal of LIBOR Rate Advances to be made in the next-following calendar
month, such payment shall be made on the next-preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due and owing to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
34
<PAGE>
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
(e) To the extent permitted by law, all payments by the Borrower hereunder
and under any of the other Loan Documents shall be made without setoff or
counterclaim. Without limitation of the preceding sentence, to the extent
permitted by law the Borrower's obligation to pay all amounts due under the
Loans shall not be affected by any circumstance whatsoever, including:
(i) any set-off, counterclaim, recoupment, deduction, abatement,
suspension, diminution, reduction, defense or other right which the
Borrower may have against Ericsson for any reason whatsoever arising under
or pursuant to the Supply Agreement or the Royalty Agreement or otherwise
relating to the purchase of goods, other property or services from or by
Ericsson;
(ii) any defect in the condition, design, operation or fitness for use
of, or any damage to or loss or destruction of, any equipment or material
provided by Ericsson;
(iii) any actual or alleged default by Ericsson or any other Person
under the Supply Agreement or the Royalty Agreement; or
(iv) any other fact or circumstance relating to the Supply Agreement
or the Royalty Agreement.
No payment hereunder shall affect any rights of the Borrower under any other
agreement with Ericsson.
Section 2.08. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to (S)4.02, 4.03 or 12.04(c)) in excess of its ratable share of
payments on account of the Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided that if all or any
--------
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share
35
<PAGE>
(according to the proportion of (a) the amount of such Lender's required
repayment to (b) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this (S)2.08 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
Section 2.09. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower shall use such proceeds) for general corporate
purposes.
Section 2.10. The Notes. The Borrower irrevocably authorizes each Lender
---------
to make or cause to be made an appropriate notation on the Schedule attached to
such Lender's Note of the making of Loans or (as the case may be) the receipt of
payments. The amount of the Loans set forth on such Schedule shall be prima-
-----
facie evidence of the principal amount thereof owing and unpaid to such Lender,
- -----
but the failure to record, or any error in so recording, any such amount on such
Schedule shall not limit or otherwise affect the Borrower's Obligations
hereunder or under the Notes to make payments of principal of or interest on the
Notes when due.
Section 2.11. First LIBOR Method and Second LIBOR Method. If there is a
------------------------------------------
Lender in addition to or other than Ericsson (and that is unaffiliated with
Ericsson) and the Administrative Agent at the direction of the Required Lenders
shall have notified the Borrower that the Second LIBOR Method shall be
applicable, the Second LIBOR Method shall become applicable as of (a) if any
LIBOR Rate Advances are then outstanding, the last day of the then-existing
Interest Period therefor and (b) otherwise the date of such notice immediately.
After becoming applicable, the Second LIBOR Method shall remain applicable at
all times thereafter. The First LIBOR Method shall be applicable at all times
until the Second LIBOR Method becomes applicable.
ARTICLE III
REPAYMENT AND PREPAYMENT OF THE LOANS
-------------------------------------
Section 3.01. Term/Amortization. (a) On the last day of each calendar
-----------------
quarter specified below (or, if such day is not a Business Day, on the next-
preceding Business Day), the Borrower will repay
(i) a ratable aggregate principal amount of Tranche A Advances forming
part of the same Tranche A Loans equal to the percentage specified in the
table below
36
<PAGE>
opposite such calendar quarter of the greatest aggregate principal amount
of Tranche A Advances outstanding on any date prior to the date of such
repayment, and
(ii) a ratable aggregate principal amount of Tranche B Advances
forming part of the same Tranche B Loans equal to the percentage specified
below opposite such calendar quarter of the greatest aggregate principal
amount of Tranche B Advances outstanding on any date prior to the date of
such repayment.
=========================================================
Calendar Quarter Percentage
- ---------------------------------------------------------
From and including the first calendar *
quarter in 2000 to and including the last
calendar quarter in 2001
- ---------------------------------------------------------
From and including the first calendar *
quarter in 2002 to and including the last
calendar quarter in 2002
- ---------------------------------------------------------
From and including the first calendar *
quarter in 2003 to and including the last
calendar quarter in 2004
==========================================================
On each repayment date specified in the next-preceding sentence, the Borrower
also will repay:
(A) a ratable aggregate principal amount of Tranche A Advances forming
part of the same Tranche A Loans equal to the difference, if any, between
(1) the aggregate principal amount of all Tranche A Advances that
would theretofore have been repaid pursuant to the next-preceding
sentence if all Tranche A Advances made after March 31, 2000 had been
prior to April 1, 2000, and
(2) the aggregate principal amount of all Tranche A Advances
actually repaid pursuant to the next-preceding sentence, and
(B) a ratable aggregate principal amount of the Tranche B Advances
forming part of the same Tranche B Loans equal to the difference, if any,
between
(1) the aggregate principal amount of all Tranche B Advances that
would theretofore have been repaid pursuant to the next-preceding
sentence if all Tranche B Advances made on or after March 31, 2000 had
been made prior to April 1, 2000, and
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
37
<PAGE>
(2) the aggregate principal amount of all Tranche B Advances
actually repaid pursuant to the next-preceding sentence.
On the Tranche A Advance Maturity Date, the Borrower will repay the aggregate
then-outstanding principal amount of all Tranche A Advances and, on the Tranche
B Advance Maturity Date, the Borrower will repay the aggregate then-outstanding
principal amount of all Tranche B Advances.
(b) On the Tranche C Advance Maturity Date, the Borrower will repay the
aggregate then-outstanding principal amount of all Tranche C Advances.
Section 3.02. Mandatory Prepayments of Loans. (a) No later than three
------------------------------
Business Days after its receipt of any Net Cash Proceeds referred to in clause
(i) below, the Borrower will prepay the Advances in an aggregate principal
amount equal to
(i) the Net Cash Proceeds from the direct or indirect sale of any
assets of the Borrower (other than the Borrower's inventory and other goods
sold in the ordinary course of the Borrower's business) that is otherwise
permitted under this Agreement, during any calendar year, to the extent
such aggregate Net Cash Proceeds received during such calendar year shall
exceed *, multiplied by
(ii) a fraction, (A) the numerator of which is the aggregate principal
amount of the Advances outstanding at the time of such sale, and (B) the
denominator of which is such aggregate principal amount, plus the aggregate
principal amount of all Indebtedness outstanding at the time of such sale
under the Nortel Loan Agreement and all other Permitted Loan Agreements the
loans under which are required to be prepaid with such Net Cash Proceeds.
Any prepayment pursuant to this subsection (a) shall be applied, first, to the
prepayment of a ratable aggregate principal amount of Tranche C Advances forming
part of the same Tranche C Loans, second, to the prepayment of a ratable
aggregate principal amount of Tranche B Advances forming part of the same
Tranche B Loans, and, third, to the repayment of a ratable aggregate principal
amount of Tranche A Advances forming part of the same Tranche A Loans. No
prepayment of any Tranche A Advances or Tranche B Advances shall reduce the
principal amount of such Advances required to be repaid on any date pursuant to
(S)3.01(a), to the extent that such Advances are outstanding on such date. No
prior prepayment of Tranche A Advances shall reduce the principal amount of the
Advances required to be prepaid pursuant to this subsection (a).
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
38
<PAGE>
(b) On or before the 120th day of each fiscal year commencing in the fiscal
year beginning on *, and each year for so long as any Tranche B Loans shall
remain outstanding, the Borrower will prepay the Tranche B Advances in an
aggregate principal amount equal to
(i) * of Excess Cash Flow in respect of the Borrower's immediately
preceding fiscal year, multiplied by
(ii) a fraction,
(A) the numerator of which is the aggregate principal amount of
the Tranche B Advances then outstanding, and
(B) the denominator of which is
(1) such aggregate principal amount, plus
(2) the aggregate principal amount of the Tranche B Loans
(as defined in the Nortel Loan Agreement) then outstanding under
the Nortel Loan Agreement, plus
(3) the aggregate principal amount of all loans under each
other Permitted Loan Agreement the proceeds of which may be used
for purposes substantially the same as those described in the
definition of Tranche B Expenses or those permitted for Tranche B
Loans (as defined in the Nortel Loan Agreement as in effect on
the date hereof) and that are required to be prepaid out of
Excess Cash Flow, if such other Permitted Loan Agreement provides
for mandatory prepayments from such Excess Cash Flow and the
Intercreditor Agreement permits such prepayment.
Any such prepayment shall be applied to the prepayment of a ratable aggregate
principal amount of Tranche B Advances forming part of the same Tranche B Loan
then outstanding, and shall not reduce the principal amount of the Tranche B
Advances required to be repaid on any date pursuant to (S)3.01(a), to the extent
that such Advances are outstanding on such date. No prior prepayment of Tranche
B Advances shall reduce the principal amount of the Tranche B Advances required
to be prepaid pursuant to this subsection (b).
(c) On *, the Borrower will prepay an aggregate principal
amount of the Tranche A Advances equal to the aggregate amount of interest
accrued on the Loans through March 31, 1998. Any such prepayment shall be
applied to the prepayment of a
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
39
<PAGE>
ratable aggregate principal amount of Tranche A Advances forming part of the
same Tranche A Loans as the Borrower shall specify, and shall be applied to the
ratable reduction of the amounts by which the Tranche A Advances are required to
be repaid pursuant to (S)3.01(a).
(d) On or before the third Business Day after the termination of the Supply
Agreement by Ericsson as a result of a default thereunder by the Borrower, the
Borrower will prepay the entire aggregate principal amount of the Advances then
outstanding.
(e) On each December 31 and June 30 (or, if such day is not a Business Day,
on the next-preceding Business Day), beginning on *, if the aggregate
principal amount of all Tranche B Advances outstanding on such date shall
exceed the lesser of:
(i) one half of the aggregate principal amount of Tranche A Advances
that may be outstanding as of such date under (S)2.01(ii) (except that, for
purposes of determining such amount, the aggregate purchase price of
equipment referred to in clause (a) or (b) of the definition of Tranche A
Expenses for which the Borrower has entered into binding, non-cancelable
orders to deliver such equipment to the Borrower within six months of such
date shall be deemed to be included in Tranche A Expenses (to the extent
that they would not otherwise be included therein)), or
(ii) the lesser of
(A) *, multiplied by the number of handsets manufactured by
Ericsson or Orbitel theretofore purchased by the Borrower, or
(B) * of the aggregate purchase price theretofore paid for all
such handsets by the Borrower,
the Borrower will prepay an aggregate principal amount of the Tranche B Advances
equal to such excess. Any such prepayment shall be applied to the prepayment of
a ratable aggregate principal amount of Tranche B Advances forming part of the
same Tranche B Loans as the Borrower shall specify, and shall be applied to the
ratable reduction of the amounts by which the Tranche B Advances are required to
be repaid pursuant to (S)3.01(a). No prior prepayment of Tranche B Advances
shall reduce the principal amount of the Tranche B Advances required to be
prepaid pursuant to this subsection (e).
Section 3.03. Optional Prepayments of Loans. The Borrower may, upon at
-----------------------------
least three-Business-Days' notice to the Administrative Agent stating the
proposed prepayment date, aggregate principal amount of the Advances to be
prepaid and whether the Advances to be prepaid are Tranche A Advances, Tranche B
Advances or Tranche C Advances, and if such notice is given the Borrower shall,
prepay the outstanding principal amount of the Advances of
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
40
<PAGE>
the tranche specified then outstanding in whole or ratably in part. Any such
prepayment of less than the entire aggregate principal amount of the Advances
then outstanding shall be applied to the prepayment of a ratable aggregate
principal amount of Advances of the tranche specified by the Borrower forming
part of the same Loans of such kind. Any prepayment of Tranche A Advances or
Tranche B Advances pursuant to this Section 3.03 shall be applied to the
reduction of the amounts by which such Advances are required to be repaid
pursuant to (S)3.01(a) on the repayment dates next occurring after the date of
such prepayment.
Section 3.04. Certain Matters relating to Repayments and Prepayments. (a)
------------------------------------------------------
On the date on which Advances of a specified tranche are to be repaid or
prepaid, and if less than all Loans of such tranche are to be repaid or prepaid,
if the Second LIBOR Method is applicable and if both Base Rate Loans and LIBOR
Rate Loans are outstanding with respect to such tranche, the Borrower will
specify whether the Loan to be repaid or prepaid shall be a Base Rate Loan or a
LIBOR Rate Loan and, if a LIBOR Rate Loan is to be repaid or prepaid and more
than one LIBOR Rate Loan is outstanding, which such Loan shall be prepaid.
(b) All prepayments and repayments pursuant to this Article III shall be
accompanied by such additional amounts as are sufficient to pay accrued and
unpaid interest on the principal amount of the Advances then being prepaid or
repaid.
(c) Advances that are prepaid or repaid may not be reborrowed and any such
prepayment or repayment shall reduce ratably the amount of the Commitments
relating to the Advances then being repaid or prepaid, except that
(i) the prepayment of Tranche A Advances pursuant to (S)3.02(c) shall
not reduce the amount of Tranche A Advance Commitment and, after such
repayment, the Borrower may, subject to (S)2.01, borrow as Tranche A
Advances amounts equal to the principal amount of the Tranche A Advances
prepaid pursuant to such Section, and
(ii) the repayment of Tranche C Advances pursuant to (S)3.01(b) shall
not reduce the amount of Tranche B and C Advance Commitment and, after such
repayment, the Borrower may, subject to (S)2.01, borrow as Tranche B
Advances amounts equal to the principal amount of the Tranche C Advances
repaid pursuant to such Section.
41
<PAGE>
ARTICLE IV
ILLEGALITY, INCREASED COSTS, CAPITAL ADEQUACY AND INDEMNITIES
-------------------------------------------------------------
Section 4.01. Illegality. Notwithstanding any other provisions herein, if
----------
any present or future law, regulation, treaty or directive or the interpretation
or application thereof shall make it unlawful for any Lender to make or maintain
LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances
to the Borrower, the Administrative Agent and the other Lenders and thereupon
(a) the Commitments of such Lender to make LIBOR Rate Loans shall
forthwith be suspended until such notifying Lender shall have notified the
Administrative Agent and the Borrower that the circumstance giving rise to
such determination no longer exists (and if such notifying Lender shall
determine that such circumstance no longer exists it shall so notify the
Administrative Agent and the Borrower promptly after determining the same),
and
(b) the aggregate principal amount of such Lender's LIBOR Rate Loans,
if any, shall be Converted automatically to Base Rate Loans on the last day
of each Interest Period applicable to such LIBOR Rate Loans or within such
earlier period as may be required by applicable law.
