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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 0-21213
LCC INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 54-1807038
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7925 JONES BRANCH DRIVE
MCLEAN, VA 22102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 873-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NOT APPLICABLE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
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 Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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 or any amendment to this
Form 10-K. [X]
Based upon the closing price of the registrant's common stock as of March
23, 1999, the aggregate market value of the common stock held by non-affiliates
of the registrant is $26,756,787.*
As of March 23, 1999, the registrant had outstanding 7,181,532 shares of
Class A Common Stock, par value $.01 per share, (the "Class A Common Stock") and
8,460,984 shares of Class B Common Stock, par value $.01 per share, (the "Class
B Common Stock").
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:
(1) Portions of the definitive Proxy Statement for the Annual Meeting
of the Stockholders to be held on May 25, 1999 (the "Proxy Statement") to
be filed within 120 days after the end of the registrant's fiscal year are
incorporated by reference into Part III, Items 10 - 13 of this Form 10-K.
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* Solely for purposes of this calculation, all executive officers and directors
of the registrant and all shareholders reporting beneficial ownership of more
than 5% of the registrant's common stock are considered to be affiliates.
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This Annual Report on Form 10-K ("Form 10-K") contains certain
forward-looking statements within the meaning of Section 27A of the Securities
and Exchange Act of 1934, which statements can be identified by the use of
forward looking terminology, such as "may", "will", "expect", "anticipate",
"estimate", or "continue" or the negative thereof or other variations thereon or
comparable terminology. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth elsewhere in this Form 10-K. See the
"Risk Factors" section of Item 1 "Business" for cautionary statements
identifying important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from results referred to in forward-looking statements. Unless
the context indicates or requires otherwise, references in this Form 10-K to the
"Company" are to (1) the combined operations of the Company's predecessor, LCC,
L.L.C., a Delaware limited liability company, and its subsidiaries (the "Limited
Liability Company") prior to the date of the merger of the Limited Liability
Company into LCC International, Inc., a Delaware corporation formed in June 1996
("LCC International"), as described below (the "Merger") and (2) LCC
International and its subsidiaries, after the Merger. Definitions of technical
and other terms are set forth in the Glossary appearing elsewhere herein.
References herein to wireless telecommunications or similar terms are not
intended to include satellite transmission, which some consider to be a
"wireless" technology.
PART I
ITEM 1. BUSINESS
GENERAL
The Company is one of the world's largest independent providers of RF
engineering and program management services to the wireless telecommunications
industry. The Company has provided these services to operators of more than 200
wireless systems in more than 50 countries. In January 1997, the Company,
through its subsidiary, Microcell Management, Inc. ("Microcell"), began
constructing, owning and managing telecommunications towers. The Company
recently announced a new strategy to focus on its core telecommunications
services business and leverage this core business to expand its position in the
telecommunications tower ownership and management business. This will enable the
Company to offer wireless network operators a more expansive integrated solution
for accomplishing many of the significant tasks involved in system design,
buildout and operation. As part of this strategy, the Company has adopted a plan
to divest itself of its software tools and field measurement and analysis
equipment businesses (the "Products Businesses"). The Company believes that the
foregoing actions will increase its long-term value to the Company's
shareholders.
The Company has provided services and products to seven of the ten largest
U.S. cellular system operators; large international cellular operators,
including British Telecom, France Telecom and Mannesmann; companies building or
proposing to build PCS systems, including AT&T Wireless Services, Bell South
Cellular Corporation, Lucent Technologies and Pacific Bell Mobile Services;
operators of iDEN systems, including Nextel Communications; and operators of
two-way messaging systems, such as PageNet. The customers listed above each
contributed 5% or more of the Company's consolidated revenues (10% or more in
the case of Nextel Communications) during one or more of fiscal years 1991
through 1998. The Company also has established working relationships with two
major telecommunications equipment vendors, pursuant to which the Company
provides services and products on a subcontract basis. The Company derives a
significant portion of its revenues from its international customers
(approximately 46.0% in 1998).
A substantial number of new wireless network licenses have been awarded
worldwide over the last several years, and the Company expects a significant
number of additional wireless licenses to be awarded in the next few years. In
addition, many existing systems are continuing to grow. Furthermore, competition
among operators of wireless networks is generating greater requirements for
operational quality and efficiency. Construction of new networks, and expansion
and optimization of existing networks, require substantial amounts of RF
engineering and program management services and provide new opportunities for
tower construction, acquisition and management.
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The Company's approximately 400 professionals provide engineering and
program management solutions to operators of a wide range of wireless networks,
incorporating all major wireless technologies available today, including TDMA
(which includes IS-54 and IS-136), GSM, CDMA, iDEN, AMPS and ETACS. The Company
provides services for operators involved in all four phases of wireless system
development: (i) Phase 1 -- bidding for the licenses necessary to build and
operate the system; (ii) Phase 2 -- design and build-out of the system; (iii)
Phase 3 -- optimization and enhancement of the system to meet the requirements
of an increasing subscriber base and to provide increased quality and coverage;
and (iv) Phase 4 -- achievement of greater efficiencies in providing service in
order to compete in areas where there are multiple system operators.