Such Lender will designate a different Applicable Lending Office if such
designation will avoid the need for any suspension or Conversions described in
the preceding sentence and will not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender.
Section 4.02. Additional Costs and Capital Adequacy. (a) If any present
-------------------------------------
or future applicable law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court having jurisdiction with respect thereto or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Lender
or the Administrative Agent by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall
(i) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special-
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or commitments of an
office of any Lender, or
(ii) impose on any Lender or the Administrative Agent any other
conditions or requirements with respect to this Agreement, the other Loan
Documents, such Lender's Commitments, or any class of loans, or commitments
of which any of the Loans or such Lender's Commitments form a part,
42
<PAGE>
and the result of any of the foregoing is to increase the cost to such Lender of
making, funding, issuing, renewing, extending or maintaining any of the Advances
or such Lender's Commitment (taking into account such Lender's then-existing
policies with respect to maintaining capital), then the Borrower shall pay to
the Administrative Agent for the account of such Lender, within 15 days after
demand from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, for such increased costs.
(b) If any law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) or the interpretation thereof
by a court or governmental authority with appropriate jurisdiction, that in any
case becomes effective after the date hereof, affects the amount of capital
required or expected to be maintained by any Lender or any corporation
controlling such Lender and such Lender determines that the amount of capital
required to be maintained by it is increased by or based upon the existence of
such Lender's commitment with respect to any Advances, the Borrower will pay to
such Lender, within 15 days after demand from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder.
(c) Each demand by a Lender pursuant to this (S)4.02 shall be accompanied
by a statement setting forth in reasonable detail the basis for such demand and
the computation of such amount, including any method by which such cost was
allocated to the Borrower. In determining the amount of any compensation, such
Lender may use any reasonable averaging or attribution methods set forth in such
demand, and any such methods so used shall be binding on the Borrower. The
amount specified in any such demand shall be conclusive evidence of the amount
owing, absent manifest error. Such Lender will designate a different Applicable
Lending Office if such designation will avoid the need for or reduce the amount
of, any compensation under this (S)4.02 and will not, in the judgment of such
Lender, be otherwise disadvantageous to such Lender. By making any payment
under this (S)4.02, the Borrower is not waiving its right to contest that the
amounts set forth in the certificates are based on manifest error.
Section 4.03. Taxes. (a) Any and all payments by the Borrower hereunder
-----
or under the Notes shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
---------
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it in lieu of income taxes, by the jurisdiction under
the laws of which such Lender or the Administrative Agent (as the case may be)
is organized or any political subdivision thereof and, in the case of each
Lender, taxes
43
<PAGE>
imposed on its income, and franchise taxes imposed on it in lieu of income
taxes, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
-----
Taxes from or in respect of any sum payable hereunder or under any Note to any
Lender or the Administrative Agent,
(i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this (S)4.03) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions, and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this (S)4.03) paid by such
Lender or the Administrative Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 15 days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in
(S)12.02, the original or a certified copy of a receipt evidencing payment
thereof. In the case of any payment hereunder or under the Notes by or on
behalf of the Borrower through an account or branch outside the United States or
on behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e) below, the terms "United States"
-------------
44
<PAGE>
and "United States person" shall have the meanings specified in (S)7701 of the
--------------------
Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service Form 1001 or 4224, as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender is exempt from or entitled to a reduced rate of
United States withholding tax on payments of interest pursuant to this Agreement
or the Notes. If the form provided by a Lender at the time such Lender first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from "Taxes" as defined in (S)4.03(a). If any form or document
referred to in this subsection (e) requires the disclosure of information, other
than information necessary to compute the tax payable and information required
on the date hereof by Internal Revenue Service form 1001 or 4224, that the
Lender reasonably considers to be confidential, the Lender shall give notice
thereof to the Borrower and shall not be obligated to include in such form or
document such confidential information.
(f) For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in (S)4.03(e) (other than if such
----- ----
failure is due to a change in law occurring subsequent to the date on which a
form originally was required to be provided, or if such form otherwise is not
required under the first sentence of subsection (e) above), such Lender shall
not be entitled to indemnification under (S)4.03(a) with respect to Taxes
imposed by the United States; provided that should a Lender become subject to
--------
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request and at such
Lender's expense to assist such Lender to recover such Taxes.
(g) If the Borrower is required to pay any amounts to or for the account of
any Lender pursuant to this (S)4.03, such Lender will designate a different
Applicable Lending Office if such designation will avoid the need for or reduce
the amount of any such payment and will not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender.
Section 4.04. Survival. Without prejudice to the survival of any other
--------
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Article IV shall survive the payment in full of
principal and interest hereunder and under the Notes.
45
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lenders and the Administrative
Agent as follows:
Section 5.01. Corporate Authority. (a) The Borrower
-------------------
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation,
(ii) has all requisite corporate power to own its Property and
conduct its business as now conducted and as presently contemplated, and
(iii) is in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where such qualification is
necessary in order to conduct its business as now conducted except where a
failure to be so qualified would not have a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement and the other
Loan Documents to which the Borrower is or is to become a party and the
transactions contemplated hereby and thereby
(i) are within the corporate authority of the Borrower,
(ii) have been duly authorized by all necessary corporate
proceedings,
(iii) do not conflict with or result in any breach or contravention
of any provision of law, statute, rule or regulation to which the Borrower
is subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower or its Property, and
(iv) do not conflict with any provision of the corporate charter or
bylaws of, or any agreement or other instrument binding upon, the Borrower
or its Property.
(c) The execution and delivery of this Agreement and the other Loan
Documents to which the Borrower is or is to become a party will result in valid
and legally binding obligations of the Borrower enforceable against it in
accordance with the respective terms and provisions hereof and thereof, except
as enforceability is limited by bankruptcy, insolvency,
46
<PAGE>
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Section 5.02. Governmental Approvals. The execution, delivery and
----------------------
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower is or is to become a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority other than those already obtained and for
any subsequent informational filing with the Securities and Exchange Commission.
Section 5.03. Title to Properties. The Borrower owns all of the assets
-------------------
reflected in the balance sheet of the Borrower as at December 31, 1995 or
acquired since that date (except property and assets sold or otherwise disposed
of in the ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales-agreements, title-
retention agreements, liens or other encumbrances except Permitted Liens.
Section 5.04. Financial Statements. There has been furnished the
--------------------
Administrative Agent the audited balance sheet of the Borrower, as at December
31, 1995, and the audited statement of income and cash flow statement of the
Borrower for the fiscal year then ended, and such balance sheet and statement of
income and cash flow have been certified by the Borrower's independent certified
public accountants and accompanied by an unqualified opinion of such
accountants. Such balance sheet and statement of income and cash flow have been
prepared in accordance with GAAP and fairly present the financial condition of
the Borrower as at the close of business on the date thereof and the results of
operations for the fiscal year then ended. There are no Contingent Obligations
of the Borrower as of such date involving material amounts, known to the
officers of the Borrower, that were not disclosed in such balance sheet and the
notes related thereto.
Section 5.05. No Material Adverse Effect, Etc. Since December 31, 1995,
-------------------------------
there has occurred no Material Adverse Effect and, except as permitted
hereunder, the Borrower has not made any Distribution.
Section 5.06. Franchises, Patents, Copyrights, Etc. Except for the
------------------------------------
License for the New York MTA, there are no franchises, patents, copyrights,
trademarks, trade names, or other Intellectual Property, individually or in the
aggregate, that are material for the conduct of the Borrower's business as now
conducted or as presently contemplated to be conducted.
Section 5.07. License, Etc. The Borrower has secured
------------
47
<PAGE>
(a) with respect to the construction, installation and development of
facilities for the New York PCS Network, the License for the New York MTA
and all material Necessary Authorizations appropriate to the level of
development theretofore achieved and sufficient to avoid noncompliance with
the minimum build-out requirements under the License for the New York MTA,
and
(b) with respect to the operation of those portions of the New York
PCS Network the development of which has theretofore been completed, the
License and all material Necessary Authorizations sufficient to operate
such completed portions.
Neither the License for the New York MTA nor any material Necessary
Authorization needed to comply with the foregoing provisions of this (S)5.07 is
the subject of any pending or, to the best of the Borrower's knowledge,
threatened revocation or revocation proceeding.
Section 5.08. Litigation. There are no actions, suits, proceedings or
----------
investigations of any kind pending or, to the best of the Borrower's knowledge,
threatened against the Borrower before any court, tribunal or administrative
agency or board (including the FCC) that, if adversely determined, might, either
in any case or in the aggregate, have a Material Adverse Effect or materially
impair the right of the Borrower, to carry on business substantially as now
conducted, or result in any substantial and material liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
balance sheet of the Borrower, or that questions the validity of this Agreement
or any of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto.
Section 5.09. No Materially Adverse Contracts, Etc. The Borrower is not
------------------------------------
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to have
a Material Adverse Effect. The Borrower is not a party to any contract or
agreement that has or is expected, in the judgment of such the Borrower's
officers, to have any Material Adverse Effect.
Section 5.10. Compliance with Other Instruments, Laws, Etc. The Borrower
--------------------------------------------
is not in violation of any provision of its charter documents, bylaws, or any
agreement or instrument to which it may be subject or by which it or any of its
Properties may be bound or any decree, order, judgment, statute, license, rule
or regulation, in any of the foregoing cases in a manner that could result in
the imposition of substantial penalties or have a Material Adverse Effect.
Section 5.11. Tax Status. The Borrower
----------
(a) has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it
is subject or filed extensions therefor;
48
<PAGE>
(b) has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and by appropriate proceedings;
and
(c) has set aside on its books provisions reasonably adequate for the
payment of all taxes for all elapsed periods subsequent to the periods to
which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.
Section 5.12. No Default. No Default has occurred and is continuing.
----------
Section 5.13. Holding Company and Investment Company Acts. The Borrower
-------------------------------------------
is not a "holding company", or a "subsidiary company" of a "holding company", or
an affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is it an "investment company", or an
"affiliated company" or a "principal underwriter" of an "investment company", or
an entity "controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940.
Section 5.14. Absence of Financing Statements, Etc. Except with respect
------------------------------------
to Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or Property of the Borrower or any rights relating thereto.
Section 5.15. FCC Matters. Except for the filing of tariffs with the FCC,
-----------
the Borrower has duly and timely filed all filings which are required to be
filed by it under the Communications Act, the failure to file which could
reasonably be expected to have a Material Adverse Effect and is in all material
respects in compliance with the Communications Act, including the rules and
regulations of the FCC applicable to it, the failure to be in compliance with
which could reasonably be expected to have a Material Adverse Effect.
Section 5.16. Tariffs. No action to change, alter, rescind or otherwise
-------
terminate the tariffs containing service regulations or any rates and charges
for commercial mobile radio services which, if adversely determined, would have
a Material Adverse Effect, is pending or known by the Borrower to be under
consideration.
Section 5.17. Disclosure. This Agreement and the statements and documents
----------
referred to herein or delivered to the Administrative Agent and/or the Lenders
by or on behalf of the Borrower pursuant hereto taken together, contain no
untrue statement of a material fact or fail
49
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to state a material fact which would be necessary to make the statements (taken
as a whole) herein and therein not misleading at such time.
Section 5.18. Burdensome Obligations. The Borrower is not a party to or
----------------------
bound by any franchise, agreement, deed, lease or other instrument, or subject
to any legal restriction which, in the opinion of the management of the
Borrower, is so unusual or burdensome, in the context of its business, as in the
foreseeable future might materially and adversely affect or impair the revenue
or operating cash flow of the Borrower, or the ability of the Borrower to
perform obligations under the Loan Documents. The Borrower does not presently
anticipate that future expenditures by the Borrower needed to meet the
provisions of federal or state statutes, orders, rules or regulations will be so
burdensome as to affect or impair, in a materially adverse manner, the business
or condition, financial or otherwise, of the Borrower.
Section 5.19. Solvency. The Borrower is, and after giving effect to the
--------
incurrence of all Indebtedness as and when contemplated by the Loan Documents
will be, Solvent.
Section 5.20. Security Interests. The security interests granted under
------------------
the Collateral Documents constitute valid, binding and continuing duly perfected
first-priority Liens in and to the Collateral (except for Permitted Liens that
have priority under applicable law) in favor of the Collateral Agent, for the
benefit of, among other Persons, the Administration Agent and the Lenders.
Section 5.21. Certain Transactions. Except as set forth in Schedule 5.21,
-------------------- -------------
none of the officers, directors, or employees of the Borrower is presently a
party to any transaction with the Borrower (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of such
the Borrower, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner. The Borrower has delivered a complete
and correct copy of the Expense Allocation Agreement to the Administrative
Agent. The Borrower is not a party to any management, operating, license or
other agreement providing for the payment of any amount to any of its
Affiliates, except for the Expense Allocation Agreement or as permitted under
(S)7.11.
Section 5.22. Business Plans. The Approved Full-Term Operating Business
--------------
Plan and Approved Annual Operating Business Plan, if any, have been prepared in
all material respects in accordance with GAAP.
Section 5.23. Employee Benefit Plans. (a) Each Employee Benefit Plan and
----------------------
each Plan has been maintained and operated in compliance in all material
respects with the
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provisions of ERISA and, to the extent applicable, the IRC, including the
provisions thereunder respecting prohibited transactions. The Borrower has made
all required contributions to each Employee Benefit Plan and each Multiemployer
Plan. To the extent applicable, the Borrower has heretofore delivered to the
Administrative Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be submitted under
(S)103(d) of ERISA, with respect to each Guaranteed Pension Plan.
(b) Under each Employee Benefit Plan that is an employee welfare benefit
plan within the meaning of (S)3(1) or (S)3(2)(B) of ERISA, no benefits are due
unless the event giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Subtitle B, Part 6 of ERISA). The
Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at
any time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of any of the Borrower or such ERISA
Affiliate without liability to any Person.
(c) Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice or lien provisions of (S)302(f) of ERISA, or otherwise,
has been timely made. No waiver of minimum funding standards or extension of
amortization periods has been requested or received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Event, or any other event or condition that
presents a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Neither the Borrower nor any ERISA Affiliate has instituted or intends to
institute proceedings to terminate a Guaranteed Pension Plan. No event
requiring notice to the PBGC under (S)302(f)(4)(A) of ERISA has occurred with
respect to any Guaranteed Pension Plan and no amendment with respect to which
security is required under (S)307 of ERISA has been made or is reasonably
expected to be made to any Guaranteed Pension Plan. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred within 12
months prior to the date of this representation), and on the actuarial methods
and assumptions employed for that valuation, the aggregate benefit liabilities
of all such Guaranteed Pension Plans within the meaning of (S)4001 of ERISA did
not exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) Neither the Borrower nor any ERISA Affiliate has incurred or expects to
incur any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under (S)4201 of ERISA or as a result of a sale of assets
described in (S)4204 of ERISA. Neither the Borrower nor any ERISA
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Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of (S)4241 or (S)4245 of ERISA or that
any Multiemployer Plan intends to terminate or has been terminated under
(S)4041A of ERISA.
Section 5.24. Regulations U and X. No portion of any Loan shall be used
-------------------
or obtained for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 5.25. Environmental Compliance. The Borrower has taken all
------------------------
necessary steps to investigate the past and present condition and usage of its
Real Estate and the operations conducted thereon and, based upon such diligent
investigation, makes the following representations:
(a) The Borrower in compliance with all applicable Environmental Laws
relating to the operation of its business and the use and occupancy of any
Real Estate. There is no pending or threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding,
or investigation, inquiry or information request by any governmental entity
relating to any Environmental Law involving the Borrower.
(b) Except as set forth in Schedule 5.25, there have been no releases
-------------
of any Materials of Environmental Concern into the environment at any
parcel of Real Estate or any facility formerly or currently owned, operated
or controlled by the Borrower. With respect to any such releases of any
Materials of Environmental Concern, the Borrower has given all required
notices to government entities. The Borrower is not aware of any releases
of Materials of Environmental Concern at parcels of Real Estate or
facilities other than those owned, operated or controlled by the Borrower
that could reasonably be expected to have an impact on the Real Estate or
facilities owned, operated or controlled by the Borrower.
(c) Set forth in Schedule 5.25 is a list of all environmental reports,
-------------
investigations and audits relating to premises currently or previously
owned or operated by the Borrower (whether conducted by or on behalf of the
Borrower or a third party, and whether done at the initiative of the
Borrower or directed by a governmental entity or other third party) which
the Borrower has in its possession or to which it has access, and complete
and accurate copies of each such report, or the results of each such
investigation or audit, have been provided to the Administrative Agent.
(d) The Borrower has filed all reports and returns required to be
filed by the Borrower under any Environmental Laws. The Borrower has
obtained and is in
52
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compliance with all licenses, permits, registrations, certificates,
consents, approvals or authorizations (collectively,
"Environmental Permits") required by all applicable Environmental Laws. No
----------------------
event has occurred and is continuing that requires, or after notice or
lapse of time or both would requires, any modification or termination of
any Environmental Permit. The Borrower (i) has not received any notice
asserting the absence of any Environmental Permit and (ii) has no knowledge
of any environmental law proposed or under consideration, which, if
effective, could have a Material Adverse Effect.
(e) Neither the Borrower nor any of the Real Estate is subject to any
applicable Environmental Laws requiring the performance of site assessments
for Materials of Environmental Concern, or the removal or remediation of
Materials of Environmental Concern, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby.
Section 5.26. Subsidiaries, Etc. The Borrower has no Subsidiaries. The
-----------------
Borrower is not engaged in any joint venture or partnership with any other
Person.
Section 5.27. Material Contracts. As of the date of this Agreement, the
------------------
Borrower is not a party to any Material Contract or any agreement with any
director, officer or employee, and no shareholder of the Borrower is a party to
any shareholder, share-voting or similar agreement relating to the Borrower,
except as set forth in Schedule 5.27.
-------------
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
-------------------------------------
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Lender has any obligation to make any Loans:
Section 6.01. Maintenance of Office. The Borrower's chief executive
---------------------
office shall be located at its address for notices specified in (S)12.02, except
that the Borrower may change its chief executive office on not less than 30-
days' advance written notice to the Administrative Agent and after taking all
such action as may be necessary or appropriate or requested by the Collateral
Agent or the Administrative Agent to continue the perfection of the Collateral
Agent's security interest in the Collateral.
Section 6.02. Records and Accounts. The Borrower shall
--------------------
53
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(a) keep true and accurate records and books of account in which full,
true and correct entries shall be made in accordance with GAAP, and
(b) maintain adequate accounts and reserves for all taxes (including
income taxes), depreciation, depletion, obsolescence and amortization of
its Properties, contingencies and other reserves.
Section 6.03. Corporate Existence; Maintenance of Licenses. The Borrower
--------------------------------------------
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence. The Borrower shall maintain in full
force and effect,
(a) with respect to the construction, installation and development of
facilities for the New York PCS Network, the License for the New York MTA
and all material Necessary Authorizations appropriate to the level of
development theretofore achieved and sufficient to avoid noncompliance with
the then applicable minimum build-out requirements under the License for
the New York MTA, and
(b) with respect to the operation of those portions of the New York
PCS Network the development of which has theretofore been completed, all
material Licenses, copyrights, patents, franchises, Necessary
Authorizations and other rights as are necessary and sufficient to operate
such completed portions.
The Borrower will at all times perform and observe all covenants and conditions
on its part to be performed and observed under FCC rules and regulations or
otherwise with respect thereto with respect to the License for the New York MTA
and not cause or permit to exist any grounds for the FCC to revoke or suspend or
not to renew such License.
Section 6.04. Maintenance of Properties. The Borrower shall do or cause
-------------------------
to be done all things necessary to preserve and keep in full force and effect
its franchises, employment contracts and permits. The Borrower shall
(a) cause all of its Properties used or useful in the conduct of its
business to be maintained and kept in good condition, repair and working
order (ordinary wear and tear excepted) and supplied with all necessary
equipment;
(b) cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the
Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
54
<PAGE>
(c) continue to engage primarily in the businesses now conducted by it
and in related businesses; and
(d) continue in full force and effect all authorizations and approvals
required to conduct its business as appropriate to the then level of
construction, development and operation of the New York PCS Network;
provided that nothing in this (S)6.04 shall prevent the Borrower from
- --------
discontinuing the operation and maintenance of any of its Properties (other than
its License with respect to the New York MTA) if such discontinuance is, in the
judgment of the Borrower, desirable in the conduct of its business and that does
not have a Material Adverse Effect.
Section 6.05. Insurance. The Borrower shall obtain and maintain insurance
---------
with respect to its properties and business with insurers that hold an A.M. Best
rating of "A" or better. The insurance coverage shall
(a) include, as a minimum, the types of policies and respective limits
as reflected in (S)11(b) of the Borrower Security Agreement;
(b) with respect to all liability insurance, name the Administrative
Agent and the Collateral Agent as additional insured;
(c) with respect to casualty insurance, name the Collateral Agent as
loss payee as its interest may appear; and
(d) provide that the insurer will give the Administrative Agent and
the Collateral Agent at least 30-days' prior written notice of the
cancellation or any material change in the coverage, aggregate limits or
any other provision of such insurance.
The Borrower shall deliver to the Administrative Agent and the Collateral Agent,
as required by (S)8.18, no later than March 31 in each calendar year and
otherwise promptly on request by the Administrative Agent or the Collateral
Agent, certificate(s) of insurance reflecting the requirements of this (S)6.05
and (S)11(b) of the Borrower Security Agreement and setting forth any
deductibles applicable to any insurance coverage.
Section 6.06. Taxes. The Borrower shall duly pay and discharge, or cause
-----
to be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it (including all
amounts due and owing to the FCC under the Borrower's License for the New York
MTA) and its Real Estate, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor,
55
<PAGE>
materials, or supplies that if unpaid might by law become a lien or charge upon
any of its Property; provided that any such tax, assessment, charge, levy or
--------
claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if the Borrower has set
aside on its books adequate reserves with respect thereto; and provided further
-------- -------
that the Borrower will pay all such taxes, assessments, charges, levies or
claims forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor.
Section 6.07. Inspection of Properties and Books. (a) The Borrower shall
----------------------------------
permit the Administrative Agent, the Lenders and their other designated
representatives to visit and inspect any of the Properties of the Borrower, to
examine the books of account of the Borrower (and to make copies thereof and
extracts therefrom), and to discuss the affairs, finances and accounts of the
Borrower with, and to be advised as to the same by, its officers, all at such
reasonable times and intervals as the Administrative Agent or any Lender may
reasonably request; provided that the Administrative Agent and each Lender shall
--------
use reasonable commercial efforts not to interfere with the Borrower's business.
(b) The Borrower authorizes the Administrative Agent and each Lender to
communicate directly with such the Borrower's independent certified public
accountants and authorizes such accountants to disclose to the Administrative
Agent and the Lenders any and all financial statements and other supporting
financial documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of the Borrower.
At the reasonable request of the Administrative Agent, the Borrower shall
deliver a letter addressed to such accountants instructing them to comply with
the provisions of this (S)6.07(b). The Administrative Agent and the Lenders
will to use commercially reasonable efforts to coordinate the communications and
disclosures to and from the accountants and Administrative Agent and the
Lenders.
Section 6.08. Compliance with Laws, Contracts, License, and Permits. The
-----------------------------------------------------
Borrower will comply in all material respects with
(a) the applicable laws and regulations wherever its business is
conducted, including all Environmental Laws, all Environmental Permits,
ERISA, the IRC, the Communications Act, and all FCC rules and regulations;
(b) the provisions of its charter documents and by-laws;
(c) all Material Contracts to which it is a party and by which it or
any of its Properties may be bound;
56
<PAGE>
(d) all obligations with respect to any Employee Benefit Plan or
Multiemployer Plan; and
(e) all applicable decrees, orders, and judgments.
If any authorization, consent, approval, permit or license from any officer,
agency or instrumentality of any government shall become necessary or required
in order that the Borrower may fulfill any of the Borrower's Obligations
hereunder or any of the other Loan Documents to which the Borrower is a party,
the Borrower shall immediately take or cause to be taken all reasonable steps
within the power of the Borrower to obtain such authorization, consent,
approval, permit or license and furnish the Administrative Agent evidence
thereof.
Section 6.09. Further Assurances. The Borrower shall cooperate with the
------------------
Lenders and the Administrative Agent and shall execute and pay for the filing of
all such further instruments and documents, including, UCC financing statements
and other security documents, as the Required Lenders, the Collateral Agent or
the Administrative Agent shall reasonably deem appropriate at in order to
effectuate the security interests to the Collateral Agent and to carry out to
their satisfaction the transactions contemplated by the Loan Documents.
Section 6.10. *
.
Section 6.11. Authorization from Landlord/Mortgagee, Etc. The Borrower
------------------------------------------
shall request that any landlord, mortgagee and easement grantor of the Borrower
agree to give the Collateral Agent and Administrative Agent, on a best-efforts
basis, notice of any default by the Borrower under the terms or conditions of
any agreement between the Borrower and any
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
57
<PAGE>
landlord, mortgagee of any such landlord or easement grantor, and allow
Collateral Agent to inspect or remove after the occurrence and continuance of an
Event of Default.
Section 6.12. Attornment and Recognition Agreements. The Borrower shall
-------------------------------------
obtain all attornment and recognition agreements from any landlord or landlord's
mortgagee of Real Estate leased or owned by the Borrower upon which any
Collateral (with a fair value in excess of $50,000) is stored or located, in
form and substance reasonably satisfactory to Administrative Agent. The
Borrower shall use its best efforts to obtain all attornment and recognition
agreements from any landlord or landlord's mortgagee of Real Estate leased or
owned by the Borrower upon which all other Collateral not covered by the
immediately preceding paragraph is stored or located, in form and substance
reasonably satisfactory to Required Lenders.
Section 6.13. Expense Allocation Agreement. The Borrower shall comply
----------------------------
with the terms of the Expense Allocation Agreement and not consent to any
waiver, modification or amendment thereto.
Section 6.14. Reporting Requirements; Notices. The Borrower shall deliver
-------------------------------
or cause to be delivered to the Administrative Agent on behalf of the Lenders
the following (in a sufficient number of copies to permit distribution to each
Lender):
(a) No later than 15 days prior to the end of each fiscal year of the
Borrower and until the first fiscal year ending after the date on which
Borrower's EBTDA is greater than zero for two successive fiscal quarters, a
proposed annual operating business plan containing the statements listed in
items (i) through (vi) in this paragraph and the exhibits contained in the
annual operating business plan delivered pursuant to (S)8.13(a) for the next-
succeeding fiscal year. The proposed annual operating business plan shall
contain (i) internally prepared statements of income and expense of Borrower in
reasonable detail for the applicable period prepared in all material aspects in
accordance with GAAP (except for the absence of footnotes), (ii) a schedule of
all Capital Expenditures estimated to be made during the period, (iii) a
statement of the amounts and times by which Borrower needs to raise additional
capital to meet its obligations when due during the period, (iv) a projected
balance sheet of Borrower, (v) a projected cash flow statement of Borrower, and
(vi) a statement listing all assumptions which formed the basis for (i) through
(v), each together with supporting schedules in sufficient detail as needed and
in all material aspects in accordance with the Approved Annual Operating
Business Plan delivered pursuant to (S)8.13(a) and on a consistent basis.
(b) No later than August 14 of each fiscal year of the Borrower, a report,
certified as true and correct by the Chief Financial Officer of the Borrower,
that shows in reasonable detail, variances, if any, between the actual operating
performance of the Borrower and what was estimated for the first six months of
such fiscal year in the Approved Annual Operating
58
<PAGE>
Business Plan for such fiscal year (or the Approved Full Term Operating Business
Plan if the Required Lenders have not approved a plan delivered pursuant to
(S)6.14(a) with respect to such fiscal year) and explains in reasonable detail
in form satisfactory to the Required Lenders the reasons for the discrepancies
between them, if any.
(c) As soon as practicable, but in any event not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrower, copies of the internally prepared unaudited balance sheet of the
Borrower, as at the end of such quarter, and the related statement of income and
statement of cash flow for the portion of the Borrower's fiscal year then
elapsed, all in reasonable detail and each setting forth in comparative form
(i) the figures for the prior year's corresponding fiscal quarter and
(ii) so long as the Borrower is required to deliver an operating
business plan pursuant to (S)6.14(a), any variances from the Approved
Annual Operating Business Plan (or the Approved Full Term Operating
Business Plan, if the Required Lenders have not approved a plan delivered
pursuant to (S)6.14(a) with respect to such fiscal year),
if any, prepared in all material aspects in accordance with GAAP, together with
a certification by the principal financial or accounting officer of the Borrower
that the information contained in such financial statements fairly presents the
financial position of the Borrower on the date thereof (subject to year-end
adjustments).