The Company believes that its involvement in the early stages of wireless
system development, coupled with its site development experience and its
relationships with telecommunications vendors, uniquely positions it to identify
and obtain opportunities in the tower ownership and management business. The
Company seeks to capitalize on these advantages, along with the trend toward
collocation and independent tower ownership in the telecommunications industry,
to expand this business through Microcell as well as other avenues. As of
December 31, 1998, Microcell owned 65 completed telecommunications towers (each
with at least one contractually committed tenant) and was in the process of
acquiring sites for, or undertaking construction of, another 132
telecommunications towers (127 of which had a contractually committed tenant).
The Company's tower customers represent a broad base of wireless communications
providers that include AT&T Wireless, PrimeCo., Centennial Communications,
Carolina PCS, Sprint Spectrum and Nextel Communications.
COMPANY BACKGROUND
The Company's business commenced in 1983 in a corporation named LCC,
Incorporated (presently named Cherrywood Holdings, Inc. ("Cherrywood")), a
Kansas corporation organized in 1983 and wholly owned by Dr. Rajendra and Neera
Singh and certain Singh family trusts. In 1994, Cherrywood transferred the
business to Telcom Ventures, L.L.C. ("Telcom Ventures"), a Delaware limited
liability company, for a 75% interest in Telcom Ventures. At the same time,
certain entities formed by The Carlyle Group, a Washington, D.C.-based
investment group (the "Carlyle Investors"), acquired a 25% interest in Telcom
Ventures in consideration of a cash contribution. Telcom Ventures then formed
the Limited Liability Company and transferred the business to the Limited
Liability Company in exchange for a 99% interest in the Limited Liability
Company. Cherrywood and TC Group, L.L.C. ("TC Group"), an affiliate of the
Carlyle Investors, received direct interests of 0.75% and 0.25%, respectively,
in the Limited Liability Company. LCC International was formed in June 1996 for
the purpose of effecting an initial public offering of equity interests in the
Limited Liability Company. This was accomplished in September 1996 by the Merger
in connection with completion at that time of the initial public offering of the
Class A Common Stock (the "Offering"). Prior to the Merger, Telcom Ventures
transferred its interest in the Limited Liability Company to RF Investors,
L.L.C. ("RF Investors"), a Delaware limited liability company of which Telcom
Ventures owns 99% and Cherrywood and TC Group own 0.75% and 0.25%, respectively.
Since the Offering, Cherrywood and TC Group have transferred to RF Investors the
shares of the Company which they received as a result of the Merger.
In June 1994, the Limited Liability Company and Telcom Ventures entered
into a Note Purchase Agreement with a then unrelated third party, MCI
Telecommunications Corporation ("MCI"), which provided for the issuance of a $20
million subordinated note by the Limited Liability Company and of a $30 million
subordinated note by Telcom Ventures (the "Telcom Ventures Note") to MCI in
return for cash in such amounts. These notes are convertible, under certain
circumstances, into 2,841,099 shares of Class A Common Stock (see note 13 to the
Consolidated Financial Statements). Immediately prior to the Merger in September
1996, the Telcom Ventures Note was assumed by the Limited Liability Company (the
"MCI Note Assumption") and the $30 million principal repayment obligation and
interest thereon became the sole obligation of the Limited Liability Company
and, following the Merger, the sole obligation of the Company. The Company made
a loan of $3.5 million to Telcom Ventures to assist Telcom Ventures in paying
certain
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taxes due in connection with the MCI Note Assumption. Interest accrues on this
note at the rate of LIBOR plus 1.75% and, together with 20.0% of the original
principal amount, is payable annually.
The Company issued 3,162,500 shares of Class A Common Stock in the Offering
at an initial public offering price of $16.00 per share. The total proceeds of
the Offering, net of underwriting discounts and offering expenses, were
approximately $44.8 million. The Company used approximately $16.2 million of the
proceeds for repayment of outstanding amounts under the Credit Facility (defined
below), $3.5 million to fund the loan to Telcom Ventures, approximately $6.85
million for vendor financing, approximately $11.85 million to fund a portion of
the ETP Acquisition (defined below) purchase price, and the remainder for
working capital and general corporate purposes.
In December 1996, through its newly formed subsidiary, Microcell, the
Company acquired the business of Microcell Management, L.L.C., which, through
the participation of the Company and others, consisted of the acquisition,
development, lease and management of telecommunications towers. As consideration
therefor, Microcell paid $290,000, $200,000 of which was used by Microcell,
L.L.C. to pay an outstanding loan from the Company. The Company issued 16.25% of
the stock of Microcell to then current members of management and two financial
investors, and has advanced Microcell approximately $22 million under an
intercompany credit facility.
In July 1998 the Company acquired 66.7% of the outstanding membership
interests in Koll Telecommunications Services, L.L.C. ("Koll"), bringing its
total ownership in Koll to 100%. Koll provides site acquisition and construction
management services to operators of wireless communications systems in the
United States. In the transaction, Koll redeemed the membership interests of one
member in exchange for that member's assumption of certain contract rights and
associated assets and liabilities. It also redeemed the membership interests of
another member in exchange for an earn-out agreement entitling that member to
40.0% of the pre-tax income, after certain adjustments, derived by Koll from its
existing contracts.