(d) As soon as practicable, but in any event no later than 90 days after
the end of each fiscal year of the Borrower, the audited balance sheet of the
Borrower as at the end of such year, and the related audited statement of income
and audited statement of cash flow for such year prepared in accordance with
GAAP, and so long as the Borrower is required to deliver an operating business
plan pursuant to (S)6.14(a), a separate variance analysis setting forth in
comparative form the figures for the previous fiscal year and any variances from
the applicable period of the Approved Annual Operating Business Plan (or the
Approved Full Term Operating Business Plan, if the Required Lenders have not
approved a plan delivered pursuant to (S)6.14(a) with respect to such fiscal
year) in reasonable detail. Such balance sheet, statement of income and
statement of cash flow shall contain a certified audit report of a nationally
recognized independent certified public accounting firm satisfactory to
Administrative Agent, which report shall contain an unqualified opinion of such
accounting firm, and an "agreed-upon procedures" report pursuant to which the
accountants
(i) review the Borrower's statement that the Borrower is in
compliance with the provisions of the Expense Allocation Agreement,
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<PAGE>
(ii) perform the agreed upon review procedures applicable thereto and
(iii) confirm that in examining the financial statements of the
Borrower they have not become aware of any Default with respect to the
Expense Allocation Agreement, or, if such accountants shall have obtained
knowledge of any then existing Default they shall disclose in such report
any such Default;
provided that such accountants shall not be liable to the Lenders for failure to
- --------
obtain knowledge of any Default. The annual financial statements shall also be
accompanied by a management letter of the Borrower's accountants (only to the
extent otherwise obtained by the Borrower).
(e) Simultaneously with the delivery of the financial statements referred
to in subsections (c) and (d) above, a statement certified by the principal
financial or accounting officer of the Borrower substantially in the form of
Exhibit G setting forth in reasonable detail computations evidencing compliance
- ---------
with the covenants contained in (S)(S)6.10, 6.15 and 7.05, and (if applicable to
such fiscal quarter) the absence of an Event of Default under (S)10.01(r), in
each case with respect to the fiscal quarter relating to the financial
statements then being delivered.
(f) Within 45 days after the end of each fiscal quarter of the Borrower, a
report on
(i) the number of cell sites constructed,
(ii) the total number of customers,
(iii) the number of new customers acquired,
(iv) the number of customers who terminated their service,
(v) the average net monthly charges billed to customers (excluding
roaming charges),
(vi) aggregate roaming revenue,
(vii) payments to Parent, Grand Parent and other Affiliates of Grand
Parent, whether under the Expense Allocation Agreement or otherwise and
(viii)equity contributions to and Subordinated Debt incurred by the
Borrower, and the Persons providing the same,
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<PAGE>
during such fiscal quarter, together with a report showing variances from the
estimates previously provided to Administrative Agent and each Lender in the
Annual Approved Operating Business Plan (or the Approved Full Term Operating
Business Plan, if the Required Lenders have not approved a plan delivered
pursuant to (S)6.14(a) with respect to such fiscal year), along with an
explanation of discrepancies between the actual numbers and the estimated
numbers.
(g) Within three Business Days after the filing or mailing thereof, copies
of all
(i) material filed with the Securities and Exchange Commission by
the Borrower, Parent or Grand Parent;
(ii) information sent to the stockholders of the Borrower or lenders
to the Borrower (exclusive of proprietary information); or
(iii) information and reports directly and materially related to the
Borrower or the New York PCS Network that Parent or Grand Parent would be
required to file with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, if Parent or Grand Parent were public
companies subject to the reporting requirements of such Act; provided that,
--------
if the information or reports covered by this clause (iii) contain
proprietary information, the Borrower shall not be obligated to provide the
proprietary information hereunder unless
(A) the Person that is the source of the information or reports
is a public company and
(B) such Person would then be required to file such proprietary
information with the SEC.
(h) Within 45 days after the end of each fiscal quarter of the Borrower an
accounts-receivable-aging report.
(i) Within three Business Days after the Borrower shall have knowledge of
the occurrence and continuance thereof, written notice of the occurrence and
continuance of a Default, together with a statement of what action the Borrower
is taking or proposes to take with respect thereto. If any Person shall give
any notice or take any other action in respect of a claimed default (whether or
not constituting a Default) under this Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
the Borrower is a party or obligor, whether as principal, guarantor, surety or
otherwise, which could result in the party to whom such indebtedness is owed
having the right under its governing documents to accelerate such indebtedness,
and such acceleration would have a
61
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Material Adverse Effect, the Borrower shall forthwith give written notice
thereof to the Administrative Agent, describing the notice or action and the
nature of the claimed default.
(j) As soon as possible, and in any event within 10 Business Days
(i) after making any such report, written notice of any violation of
any Environmental Law that the Borrower reports in writing or is reportable
by such Person in writing (or for which any written report supplemental to
any oral report is made) to any federal, state or local environmental
agency and
(ii) after the Borrower shall become aware thereof, written notice of
any inquiry, proceeding, investigation, or other action, including a notice
from any agency of potential environmental liability, or any federal, state
or local environmental agency or board, that, has the potential to
materially affect the assets, liabilities, financial conditions or
operations of the Borrower or the security interests for the benefit of the
Lenders pursuant to the Borrower Security Agreement.
(k) As soon as possible, and in any event within 10 days after the Borrower
or any ERISA Affiliate knows or has reason to know or believes that any ERISA
Affiliate knows or has reason to know or believes that any ERISA Event has
occurred, a statement of the chief financial officer of the Borrower or such
ERISA Affiliate describing such ERISA Event, together with any correspondence
with, or filings made with, the PBGC or Department of Labor, and the action, if
any, which the Borrower or such ERISA Affiliate proposes to take with respect
thereto.
(l) Promptly after
(i) filing the same with the Department of Labor or Internal Revenue
Service, (A) a copy of its initial actuarial statement required to be
submitted under (S)103(d) of ERISA and Annual Report, Form 5500, with all
required attachments, in respect of each Guaranteed Pension Plan, and (B) a
notice of all subsequent filings (with copies to be provided upon request
of the Administrative Agent),
(ii) receipt or dispatch thereof, a copy of any notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under
(S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in
respect of a Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or
4245 of ERISA, and
(iii) becoming aware of the occurrence thereof, notice of (A) any
transaction that could result in the imposition of a penalty under
(S)502(i) of ERISA or an excise tax under (S)4975 against the Borrower or
an ERISA Affiliate; (B) any partial or complete
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withdrawal from a Multiemployer Plan by any of the Borrower or an ERISA
Affiliate; (C) a failure by any of the Borrower or an ERISA Affiliate to
make a payment to a Plan required to avoid imposition of a lien under
(S)302(f) of ERISA; (D) the adoption of an amendment to a Guaranteed
Pension Plan requiring the provision of security under (S)307 of ERISA; or
(E) any change in the actuarial assumptions or funding methods used for any
Guaranteed Pension Plan, where the effect of such change is to materially
increase the unfunded benefit liability or materially reduce the obligation
to make periodic contributions.
(m) Within three Business Days after becoming aware of any setoff, of any
claims (including, with respect to the Real Estate, environmental claims),
withholdings or other defenses to which any of the Collateral, or the Collateral
Agent's, the Administrative Agent's or the Lenders' rights with respect to the
Collateral, are subject, written notice thereof.
(n) Within 10 days after becoming aware thereof of
(i) any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Borrower or to which the
Borrower is or becomes a party that could reasonably be expected to have
a Material Adverse Effect (which notice shall include a statement as to
the nature and status of the proceedings, or
(ii) any judgment not covered by insurance, final or otherwise,
against the Borrower in an amount in excess of $1,000,000,
written notice thereof.
(o) Within 120 days after the end of each fiscal year of the Borrower,
beginning with its fiscal year ended *, and for so long as any Tranche B
Advances are outstanding, a report that includes calculations showing
in reasonable detail of the Borrower's Excess Cash Flow for such fiscal year, if
any, certified as correct by the Borrower's Chief Financial Officer.
(p) Within three Business Days after its receipt thereof, copies of all
material notices and correspondence received from or sent to the FCC relating to
the New York PCS Network License.
(q) Not later than 30 days prior to the occurrence thereof, written notice
to the Administrative Agent of a change in (i) the business or corporate name of
the Borrower or Parent, (ii) the location of the Collateral of the Borrower
(subject to (S)6(a) of the Borrower Security Agreement) or (iii) the Borrower's
chief executive office or other locations or the location where the Borrower's
books and records are kept.
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
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(r) Within 15 Business Days after the end of each fiscal quarter of the
Borrower, a report showing the respective aggregate principal amounts of all
Indebtedness outstanding as of the last day of such fiscal quarter under each
Permitted Loan Agreement (as defined in the Intercreditor Agreement).
(s) Such other information concerning its business, operations or financial
condition as shall be reasonably requested.
Upon the Administrative Agent's receipt of any and all financial and other
information furnished by the Borrower pursuant to this (S)6.14 the
Administrative Agent shall promptly deliver copies thereof to each Lender.
Section 6.15. Financial Covenants of the Borrower. So long as any Loan,
-----------------------------------
Note or other of the Borrower's Obligations are outstanding or any Lender has
any Commitment, the Borrower will:
(a) Have earned for each fiscal quarter, prior to the first fiscal quarter
in which the Borrower's EBTDA shall have exceeded zero for two successive fiscal
quarters, Revenue of not less than the applicable amount shown on Schedule
--------
6.15(a) with respect to such fiscal quarter.
- -------
(b) Maintain or cause to be maintained as of the last day of each fiscal
quarter (other than any fiscal quarter in which EBTDA is positive or any fiscal
quarter ending after the Borrower's EBTDA has exceeded zero for two successive
fiscal quarters), a ratio of
(i) the sum of the following, in each case as determined as of such
date:
(A) the Borrower's cash on hand,
(B) the Borrower's Investments to the extent they are permitted
by (S)(S)7.04(b) through (e),
(C) without duplication of any amount described in clauses (D)
and (E) below, Qualified Commitments in respect of Subordinated Debt,
the proceeds of which are available to be used for general business
purposes of the Borrower,
(D) the aggregate undrawn amount of the Tranche C Commitments (as
defined in the Nortel Loan Agreement), if all conditions precedent to
any advance thereunder on such date would be satisfied (other than
actually
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<PAGE>
submitting a Draw Request and other required documents) and
up to the amount then available to be drawn,
(E) until June 30, 1998, the greater of (1) zero and (2) (x) the
lesser of * and the then-remaining undrawn amount of the
Lenders' Tranche A Advance Commitments, minus (y) the aggregate amount
of interest accrued on the Advances (whether or not theretofore paid),
but only if all conditions precedent to a Tranche A Advance hereunder
on such date would be satisfied (other than actually submitting a Draw
Request and other required documents), and
(F) Qualified Commitments in respect of equity, to
(ii) EBTDA for such fiscal quarter,
of not less than *.
For purposes of calculating the ratio in this (S)6.15(b), negative EBTDA shall
be treated as if it were a positive number.
(c) Beginning with the first fiscal quarter of its fiscal year beginning
on January 1, 1997, maintain or cause to be maintained as of the last day of
each fiscal quarter, a ratio of
(i) (A) the aggregate principal amount of the Borrower's
Indebtedness outstanding on such date, minus
(B) the aggregate principal amount of the Borrower's Subordinated
Debt outstanding on such date, to
(ii) the amount equal to
(A) shareholder equity shown on the Borrower's balance sheet
prepared in accordance with GAAP as of such date, plus
(B) to the extent not otherwise included in the amount determined
pursuant to clause (A) above, the aggregate principal amount of all
Subordinated Debt outstanding as of such date, plus
(C) to the extent not otherwise included in the amount determined
pursuant to clause (A) above, * (representing the difference
between the price paid for the Block B License for the New York MTA
*
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
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and Borrower's cost of the License for the New York MTA
* , minus
(D) to the extent not otherwise included in the amount determined
pursuant to clause (A) above, the cumulative amount of retained
earnings (or deficit) of Borrower as determined in accordance with
GAAP,
of not more than (a) until the fiscal quarter ending on December 31, 1997, *,
and (b) thereafter, *.
(d) Have, for each fiscal quarter set forth on Schedule 6.15(d), Adjusted
----------------
EBITDA of not less than the amounts shown on such Schedule for such fiscal
quarter.
Section 6.16. Certified Copies of Insurance Policies. Within 30 days
--------------------------------------
after the Closing Date, deliver to the Administrative Agent certified copies by
the applicable insurer(s) of all insurance policies that shall have been
required to have been delivered to the Administrative Agent by the Closing Date
pursuant to Section 8.05(b).
Section 6.17. Mortgage Liens. If the Borrower shall acquire any Real
--------------
Estate and shall not at the time of such acquisition incur Indebtedness with
respect thereto pursuant to (S)7.01(e)(ii)(C), it will grant to the Collateral
Agent a first-mortgage lien in form and substance satisfactory to the Required
Lenders on such Real Estate. Any Lien on any such Real Estate shall provide
that it shall be released upon the incurrence of any Indebtedness under
(S)7.01(e)(ii)(C) that is secured by a Lien on such Real Estate permitted under
(S)7.02(e)(ii).
ARTICLE VII
CERTAIN NEGATIVE COVENANTS OF THE BORROWER
------------------------------------------
The Borrower covenants and agrees that, so long as any Loan or Note or
other fees or expenses are outstanding or any Lender has any obligation to make
any Loans:
Section 7.01. Restrictions on Indebtedness. The Borrower shall not
----------------------------
create, incur, assume, guarantee or be or remain liable, contingently or
otherwise, with respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under any of the Loan
Documents;
(b) Indebtedness owing under the Nortel Loan Agreement and other
Indebtedness outstanding under a Permitted Loan Agreement;
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
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(c) Indebtedness the proceeds of which are used
(i) to repay up to * aggregate principal amount of
Tranche C Loans (as defined in the Nortel Loan Agreement),
(ii) to repay up to * aggregate principal amount of
Tranche C Advances, and/or
(iii) to prepay Tranche A Advances pursuant to (S)3.02(c),
but only so long as
(A) the aggregate principal amount of such Indebtedness does not
exceed the aggregate principal amount of the Indebtedness then being
prepaid or repaid with such proceeds, in whole or in part, and
(B) no portion of the principal amount of such Indebtedness is
scheduled to be repaid or has required prepayments prior to the
Tranche A Advance Maturity Date or the Tranche B Advance Maturity
Date;
(d) Subordinated Debt;
(e) (i) Indebtedness (in addition to any purchase-money
Indebtedness described in clauses (ii) and (iii) below)in an aggregate
principal amount not exceeding * incurred in connection with
the purchase and installation of equipment to be used in the New York
PCS Network that is supplied by suppliers that are not Affiliates of
the Borrower, but only so long as such Indebtedness is not in excess
of the fair value of the property being acquired and related services
associated with the equipment;
(ii) (A) purchase-money Indebtedness (in addition to any
purchase-money Indebtedness described in clause (i) above and (iii)
below),
(B) Capital Lease obligations, and
(C) Indebtedness incurred in the acquisition of Real Estate
or within six months after the date of acquisition and that is
secured by a Lien permitted under Section 7.02(e)(ii),
but only so long as
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
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(I) the aggregate principal amount thereof any one time
outstanding does not exceed *,
(II) such Indebtedness is in a principal amount that does
not exceed the fair value of the property being acquired or
leased and
(III) the aggregate principal amount of such purchase-money
Indebtedness (other than any of such Indebtedness described in
clause (C) above) and Capital Lease obligations outstanding at
any one time does not exceed *; and
(iii) purchase-money Indebtedness (in addition to any purchase-
money Indebtedness described in clause (i) and (ii) above) incurred in
order to acquire inventory (other than in respect of handsets and
accessories with respect thereto manufactured or supplied by Ericsson
or Orbitel or their respective Affiliates),
and any refunding or refinancing of any such Indebtedness by lenders that
are not Affiliates of the Borrower in an aggregate principal amount not
exceeding the aggregate principal amount of the Indebtedness being
refinanced or refunded;
(f) Indebtedness the proceeds of which are used solely for working-
capital purposes, so long as, with respect to each of the two most recent
complete fiscal quarters of the Borrower, preceding the date on which such
Indebtedness is incurred
(i) the amount equal to
(A) the Borrower's EBTDA for such fiscal quarter minus
(B) the amount of interest that would have accrued on such
Indebtedness during such fiscal quarter if such Indebtedness had
been outstanding for all of such fiscal quarter and such interest
had accrued at the rate per annum applicable at the time of
incurrence
shall have exceeded zero, and
(ii) the ratio of
(A) the aggregate principal amount of all Indebtedness of
the Borrower outstanding on such date, after giving effect to
such Indebtedness, to
- ------------
* Confidential information has been omitted and filed separately
with the Commission.
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<PAGE>
(B) EBITDA for such fiscal quarter,
shall not exceed *;
(g) Indebtedness under the Working Capital Loan Agreement the proceeds
of which are used solely for working-capital purposes in an aggregate
principal amount not exceeding *;
(h) Indebtedness owed to the FCC in respect of the License for the New
York MTA;
provided that the Borrower shall not at any time incur or suffer to exist any
- --------
Indebtedness, whether or not otherwise permitted under clauses (a) through (h)
inclusive of this (S)7.01, in an aggregate principal amount then outstanding in
excess of *.
Indebtedness of the Borrower to the Parent or Grand Parent shall only be
permitted hereunder pursuant to subsection (d), above.
Section 7.02. Restrictions on Liens. The Borrower shall not (A) create or
---------------------
incur or suffer to be created or incurred or to exist any Lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest of any kind
upon any of its Property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; (B) transfer any of
such Property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (C) acquire, or
agree or have an option to acquire, any property or assets upon conditional sale
or other title-retention or purchase-money security agreement, device or
arrangement; (D) suffer to exist for a period of more than 30 days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; or (E) sell, assign,
pledge or otherwise transfer any accounts, contract rights, general intangibles,
chattel paper or instruments, with or without recourse; provided that the
--------
Borrower may create or incur or suffer to be created or incurred or to exist
(collectively "Permitted Liens"):
----------------
(a) Liens securing purchase-money Indebtedness permitted under
(S)7.01(e) owing to a Person that is not a party to the Intercreditor
Agreement; provided that such Liens cover only the property acquired with
--------
the proceeds of such Indebtedness;
- ---------------------
* Confidential information has been omitted and filed separately with the
Commission.
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(b) Liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or Liens on Properties to secure claims
for labor, material or supplies in respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance;
(d) Liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties, in existence less than 120 days from the
date of creation thereof in respect of obligations not overdue;
(e) encumbrances on Real Estate consisting of:
(i) easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the
title thereto, landlord's or lessor's liens under leases to which such
the Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the
use of the property affected in the ordinary conduct of the business
of the Borrower, which defects do not individually or in the aggregate
have a Material Adverse Effect on the business of the Borrower, and
(ii) mortgage (or deed of trust) liens (collectively "Mortgage
--------
Liens") to secure the payment of Indebtedness permitted to be incurred
-----
under (S)7.01(e)(ii)(C), provided that
--------
(A) the amount secured by any Mortgage Lien shall not exceed
the sum of (1) the acquisition cost of the Real Estate acquired
by the Borrower and (2) the cost of any improvements constructed
thereon; and
(B) the Borrower shall simultaneously with the acquisition
of the Real Estate in question either
(1) grant to the Collateral Agent a second mortgage (or
deed of trust), in form and substance satisfactory to the
Required Lenders, subordinate only to the Mortgage Lien, and
securing the obligations of the Borrower owing to lenders
that are parties to the Intercreditor Agreement, or
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<PAGE>
(2) cause the lender in whose favor the Mortgage Lien
is to be made to execute and deliver to the Collateral Agent
an option to purchase the Mortgage Lien, substantially in
the form of Exhibit I;
---------
(f) Liens in favor of the Collateral Agent for the benefit of the
lenders and agents parties to the Intercreditor Agreement securing the
obligations permitted to be secured under the Intercreditor Agreement; and
(g) deposits to secure the performance of bids, trade contracts (other
than in respect of Indebtedness for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds, and other
obligations of a like nature incurred in the ordinary course of business
not to exceed in the aggregate at any one time $5,000,000.
Section 7.03. No Contingent Obligations. The Borrower shall not create,
-------------------------
incur, assume, guarantee or remain liable on any Contingent Obligations.
Section 7.04. Restrictions on Investments. The Borrower shall not make or
---------------------------
permit to exist or to remain outstanding any Investment except:
(a) Investments in Rate Hedging Agreements in a notional principal
amount on any date not to exceed the aggregate principal amount of
Indebtedness of the Borrower accruing interest at a floating rate, and only
so long as the purpose of such Investments shall be to hedge such floating-
rate interest and shall not be to speculate on interest rates;
(b) Investments in commercial paper maturing in 90 days or less from
the date of issuance which, at the time of acquisition by the Borrower, is
accorded a rating of A1 or better by Standard & Poor's Ratings Group or P1
or better by Moody's Investors Service, Inc. or an equivalent rating by
another nationally recognized credit-rating agency of similar standing;
(c) Investments in
(i) direct obligations of, or obligations guaranteed by, the
United States of America or any agency that constitutes a full-faith-
and-credit obligation of the United States of America, in any case
maturing in 12 months or less from the date of acquisition thereof,
and
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(ii) repurchase agreements fully secured by underlying
securities of the type described in clause (i) and issued by a bank or
trust company meeting the requirements of (S)7.04(d);
(d) Investments in certificates of deposit maturing within six months
from the date of issuance thereof (i) issued by a bank or trust company
organized under the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating at least $500,000,000
and whose long-term certificates of deposit are, at the time of acquisition
thereof by the Borrower, rated AA or better by Standard & Poor's Ratings
Group or Aa or better by Moody's Investors Service, Inc., or (ii) issued by
any Lender;
(e) Investments in money-market funds (other than single-state funds)
that make investments in accordance with the regulations of the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended;
(f) Loans or advances in the usual and ordinary course of business to
officers, directors and employees for expenses (including moving expenses
related to a transfer) incidental to carrying on the business of the
Borrower; and
(g) Investments existing on the date hereof and listed on Schedule
--------
7.04.
----
Section 7.05. Distributions. The Borrower shall not make any
-------------
Distributions (other than a dividend or other distribution of any shares of
common Stock of the Borrower subject, to the extent received by Parent, to the
Parent's pledge under the Parent Pledge Agreement), except that the Borrower may
(a) pay interest in respect of Subordinated Debt owing to Parent and
Grand Parent, but only if:
(i) at the time of and after giving effect to such payment, no
Default shall have occurred and be continuing, and
(ii) interest on such Subordinated Debt shall accrue at a rate
per annum not exceeding a fixed rate of * per annum (or, if approved
by the Required Lenders, such higher rate as is consistent with then-
available market rates);
(b) repay or prepay principal owing in respect of Subordinated Debt
owing to Parent and Grand Parent, but only if:
- -----------------
* Confidential information has been omitted and filed separately with the
Commission.
72
<PAGE>
(i) at the time of and after giving effect to such repayment or
prepayment, no Default shall have occurred and be continuing,
(ii) the aggregate principal amount of all such Subordinated Debt
that is being repaid or prepaid at such time shall not exceed the sum
of
(A) the difference, if any, between
(1) the maximum aggregate principal amount of the
Loans that could be outstanding at such time under (S)2.01
(after giving effect to the limitations set forth in the
second sentence thereof) and
(2) the sum of
(I) the aggregate principal amount of the Loans
that are actually outstanding at such time, and
(II) the aggregate principal amount of such
Subordinated Debt that shall have been repaid or
prepaid after the date of this Agreement and is
allocable to amounts that may be distributed pursuant
to this clause (A),
(B) the difference, if any, between
(1) the maximum aggregate principal amount of the loans
that could then be outstanding at such time under the Nortel
Loan Agreement, given the permissible uses of proceeds
thereof, and
(2) the sum of
(I) the aggregate principal amount of the loans
that are actually outstanding thereunder at such time,
and
(II) the aggregate principal amount of such
Subordinated Debt that shall have been repaid or
prepaid after the date of this Agreement and is
allocable to amounts that may be distributed pursuant
to this clause (B), and
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(C) the amount equal to
(1) the aggregate principal amount of such Subordinated
Debt that shall have been loaned to the Borrower within the
90 days preceding the date of such repayment or prepayment,
minus
(2) the aggregate principal amount of such Subordinated
Debt that shall have been repaid within the 90 days
preceding the date of such repayment or prepayment and is
allocable to amounts that may be distributed pursuant to
this clause (C);
provided that
--------
(x) any such repayment or prepayment on any date shall
be allocated to clause (A), (B) or (C) above for purposes of
determining whether any distribution may be made pursuant to
this clause (ii) in the following order of priority: first,
-----
any such repayment or prepayment shall be allocated to
clause (C) above until any further allocation to such clause
on such date would cause the amount calculated pursuant to
such clause to be less than zero; second any such repayment
------
or prepayment shall be allocated to clause (B) above until
any further allocation to such clause on such date would
cause the amount calculated pursuant to such clause to be
less than zero; and third any such repayment or prepayment
-----
shall be allocated to clause (A) above, and
(y) any such repayment or prepayment that is made with
proceeds of a borrowing under this Agreement or the Nortel
Loan Agreement shall not be taken into account for the
computation provided for in clauses (A)(2)(II) or (B)(2)(II)
above;
(iii) at any preceding date, no Default would have occurred if
such Subordinated Debt had not been outstanding;
(c) make other Distributions (other than Distributions in respect of
Subordinated Debt owing to Persons other than Parent or Grand Parent), but
only if at the time of and after giving effect to such Distribution:
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<PAGE>
(i) no Default shall have occurred and be continuing,
(ii) the Borrower shall have had EBTDA in excess of zero for each
of its four consecutive fiscal quarters ending with its fiscal quarter
most recently ended prior to the date of such Distribution (the
"Preceding Fiscal Quarter") and
-------------------------
(iii) the aggregate amount for all Distributions by the Borrower
during the fiscal year of the Borrower in which the date of such
Distribution occurs shall not exceed:
(A) Working Capital of the Borrower as of the last day of
the Preceding Fiscal Quarter, minus
(B) the aggregate amount of Debt Service payable by the
Borrower during the 12 calendar months next-following the
Preceding Fiscal Quarter, minus
(C) while any Tranche B Advance is outstanding, (1) *,
multiplied by (2) *, multiplied by (3) the number of Borrower's
fiscal quarters that have begun on or before the date of such
Distribution during the Borrower's then-current fiscal year,
multiplied by (4) Excess Cash Flow in respect of the Borrower's
immediately preceding complete fiscal year, minus
(D) the aggregate amount of any prepayment of Indebtedness
required to be made pursuant to (S)3.02(b) hereunder and pursuant
to (S)3.2.C of the Nortel Loan Agreement during the Borrower's
then-current fiscal year and that has not theretofore been made.
Section 7.06. Merger, Consolidation, Disposition of Assets, Etc. (a) The
-------------------------------------------------
Borrower shall not be a party to any merger or consolidation, shall not have any
Investment in any Subsidiary or agree to or effect any asset acquisition or
Stock acquisition (including any acquisition of any License) (other than the
acquisition of assets in the ordinary course of business consistent with sound
and prudent practices) and shall not issue any additional capital Stock (whether
or not such issuance would otherwise be permitted hereunder).
(b) The Borrower shall not become a party to or agree to or effect any
disposition of assets, other than
(i) the disposition of assets in the ordinary course of business,
- -------------------
* Confidential information has been omitted and filed separately with the
Commission.
75
<PAGE>
(ii) the disposition of obsolete assets or equipment no longer
necessary to the operation of the Borrower's business, consistent with
sound and prudent practices, and
(iii) other disposition of assets for their fair-market value, as
determined in good faith by the Borrower, solely for cash consideration in
an amount not to exceed * in the aggregate during the term of this
Agreement.
Section 7.07. Sale and Leaseback. The Borrower shall not enter into any
------------------
arrangement, directly or indirectly, whereby the Borrower shall sell or transfer
any Property owned by it in order then or thereafter to lease such Property or
lease other property that the Borrower intends to use for substantially the same
purpose as the Property being sold or transferred.
Section 7.08. Compliance with Environmental Laws. The Borrower shall not
----------------------------------
(a) use any of the Real Estate or any portion thereof for the
handling, processing, storage or disposal of Materials of Environmental
Concern, except in compliance with Environmental Laws;
(b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Materials of
Environmental Concern, except in compliance with Environmental Laws;
(c) generate any Materials of Environmental Concern on any of the Real
Estate, except in compliance with Environmental Laws;
(d) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e., releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) or threatened release of Materials of
Environmental Concern on, upon or into the Real Estate except in compliance
with Environmental Laws; or
(e) otherwise conduct any activity at any Real Estate, except in
compliance with Environmental Laws, or use any Real Estate in any manner
that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law.
Section 7.09. Employee Benefit Plans. Neither the Borrower nor any ERISA
----------------------
Affiliate shall
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the IRC which could result in a material
liability for the Borrower;
- -------------------
* Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, whether or
not such deficiency is or may be waived;
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower pursuant to (S)302(f) or (S)4068 of ERISA;
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities;
(e) fail to make when due any required contributions to a
Multiemployer Plan;
(f) withdraw (completely or partially) from any Multiemployer Plan
where such withdrawal is likely to result in a material liability of the
Borrower or an ERISA Affiliate;
(g) terminate or institute proceedings to terminate, any Guaranteed
Pension Plan, where such termination is likely to result in a material
liability of the Borrower or an ERISA Affiliate;
(h) make any amendment to any Guaranteed Pension Plan with respect to
which security is required under (S)307 of ERISA; or
(i) fail to give any and all notices and make all disclosures and
governmental filings required under ERISA or the IRC where such failure is
likely to result in material liability to the Borrower or an ERISA
Affiliate.
Section 7.10. Key Management Personnel Compensation. Until such time as
-------------------------------------
the Borrower's EBTDA has exceeded zero for two successive fiscal quarters, the
Borrower's compensation program for the categories of its key management
personnel listed on Schedule 7.10 shall not provide for incentive-based cash
-------------
compensation that is in excess of three times the applicable base salary.
Section 7.11. Transactions with Affiliates. The Borrower shall not enter
----------------------------
into
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(a) any agreement or arrangement providing for the payment of any
amounts to any of its Affiliates, except that the Borrower may enter into
(i) the Expense Allocation Agreement and the Servicing Agreement
dated as of the date hereof between the Borrower and Grand Parent;
(ii) a tax-sharing agreement or arrangement pursuant to which the
Borrower shall not make any payments or agree to make any payments in
lieu of income taxes unless the cumulative sum of such payments does
not exceed the cumulative sum of income taxes that the Borrower would
have paid if the Borrower had always filed income-tax returns as a
separate entity; and
(iii) a management, consulting or other agreement, but only if
such agreement either
(A) relates to providing management, consulting or other
services to an Affiliate operating BTA markets and
(1) is on terms that are fair and reasonable and no
less favorable to the Borrower than it would obtain in a
comparable arm's-length transaction with a Person not an
Affiliate;
(2) does not provide for payments by the Borrower under
such agreement; and
(3) does not provide for the performance of services or
purchase or delivery of property by the Borrower in a manner
that, individually or together with all other such
agreements with Affiliates operating BTA markets, would have
a material adverse effect on the ability of the Borrower to
build-out or operate the New York MTA, or
(B) is approved in writing by the Required Lenders, or
(b) any other agreement, arrangement or transaction with any of
its Affiliates (whether or not providing for the payment of any
amounts to any of its Affiliates), except in the ordinary course of
business and on terms that are fair and reasonable and no less
favorable to the Borrower than it would obtain in a comparable arm's-
length transaction with a Person not an Affiliate.
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Section 7.12. Change in Nature of Business. The Borrower shall not make
----------------------------
any fundamental change in its business as carried on and as proposed to be
carried on at the date hereof.
Section 7.13. Charter Amendments. The Borrower shall not amend its
------------------
certificate of incorporation or bylaws.
Section 7.14. Accounting Changes. The Borrower shall not make or permit,
------------------
or permit any of its Subsidiaries to make or permit, any change in accounting
policies or reporting practices, except as required by GAAP, or change its
fiscal year.
Section 7.15. Prepayments, Etc., of Indebtedness. The Borrower shall not:
----------------------------------
(a) and shall not permit any Affiliate to, prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness owing by the Borrower, other than the prepayment of the
Advances in accordance with the terms of this Agreement or as the Required
Lenders may otherwise agree, except for prepayments, redemptions, purchases
or other satisfactions by the Borrower as to which lenders under Section
5.02 of the Intercreditor Agreement are not required to pay any amount to
other lenders party thereto or Indebtedness owing to the FCC, or
(b) amend, modify or change in any manner any term or condition of any
Subordinated Debt or any other Indebtedness secured by Liens in favor of
the Collateral Agent, except for amendments, modifications and changes that
the lenders party to the Intercreditor Agreement are permitted to enter
into thereunder.
If on any date any amount shall be due and owing hereunder and under any other
Indebtedness of the Borrower and the Borrower shall not pay in full all such
amounts as are then due and owing, the Borrower shall not pay any such amounts
except ratably, in accordance with the respective amounts then due and owing
thereunder. If the Borrower shall take any action in violation of this Section
7.15, it irrevocably authorizes each lender to it that is a party to the
Intercreditor Agreement on its behalf to make any payment required under Section
5.02 or 5.03 of the Intercreditor Agreement and acknowledges that any amount so
paid by any such lender shall be deemed not to have been paid by the Borrower to
such lender.
Section 7.16. Amendment, Etc., of Material Contracts. The Borrower shall
--------------------------------------
not cancel or terminate any Material Contract or consent to or accept any
cancellation or termination thereof, amend or otherwise modify any Material
Contract or give any consent, waiver or approval thereunder, waive any default
under or breach of any Material Contract, agree in any manner to any other
amendment, modification or change of any term or condition of any
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Material Contract, or take any other action in connection with any Material
Contract that, in any such case, could, at the time thereof, reasonably be
expected to have a material adverse effect on the Borrower's ability to perform
its obligations under this Agreement or any other Loan Document.
Section 7.17. Negative Pledge. The Borrower shall not enter into or
---------------
suffer to exist, or permit any of its Subsidiaries to enter into or suffer to
exist, any agreement prohibiting or conditioning the creation or assumption of
any Lien in favor of the Collateral Agent upon any of its property or assets.
Section 7.18. Partnerships. The Borrower shall not become a general
------------
partner in any general or limited partnership.
Section 7.19. Default Under the Supply Agreement. The Borrower shall not
----------------------------------
default in the performance or observance of any covenants or conditions on its
part to be performed or observed under the Supply Agreement.
ARTICLE VIII
CONDITIONS TO THE INITIAL ADVANCE
---------------------------------
The obligations of the Lenders to make their initial Advances shall be
subject to the satisfaction of the following conditions precedent on or prior to
the date of such initial Advances (the "Closing Date"):
------------
Section 8.01. Loan Documents. Each Lender shall have received a Note,
--------------
duly executed and delivered by the Borrower, as well as each of the other Loan
Documents, which shall have been duly executed and delivered by the respective
parties thereto, shall be in full force and effect and shall be in form and
substance satisfactory to the Administrative Agent, each of the Lenders and
their counsel.
Section 8.02. Proceedings and Documents. All corporate and other
-------------------------
proceedings in connection with the transactions contemplated hereby and by the
other Loan Documents shall be satisfactory to the Administrative Agent, each of
the Lenders and their counsel, and the Administrative Agent, each of the Lenders
and their counsel shall have received such secretary's certificates,
certificates of the Secretary of State of Delaware and other copies of documents
with respect thereto as they may reasonably request.
Section 8.03. Validity of Liens. The Borrower Security Agreement and the
-----------------
Parent Pledge Agreement shall each be effective to create in favor of the
Collateral Agent a legal,
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valid and enforceable first-priority security interest (except for Permitted
Liens that have priority under applicable law) in and Lien upon the Collateral.
All filings, recordings, deliveries of instruments and other actions necessary
or desirable in the opinion of the Collateral Agent to protect and preserve such
security interests shall have been duly effected and all such documents shall
have been duly executed by the Borrower and Parent. The Administrative Agent
shall have received evidence thereof in form and substance satisfactory to the
Administrative Agent.
Section 8.04. Search Reports and Related Documents. The Administrative
------------------------------------
Agent shall have received
(a) such UCC, tax, patent, trademark and judgment lien search reports
with respect to such applicable public offices where Liens are filed, as
shall be acceptable to the Administrative Agent, disclosing that there are
no Liens of record in such official's office covering any Collateral or
showing the Borrower or Parent as a debtor thereunder;
(b) a certificate of the Borrower and Parent signed by an authorized
officer of each thereof, dated the Closing Date, certifying that, as of the
Closing Date, there will exist no Liens on the Collateral other than
Permitted Liens; and
(c) duly executed file-stamped copies of UCC-1 and UCC-3 financing
statements with respect to the Collateral (other than Pledged Collateral),
filed in each office where such filing is necessary or appropriate to
perfect a Lien on the Collateral.
Section 8.05. Certificates of Insurance. The Administrative Agent shall
-------------------------
have received
(a) a certificate of insurance from an independent insurance broker,
dated as of the Closing Date, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the insurance
obtained in accordance with the provisions of the Borrower Security
Agreement and this Agreement, and
(b) copies of all policies evidencing such insurance, which shall
contain provisions naming the Collateral Agent as an additional insured and
loss payee on behalf of the Lenders as its interests may appear, and
providing for 30-days' prior written notice to Administrative Agent and the
Collateral Agent of cancellation or diminishment.
Section 8.06. Solvency Certificate. Each of the Lenders and the
--------------------
Administrative Agent shall have received an officer's certificate of the
Borrower and Parent dated as of the Closing Date as to the Borrower and Parent
being Solvent following the consummation of the
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transactions contemplated herein and in form and substance satisfactory to the
Administrative Agent and Lenders.
Section 8.07. Opinion of Counsel to the Borrower. Each of the Lenders and
----------------------------------
the Administrative Agent shall have received a favorable legal opinion of the
Borrower's counsel addressed to the Lenders and the Administrative Agent, dated
as of the Closing Date, in form and substance satisfactory to the Lenders and
the Administrative Agent.
Section 8.08. Opinion of Counsel to Parent. Each of the Lenders and the
----------------------------
Administrative Agent shall have received a favorable legal opinion of Parent's
counsel addressed to the Lenders and the Administrative Agent, dated as of the
Closing Date, in form and substance satisfactory to the Lenders and the
Administrative Agent.
Section 8.09. Opinion of FCC Counsel. Each of the Lenders and the
----------------------
Administrative Agent shall have received a favorable legal opinion addressed to
the Lenders and Administrative Agent from FCC counsel to the Borrower and
Parent, dated as of the Closing Date, in form and substance satisfactory to the
Lenders and the Administrative Agent.
Section 8.10. Opinion of Counsel to Lenders and Administrative Agent.
------------------------------------------------------
Each of the Lenders and the Administrative Agent shall have received a favorable
legal opinion addressed to the Lenders and Administrative Agent from counsel to
the Lenders and Administrative Agent, dated as of the Closing Date, in form and
substance satisfactory to the Lenders and the Administrative Agent.
Section 8.11. Payment of Fees. The Borrower shall have paid all fees and
---------------
expenses, including the reasonable attorneys' fees of Administrative Agent's
counsel, and any FCC and local counsel to the Lenders, on the Closing Date and
payable by the Borrower hereunder.
Section 8.12. Approvals, Permits. The Borrower shall have obtained all
------------------
federal, state and local governmental and regulatory consents, approvals,
Licenses and permits, including any third-party consents, as required or
necessary for the Borrower to accept Loans and commence with the construction
and development of the New York PCS Network as contemplated for the current
stage of construction and development on the Closing Date and operate its
business pursuant to the Approved Full Term Operating Business Plan and shall
remain in effect; all applicable waiting periods shall have expired without any
action being taken by any competent authority; no law or regulation shall be
applicable in the judgment of the Lenders that restrains, prevents or imposes
materially adverse conditions upon the Loans or the construction and development
of the New York PCS Network referred to above, and the Administrative Agent and
each of the Lenders shall receive a certificate of an authorized officer of the
Borrower to that effect dated the Closing Date.
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Section 8.13. Delivery of Operating Business Plans. The Borrower shall
------------------------------------
have delivered to Administrative Agent and each Lender
(a) an annual operating business plan for its 1996 fiscal year and
(b) a full-term operating business plan, each of which shall be in
form and substance satisfactory to the Administrative Agent and each
Lender,
together with a certificate of its Chief Financial Officer dated the Closing
Date certifying as to the reasonableness of the assumptions and expectations
contained therein and that there are presently no facts known to such Person
that would make either such plan misleading in any material respect.
Section 8.14. Delivery of Pledged Shares. The Parent shall have delivered
--------------------------
to the Collateral Agent all pledged stock certificates representing all of the
issued and outstanding capital Stock of the Borrower owned by Parent, which
shall not be less than 95.6% of all of the Borrower's issued and outstanding
shares of capital Stock, together with stock powers executed in blank.
Section 8.15. Material Agreements. Subject to confidentiality
-------------------
restrictions, the Administrative Agent and each of the Lenders shall have
received a complete and correct copy of (a) the Expense Allocation Agreement and
the servicing agreement referred to in (S)7.11(a)(i), in each case as then in
effect, and (b) each other contract set forth on Schedule 5.27, as such other
-------------
contract is then in effect and as to which the Administrative Agent shall have
requested a copy on or before the Closing Date.
Section 8.16. Litigation. There shall exist no action, suit,
----------
investigation, litigation or proceeding pending or threatened in any court or
before any arbitrator or governmental instrumentality that could have a Material
Adverse Effect.
Section 8.17. Insurance Certificates. One or more insurance certificates
----------------------
to the effect set forth in (S)6.05.
Section 8.18. Other Documents. The Administrative Agent and each Lender
---------------
shall receive all other documents, instruments and opinions from the Borrower
and Parent (including opinions of counsel for the Borrower and Parent) as
Administrative Agent and each Lender may reasonably request, in form and
substance satisfactory to the Administrative Agent and each Lender and their
counsel, and which shall be in full force and effect on the date of the initial
disbursement under this Agreement.
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ARTICLE IX
ADDITIONAL CONDITIONS TO ADVANCES
---------------------------------
Section 9.01. Conditions to All Advances. The obligation of each Lender
--------------------------
to make any Advance, including its initial Advance, shall also be subject to the
satisfaction of the following conditions precedent:
(a) The Administrative Agent shall have received a properly completed
Draw Request.
(b) Each of the representations and warranties of Borrower contained
in this Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this Agreement shall
be true at and as of the time of the making of such Advance with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Agreement and
the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to
the extent that such representations and warranties relate expressly to an
earlier date). The Administrative Agent shall have received a certificate
of an authorized officer of Borrower to such effect.
(c) No change shall have occurred in any law or regulations thereunder
or interpretations thereof that in the reasonable opinion of any Lender
would make it illegal for such Lender to make such Loan and no order of any
court or Governmental Body has been entered prohibiting the consummation of
the transactions contemplated by the Loan Documents.
(d) Each Lender shall have received such statements in substance and
form reasonably satisfactory to such Lender as such Lender shall require
for the purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
(e) The Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request.
(f) Grand Parent shall not be in default in the performance of its
obligations under the Cash Maintenance Agreement.
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(g) The Borrower shall have delivered to the Administrative Agent
invoices or other evidence reasonably satisfactory to the Administrative
Agent showing the aggregate amount of Tranche A Expenses (if the proposed
Advance is a Tranche A Advance), Tranche B Expenses (if the proposed
Advance is a Tranche B Advance) or Tranche C Expenses (if the proposed
Advance is a Tranche C Advance) that have been incurred by the Borrower
through the date of such Advance.
ARTICLE X
EVENTS OF DEFAULT; ACCELERATION; ETC.
-------------------------------------
Section 10.01. Events of Default and Acceleration.
----------------------------------
Upon the occurrence and during the continuance of any of the following
events,
(a) the Borrower shall fail to pay any principal of the Loans, any
Arrangement Fee, any interest on the Loans or any other sum hereunder or
under any of the other Loan Documents to which it is a party, in any such
case within three days after the date on which the same shall become due
and payable; or
(b) the Borrower shall fail to comply with any of the covenants
contained in Article VII or (S)6.10, 6.14(i) or 6.15; or
(c) Parent or the Borrower shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified elsewhere in this (S)10.01) and such failure shall
continue for a period of 30 days; or
(d) any representation or warranty of the Borrower or Parent under the
Loan Agreement or any of the other Loan Documents or in any other document
or instrument delivered pursuant to or in connection with this Agreement or
any Loan Document shall not be correct in any material respect upon the
date when made or deemed to have been made or repeated; or
(e) the Borrower shall
(i) make an assignment for the benefit of creditors, or
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(ii) generally not pay its debts as such debts become due or
admit in writing its inability to generally pay or generally fail to
pay its debts as they mature or become due, or
(iii) petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Borrower or of any
substantial part of the assets of the Borrower, or
(iv) shall commence any case or other proceeding relating to the
Borrower under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction providing for the relief of debtors,
now or hereafter in effect, or
(v) shall take any action to authorize or in furtherance of any
of the foregoing,
or any such petition or application shall be filed or any such case or
other proceeding shall be commenced against the Borrower and the Borrower
shall indicate its approval thereof, consent thereto or acquiescence
therein or shall not be able to have such proceeding dismissed within 30
days thereof or any of the actions sought in such proceeding (including the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or any substantial
part of its property) shall occur; or the Borrower or Parent shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or
(f) the Borrower shall fail to pay any principal of, premium or
interest on or any other amount payable in respect of any Indebtedness that
is outstanding in a principal amount of at least $5 million in the
aggregate (but excluding Indebtedness outstanding hereunder) of the
Borrower, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness or otherwise to cause, or to permit the
holder thereof to cause, such Indebtedness to mature; or any such
Indebtedness shall be declared to be due and payable or required to be
prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Indebtedness shall be required to be made,
in each case prior to the stated maturity thereof; or
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(g) any judgment or order for the payment of money in excess of
$1,000,000 (excluding any portion thereof that an insurance company of
recognized standing and creditworthiness has agreed to pay) shall be
rendered against the Borrower and either
(i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order, or
(ii) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(h) any of the Loan Documents shall be cancelled, terminated, revoked
or rescinded otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of the Lenders, or
any action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of the Borrower or any of its stockholders, or any court or any
other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents
is illegal, invalid or unenforceable in accordance with the terms thereof;
or
(i) with respect to any Guaranteed Pension Plan, an ERISA Event shall
have occurred and the Required Lenders shall have determined in their
reasonable discretion that such event reasonably could be expected to
result in liability of the Borrower to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $250,000 and such event in the
circumstances occurring reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been
appointed by the United States District Court to administer such Plan; or
the PBGC shall have instituted proceedings to terminate such Guaranteed
Pension Plan; or appointed a trustee to administer or liquidate any plan;
or
(j) the Borrower shall be the subject of writs of attachment or
garnishment and the like that might have a Material Adverse Effect and that
are unstayed for a period of 30 consecutive days or any such attachment
shall not have been bonded over within 30 days of the entry thereof; or
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(k) the FCC or any other Governmental Body shall cancel, revoke or suspend
any of the Borrower's material Licenses for the New York PCS Network or
fails to renew any such License; or
(l) the FCC or any other Governmental Body shall commence any
proceeding to cancel, revoke or suspend any of the Borrower's material
Licenses for the New York PCS Network which proceeding for the
cancellation, revocation or suspension (i) could reasonably be expected to
have a Material Adverse Effect and (ii) has not been stayed or enjoined by
the Borrower within five business days after the commencement of any such
proceeding; or
(m) the Borrower shall fail to pay when due amounts owing the FCC
unless (i) the Borrower's failure to pay can reasonably be expected, in the
sole judgment of Required Lenders, not to result in any cancellation,
revocation or suspension of the Borrower's License for the New York PCS
Network or (ii) the Borrower has obtained a stay or injunction against any
action by the FCC to cancel, revoke or suspend such License notwithstanding
the Borrower's failure to pay; or
(n) the Collateral Agent shall cease to have a valid and perfected
first-priority Lien on any Collateral securing the Borrower's obligations
hereunder (or, in the case of Collateral pledged by Parent, Parent's
guaranty of the Borrower's obligations hereunder), or the Borrower or
Parent shall so assert; or
(o) at any time any of the following shall occur:
(i) Grand Parent shall cease to have legal and beneficial title,
directly or indirectly through one or more subsidiaries all of the
issued and outstanding shares of capital Stock are owned by it, at
least a majority of the Voting Stock of the Borrower then outstanding;
(ii) any person (other than Ericsson and its affiliates) engaged
in, or having an Affiliate engaged in, the business of manufacturing,
selling or distributing telecommunications equipment shall own,
directly or indirectly and as legal or beneficial owner, more than 30%
of the Voting Stock of the Borrower then outstanding;
(iii) at least 95.6% of each series and class of issued and
outstanding shares of capital Stock of the Borrower shall not be
pledged as security for the Borrower's obligations hereunder and under
the other Loan Documents, or as security for the obligations of Parent
under the Parent Guaranty; or
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(iv) any sale of capital Stock of the Borrower held by Parent or
any other shareholder (other than Associated PCN Company), or any sale
of capital Stock of the Parent, shall occur, in either case for
consideration other than cash, or in either case unless the Borrower
shall receive the entire Net Cash Proceeds of such sale; or
(p) there shall occur in the judgment of the Required Lenders any
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower that could reasonably
be expected to have a material adverse effect on the ability of the
Borrower to perform its obligations under the Loan Agreement and related
documents; or
(q) the Borrower shall default, after any applicable grace period,
under any equipment-acquisition agreement (other than the Supply Agreement)
providing for the purchase of more than $10,000,000 in aggregate purchase
price of equipment or other goods, from any Person, or such Person shall so
allege in writing; or
(r) as of such date *
.
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice to the Borrower, (i) declare the obligation of each Lender to make
Advances to be terminated, whereupon the same shall forthwith terminate, and/or
(ii) declare the Notes, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided that upon the occurrence
- --------
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
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of an Event of Default under subsection (e) above, (A) the obligation of each
Lender to make Advances shall automatically be terminated and (B) the Notes, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
ARTICLE XI
THE ADMINISTRATIVE AGENT
------------------------
Section 11.01. Authorization and Action. Each Lender appoints and
------------------------
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
and thereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by the Loan
Documents (including enforcement or collection of the Notes), the Administrative
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding upon all Lenders; provided that
--------
the Administrative Agent shall not be required to take any action that exposes
the Administrative Agent to personal liability or that is contrary to this
Agreement or applicable law. The Administrative Agent will give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
Section 11.02. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent:
(a) may treat the Lender that made any Advance as the holder of the
Indebtedness resulting therefrom until the Administrative Agent receives
and accepts an Assignment and Acceptance entered into by such Lender, as
assignor, and an assignee, as provided in (S)12.07;
(b) may consult with legal counsel (including counsel for any Loan
Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts;
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(c) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations
made in or in connection with the Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
any Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party;
(e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of
any Loan Document or any other instrument or document furnished pursuant
hereto;
(f) shall incur no liability under or in respect of any Loan Document
by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy, cable or telex) believed by it
to be genuine and signed or sent by the proper party or parties; and
(g) shall incur no liability as a result of any determination whether
the transactions contemplated by the Loan Documents constitute a "highly
leveraged transaction" within the meaning of the interpretations issued by
the Comptroller of the Currency, the Federal Deposit Insurance Corporation
and the Board of Governors of the Federal Reserve System.
Section 11.03. Ericsson and Affiliates. With respect to its Commitments,
-----------------------
the Advances made by it and the Note issued to it, Ericsson and any other
Administrative Agent in its individual capacity shall have the same rights and
powers under the Loan Documents as any other Lender and may exercise the same as
though it were not the Administrative Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include Ericsson in its individual
capacity or any other Administrative Agent in its individual capacity. Ericsson
or any other Administrative Agent in its individual capacity and its affiliates
may a generally engage in any kind of business with, the Borrower and any of its
Affiliates and any Person who may do business with or own securities of any
Borrower or any of its Affiliates, all as if Ericsson or any other
Administrative Agent in its individual capacity were not the Administrative
Agent and without any duty to account therefor to the Lenders.
Section 11.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender
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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 this Agreement.
Section 11.05. Indemnification. Each Lender severally will indemnify the
---------------
Administrative Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender's ratable share of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Administrative Agent under the Loan Documents; provided that no Lender
--------
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender will reimburse the
Administrative Agent promptly upon demand for its ratable share of any costs and
expenses payable by the Borrower under (S)12.04, to the extent that the
Administrative Agent is not promptly reimbursed for such costs and expenses by
the Borrower. For purposes of this (S)11.05, the Lenders' respective ratable
shares of any amount shall be determined, at any time, according to the sum of
(a) the aggregate principal amount of the Advances outstanding at such time and
owing to the respective Lenders and (b) the aggregate unused portions of their
respective Commitments. The failure of any Lender to reimburse the
Administrative Agent promptly upon demand for its ratable share of any amount
required to be paid by the Lenders to the Administrative Agent as provided
herein shall not relieve any other Lender of its obligation hereunder to
reimburse the Administrative Agent for its ratable share of such amount, but no
Lender shall be responsible for the failure of any other Lender to reimburse the
Administrative Agent for such other Lender's ratable share of such amount.
Section 11.06. Successor Administrative Agents. The Administrative Agent
-------------------------------
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized under the laws of the United States
or of any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent and upon the execution and filing
or recording of such financing statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted or
purported to
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be granted by the Collateral Documents, such successor Administrative Agent
shall succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
the Loan Documents. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article XI
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement. A successor
Administrative Agent will notify the Borrower of its appointment promptly after
its appointment.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that
--------
(a) no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following at any time:
(i) waive any of the conditions specified in Article IX or, in
the case of the initial Borrowing, Article VIII;
(ii) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Lenders, that
shall be required for the Lenders or any of them to take any action
hereunder;
(iii) release any Collateral, other than as contemplated by the
Loan Documents;
(iv) permit the creation, incurrence, assumption or existence of
any Lien on any item of Collateral to secure any Obligations other
than Obligations owing to the Lenders and the Administrative Agent
under the Loan Documents and other than Debt owing to any other
Person;
(v) amend this (S)12.01;
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(vi) increase the Commitments of the Lenders or subject the
Lenders to any additional obligations;
(vii) reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder; or
(viii) postpone any date fixed for any payment of principal of,
or interest on, the Notes or any fees or other amounts payable
hereunder;
(b) no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Lenders required
above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document; and
(c) no amendment, waiver or consent shall, unless in writing and
signed by the Collateral Agent in addition to the Lenders required above to
take such action, adversely affect the rights or duties of the Collateral
Agent under this Agreement or any other Loan Document.
The Lenders will consider in good faith amendments proposed by the Borrower that
are intended to reconcile any apparent conflicts between the provisions of
(S)(S)3.02(a) and (b), 6.15 and 7.01 through 7.05 of this Agreement and the
related provisions of the Nortel Loan Agreement but shall not have any
obligation to enter into such amendments.
Section 12.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telegraphic, telecopy,
telex or cable communication) and mailed, telegraphed, telecopied, telexed,
cabled or delivered,
(a) if to the Borrower, at:
Omnipoint Communications Inc.
49 Old Bloomfield Road
Mountain Lakes Corporate Center
Mountain Lakes, New Jersey 07046
Attn: Harry Plonskier
(fax no. (201) 257-2425)
with a copy to:
Piper & Marbury, L.L.P.
1200 19th Street, N.W.
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Washington, DC 20036
Attn: Edwin Martin, Esq.
(fax no. (202) 861-6317)
(b) if to any Lender, at its Domestic Lending Office; and
(c) if to the Administrative Agent, at
740 E. Campbell Road
Richardson, Texas 75081
Attn: Vice President-Finance
(fax no. (214) 952-8782)
with a copy, at the same address to the
attention of the Vice President-General Counsel
(fax no. (214) 907-7553)
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective
when deposited in the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the cable company,
respectively, except that notices and communications to the Administrative Agent
pursuant to Article II, III, or XI shall not be effective until received by the
Administrative Agent.
Section 12.03. No Waiver; Remedies. No failure on the part of any Lender
-------------------
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note or any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 12.04. Costs, Expenses. (a) The Borrower will pay on demand
---------------
(i) all costs and expenses of the Administrative Agent incurred after
March 28, 1996 in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including
(A) all search, filing and recording fees and expenses and (B) the
reasonable fees and expenses of counsel for the Administrative Agent with
respect thereto, with respect to advising the Administrative Agent as to
its rights and responsibilities, or the perfection, protection or
preservation of rights or interests, under the Loan Documents, with
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respect to negotiations with the Borrower, Parent, Grand Parent or with
other creditors of the Borrower, Parent or Grand Parent arising out of any
Default or any events or circumstances that may give rise to a Default and
with respect to presenting claims in or otherwise participating in or
monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto), and
(ii) all costs and expenses of the Administrative Agent and the
Lenders in connection with the enforcement of the Loan Documents, whether
in any action, suit or litigation, any bankruptcy, insolvency or other
similar proceeding affecting creditors' rights generally or otherwise
(including the reasonable fees and expenses of counsel for the
Administrative Agent and each Lender with respect thereto).
(b) If, at any time while the Second LIBOR Method is applicable, any
payment of principal of, or Conversion of, any LIBOR Rate Advance is made by the
Borrower to or for the account of a Lender other than on the last day of the
Interest Period for such Advance, as a result of any repayment, prepayment
(other than pursuant to (S)3.03(b)) or Conversion thereof, acceleration of the
maturity of the Notes pursuant to (S)10.01 or for any other reason, the Borrower
shall, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender any loss, cost or expense (including loss of anticipated profit) that any
Lender may sustain or incur as a consequence of the making of any payment of a
LIBOR Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto.
(c) If the Borrower fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including fees and expenses of
counsel and indemnities, such amount may be paid on behalf of the Borrower by
the Administrative Agent or any Lender, in its sole discretion.
(d) The Borrower will indemnify each Lender, the Collateral Agent, the
Administrative Agent and their respective affiliates and their officers,
directors, employees, agents and advisors (each an "Indemnified Party") and hold
-----------------
each Indemnified Party harmless from and against from and against any and all
claims, damages, losses, liabilities and expenses (including reasonable fees and
expenses of counsel and, with respect to the Collateral Agent, reasonable
allocated costs and expenses of in-house counsel and legal staff) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with
(i) the Notes, this Agreement and other Loan Documents, any of the
transactions contemplated herein or therein or the actual or proposed use
of the proceeds of the Advances, or
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(ii) the actual or alleged presence of Materials of Environmental
Concern on any property of the Borrower or any environmental proceeding
relating in any way to the Borrower,
except to the extent such claim, damage, loss, liability or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of any investigation, litigation or other proceeding to which the
indemnity in this (S)12.04(d) applies, the indemnity shall be effective whether
or not such investigation, litigation or proceeding is brought by the Borrower,
its directors, shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated. The Borrower also shall
not to assert any claim against the Administrative Agent, the Collateral Agent,
any Lender, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to the Notes, this Agreement, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Advances.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this (S)12.04 shall survive the payment in full of principal and interest
hereunder and under the Notes.
Section 12.05. Right of Set-off. Upon (a) the occurrence and during the
----------------
continuance of any Event of Default and (b) the making of the request specified
by (S)10.01 to authorize the Administrative Agent to declare, or the
Administrative Agent's declaration of, the Notes to be due and payable pursuant
to the provisions of (S)10.01, each Lender and each of its Affiliates is
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and otherwise apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender or such Affiliate to or for the credit or the
account of the Borrower against any and all of the Obligations of the Borrower
now or hereafter existing under this Agreement and the Note or Notes held by
such Lender, irrespective of whether such Lender shall have made any demand
under this Agreement or such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application; provided that the failure to give such notice shall not
--------
affect the validity of such set-off and application. The rights of each Lender
and its Affiliates under this (S)12.05 are in addition to other rights and
remedies (including other rights of set-off) that such Lender and its Affiliates
may have.
Section 12.06. Binding Effect. This Agreement shall become effective when
--------------
it shall have been executed by the Borrower and the Administrative Agent and
when the
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Administrative Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Administrative Agent, each Lender, the Collateral Agent and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders. Sections 12.04(d) and 12.12, insofar as they
relate to the Collateral Agent, and Section 7.15 also shall inure to the benefit
of each lender to the Borrower that at any time is a party to the Intercreditor
Agreement.
Section 12.07. Assignments and Participations. (a) Each Lender may
------------------------------
assign to one or more banks or other entities (including any trust or other
Person in connection with a securitization or monetization of the Advances or
other indirect raising of capital) all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
or Commitments the Advances owing to it and/or the Note or Notes held by it);
provided that
- --------
(i) each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations under and in respect of all
Commitments;
(ii) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment and Advances of the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than
$5,000,000 and shall be an integral multiple of $1,000,000;
(iii) the parties to each such assignment shall
(A) execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note or Notes subject to such assignment
and a processing and recordation fee of $2,500,
(B) deliver a copy of such Assignment and Acceptance to the
Borrower at the time it delivers a copy to the Administrative Agent;
and
(iv) unless the Borrower shall have consented thereto, no such
assignment shall be made
(A) while any undrawn Commitment is outstanding, except to a
Person that shall have represented that it has a combined capital and
surplus of at least $50,000,000, and
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(B) except to a Person, other than a commercial bank or other
financial institution, that shall have represented that such Person is
not engaged in, and does not have an Affiliate that is engaged in, the
business of providing PCS telecommunications services to the public.
A Lender may assign outstanding Advances without assigning undrawn Commitments,
and may assign undrawn Commitments without assigning outstanding Advances. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in such Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder and under the Intercreditor Agreement
have been assigned to it pursuant to such Assignment and Acceptance, have
the rights and obligations of a Lender hereunder and thereunder and
(y) the Lender assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement and the Intercreditor Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished
pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this
Agreement and the Intercreditor Agreement, together with copies of the
financial statements referred to
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in (S)5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any other Lender 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 this Agreement;
(v) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Administrative
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto;
(vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement and
the Intercreditor Agreement are required to be performed by it as a Lender;
(vii) such assignee makes the representations set forth in subsection
(a)(iv) above; and
(viii) such assignee confirms that it is bound by the confidentiality
provisions set forth in (S)12.10.
(c) The Administrative Agent shall maintain at its address referred to in
(S)12.02 a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amount of the Advances owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be
--------
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit C,
(i) accept such Assignment and Acceptance,
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(ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Administrative Agent in exchange
for the surrendered Note or Notes a new Note to the order of such assignee in an
amount equal to the Advances and/or Commitments assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained Advances or
Commitments hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Advances and/or Commitments retained by it hereunder. Such
new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be
substantially in the form of Exhibit C.
(e) Each Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitments, the Advances owing to it and the Note or Notes held by it);
provided that
- --------
(i) such Lender's obligations under this Agreement (including its
Commitments) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement and
(iv) the Borrower, the Administrative Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this (S)12.07, disclose to the
assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
--------
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this
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Agreement (including the Advances owing to it and the Note or Notes held by it)
in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System.
Section 12.08. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
Section 12.09. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 12.10. Confidentiality. Neither the Administrative Agent nor any
---------------
Lender shall disclose any Confidential Information to any Person without the
consent of the Borrower, other than
(a) to the Administrative Agent's or such Lender's Affiliates and
their officers, directors, employees, agents and advisors and to actual or
prospective Eligible Assignees and participants, and then only on a
confidential basis,
(b) as required by any law, rule or regulation or judicial process and
(c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
The Administrative Agent and the Lenders shall not, and the Borrower shall
not and shall cause its Affiliates not to, disclose the terms of this Agreement,
the other Loan Documents or the transactions contemplated hereby to any Person
without the consent of the other party hereto, except
(i) to any other lender that is a party to a Permitted Loan Agreement
(as defined in the Intercreditor Agreement) and that shall have agreed to
be bound by the provisions of this paragraph,
(ii) to the extent that such terms or transactions become generally
available to the public,
(iii) to their respective Affiliates and their officers, directors,
employees, agents, advisors and (in the case of the Lenders) to actual or
prospective assignees and
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participants, in each case to the extent that the Administrative Agent, any
Lender or the Borrower deems necessary or appropriate,
(iv) as required by any law, rule or regulation or judicial process
and
(v) as requested by any state, federal or foreign regulatory
authority.
A reasonable period of time prior to making any disclosure with respect to such
terms and transactions that is permitted under clause (iv) or (v) of the
preceding sentence, the party proposing, or whose Affiliate is proposing, to
make such disclosure will consult with the other party concerning the need for
and scope of any such disclosure.
Section 12.11. Consent to Jurisdiction. The Borrower irrevocably
-----------------------
(a) submits to the jurisdiction of any New York State or Federal court
sitting in New York City and any appellate court from any thereof in any
action or proceeding arising out of or relating to any Loan Document;
(b) agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State or in such Federal court;
(c) waives, to the fullest extent that it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding;
(d) consents to the service of any and all process in any such action
or proceeding by the mailing of copies of such process to such Borrower at
its address specified in (S) 12.02; and
(e) agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
Nothing in this (S)12.11 shall affect the right of the Administrative Agent or
any Lender to serve legal process in any other manner permitted by law or affect
the right of the Administrative Agent or any Lender to bring any action or
proceeding against any Borrower or its property in the courts of other
jurisdictions.
Section 12.12. Matters Relating to the Collateral Agent. (a) The
----------------------------------------
Borrower will pay the Collateral Agent a fee in an amount, computed as provided
and payable at the times separately agreed to by the Collateral Agent and the
Borrower. In addition, the Borrower will pay on demand all costs and expenses of
the Collateral Agent (including allocated costs and
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reasonable expenses of in-house counsel and legal staff) in connection with the
preparation, execution, delivery, performance, administration, enforcement,
modification and amendment of this Intercreditor Agreement, the Borrower
Security Agreement, the Parent Pledge Agreement, the Mortgages and/or any other
Loan Document at any time, including without limitation the reasonable fees and
expenses of counsel (including reasonable allocated costs and expenses of in-
house counsel and legal staff) and the costs and expenses incurred by the
Collateral Agent in the course of performing its duties and obligations as
Collateral Agent.
Section 12.13. Amendments, etc. to Intercreditor Agreement. Neither the
-------------------------------------------
Administrative Agent nor the Lenders shall consent to any amendment or
modification of, supplement to, replacement of or substitution for the
Intercreditor Agreement unless either
(a) the Borrower shall have consented thereto in writing, or
(b) at the time at which such amendment, modification or waiver is
entered into a Default, or any event that, with the passage of time or
giving of notice or both would constitute an event of default under any
other Permitted Loan Agreement, shall have occurred and be continuing.
Section 12.14. Waiver of Jury Trial. Each of the Borrower, the
--------------------
Administrative Agent and the Lenders irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to any of the Loan Documents, the
Advances or the actions of the Administrative Agent or any Lender in the
negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.
OMNIPOINT COMMUNICATIONS INC.
By /s/ Harry Plonskier
------------------------------
Title: Vice President, Finance
ERICSSON INC., as Administrative Agent
-------------
and a Lender
Tranche A Advance Commitment:
- ----------------------------
*
- -------------
* Confidential information has been omitted and filed separately
with the Commission.
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Tranche B and C Advance By /s/ Joseph Hagan
- ----------------------- ------------------------------
Commitment: * Title: Chief Financial Officer
- ----------
Domestic Lending Office and LIBOR
- ---------------------------------
Lending Office:
- --------------
740 East Campbell Road
Richardson, Texas 75081
Attn: Vice President-Finance
(fax no. (214) 952-0432)
A copy of any notice delivered pursuant to
(S)12.02 should be delivered to the address set
forth above to the attention of the
Vice President-General Counsel
(fax no. (214) 907-7553)
- -------------------
* Confidential information has been omitted and filed separately with the
Commission.
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EXHIBIT 10.54
AGREEMENT
This Agreement, made this 24th day of February, 1997 is entered into by
Omnipoint Corporation, a Delaware corporation (the "Company") and Kjell S.
Andersson, an individual (the "Employee").
WHEREAS, the Company and the Employee entered into that certain Employment
Agreement, dated November 3, 1996; and
WHEREAS, the parties now wish to modify certain terms and provisions of the
Employment Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
of the parties hereto, and other good and valuable consideration, the parties
agree as follows:
1. The Effective Date of the Employment Agreement is February 24, 1997.
2. Paragraph 3.2 of the Employment Agreement is amended by deleting
"$1,560,000" and inserting in its place "$1,087,500", and by deleting
"$2,147,388.50" and inserting in its place "$1,496,977.56."
3. Any term used in this Agreement which has initial capital letters and
which is not defined herein shall have the meaning attributed to it in the
Employment Agreement.
4. Except as otherwise provided herein, the Employment Agreement shall
remain unchanged and the parties hereto hereby confirm and agree to be bound by
all the terms and provisions of the Employment Agreement as amended hereby.
5. This Agreement may be executed in several counterparts and all so
executed shall constitute one agreement binding on all parties hereto.
WITNESS the execution under seal as of the day and date above written.
OMNIPOINT CORPORATION
By:/s/ Art Pumo
------------
Title: Vice President, Human Resources
EMPLOYEE
/s/ Kjell S. Andersson
----------------------
Kjell S. Andersson
<PAGE>
Exhibit 11.1
OMNIPOINT CORPORATION
STATEMENT OF COMPUTATION OF LOSS PER SHARE
Type of Securities
------------------
<TABLE>
<CAPTION>
<S> <C>
Company, for the year ended December 31, 1994
Common stock outstanding 23,881,516
Issuance of cheap stock (1) 6,870,753
----------
Weighted average common shares outstanding 30,752,269
==========
Company, for the year ended December 31, 1995
Common stock outstanding 24,539,689
Issuance of cheap stock (1) 6,870,753
----------
Weighted average common shares outstanding 31,410,442
==========
Company, for the year ended December 31, 1995 Pro Forma
Common stock outstanding 24,539,689
Conversion of preferred stock 8,013,989
Conversion of convertible subordinated notes 104,452
Issuance of cheap stock (1) 6,870,753
----------
Weighted average common shares outstanding 39,528,883
==========
Company, for the year ended December 31, 1996
Common stock outstanding 27,696,786
Conversion of preferred stock 9,733,899
Conversion of convertible subordinated notes 1,434,075
Shares issued during initial public offering 7,388,356
Issuance of cheap stock (1) 564,719
----------
Weighted average common shares outstanding 46,817,835
==========
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common equivalent shares issued during the twelve month period
prior to the initial filing date of the Company's Initial Public Offering
Registration Statement at exercise prices below the initial public
offering price of $16.00 have been included in the calculation of cheap
stock shares using the treasury stock method, as if they were outstanding
for all periods presented.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Omnipoint Corporation on Form S-1 (File Nos. 33-98360 and 33-03739), Form S-4
(File Nos. 333-19895 and 333-13961 and Form S-8 (File Nos. 333-07345 and
333-03945) of our reports dated January 31, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Omnipoint
Corporation as of December 31, 1996 and 1995, and for the three years in the
period ended December 31, 1996 which reports are included in this Annual Report
on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 31, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF OMNIPOINT CORPORATION AS OF AND FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 215,029
<SECURITIES> 46,827
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 37,490
<CURRENT-ASSETS> 344,657
<PP&E> 195,168
<DEPRECIATION> (8,317)
<TOTAL-ASSETS> 1,419,472
<CURRENT-LIABILITIES> 98,342
<BONDS> 477,503
0
0
<COMMON> 510
<OTHER-SE> 133,264
<TOTAL-LIABILITY-AND-EQUITY> 1,419,472
<SALES> 531
<TOTAL-REVENUES> 531
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 100,932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,226
<INCOME-PRETAX> (126,930)
<INCOME-TAX> 0
<INCOME-CONTINUING> (126,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (126,930)
<EPS-PRIMARY> (2.71)
<EPS-DILUTED> (2.71)
</TABLE>