RECENT DEVELOPMENTS
On March 26, 1999, the Board of Directors of the Company approved a plan of
divestiture of the Products Businesses, including the operations of its
subsidiary, LCC Europe AS, which acquired the hardware and software products
business of European Technology Partners AS in December 1996 ("ETP
Acquisition"). This decision was the result of an analysis of the Company's
businesses conducted by management and certain members of the Company's Board of
Directors during the past several months. The Company believes that the
long-term financial interests of the Company's shareholders would be best served
by pursuing a strategy which focuses on the Company's core telecommunications
services business along with the telecommunications tower ownership and
management business to provide wireless operators with a more expansive
complement of the services required for the development and operation of their
systems. The Company has engaged an investment banking firm to assist it in the
disposition of the Products Businesses. Pending such disposition, the Company
intends to operate its field measurement and analysis products business
consistent with past practice, subject to implementation of various cost savings
measures, and intends to reduce significantly the operations of its software
tools business if such business is not sold in the near future.
INDUSTRY BACKGROUND
Overview
Wireless telecommunications networks use a variety of radio frequencies to
transmit voice and data. Wireless telecommunications networks include two-way
radio applications, such as cellular, wide band and narrow band PCS and iDEN
networks, and one-way radio applications, such as paging services. Each
application operates within a distinct radio frequency block. Although cellular
represents the largest segment of the wireless communications industry, other
wireless technologies are expected to grow significantly. These technologies all
require radio frequency engineering for system design, build-out and
optimization, and use telecommunications towers to carry their signals.
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Types of Wireless Communications
The wireless communications industry encompasses a broad range of
technologies and applications from cellular phones to mobile radio and paging
systems. Each technology requires antennae mounted on either roof tops or on
towers to enable the system to send and receive radio signals. These radio
signals operate within portions of the spectrum designated by the FCC
specifically for each technology. The rapid development of cellular wireless
technology used for telephone service has practically depleted the availability
of this portion of the spectrum throughout the United States. Originally two
carriers were licensed to operate a network in each metropolitan statistical
area. In order to promote competition in the provision of services to consumers,
in recent years the FCC has opened up previously unavailable portions of the
spectrum for commercial use. This has led to the development of new technologies
using these additional portions of the spectrum, which can service
geographically the same area as services using other portions of the spectrum;
with the advent of PCS, there is now the potential for three to five additional
competitors in each metropolitan statistical area. New technologies overlapping
geographically are expected to increase the demand for use of telecommunications
tower space. The key technologies in the communications industry today are as
follows:
Cellular. A cellular network is a telephone system based on a grid of
"cells" deployed primarily at 800 and 900 MHz. Each cell contains transmitters,
receivers and antennas, and is connected to switching gear and control
equipment. The cellular industry is well established in the developed world. In
some countries, the cellular network provides significantly improved access to
the local and international wireline telephone network compared to existing
wireline telephone service. As the cellular market migrates from an analog based
transmission technology to a digital ("analog" and "digital" refer to different
methodologies by which "packets" of information are transmitted) based
transmission technology, demand is expected to increase as prices decline. To
increase network capacity and improve service quality and to reduce prices,
cellular carriers must re-engineer their networks, increase the number of cells
and therefore the number of antennae. The antennae are mounted principally on
rooftops in urban areas and on towers in suburban and rural areas along
interstate highways. The increased demand for tower space, coupled with
environmental, zoning, safety and aesthetic restrictions on new tower
construction in suburban areas, is making the rental of tower space an
increasingly attractive option to wireless carriers.
PCS. In 1993, the FCC allocated a portion of the radio spectrum for the
provision of a new wireless communications service, commonly known as PCS. The
principal difference between PCS and traditional cellular service is that PCS
systems operate at a higher frequency range and have a more limited transmission
range requiring more cell sites than cellular to obtain equivalent geographic
coverage. Licenses to operate PCS networks were awarded in the United States
through auctions conducted during 1995, 1996 and 1997. Several PCS licenses have
been awarded outside of the United States. Due to the reduced coverage of a PCS
signal, it is expected that PCS operators will require a large number of new
towers to deploy PCS networks.
iDEN. iDEN is a mobile communication service that relies on specialized
mobile radio ("SMR") frequencies that have been historically limited to two-way
voice communications in small local networks (such as for taxi or messenger
dispatch). As a result of advances in digital technology, iDEN operators have
begun to design and deploy digital mobile networks that increase the frequency
capacity of iDEN systems to a level that is competitive with that of cellular
and PCS systems. Companies such as Nextel Communications (in the U.S.), Clearnet
Communications (in Canada) and Tricom (in Mexico) have acquired licenses for
iDEN two-way radio channels in their respective operating areas and are offering
wireless voice services over their networks. A derivative SMR technology known
as "TETRA" or "Terrestrial Trucking Radio" is becoming an increasingly popular
technology in Europe.
Paging. Paging is a method of wireless telecommunications that uses an
assigned radio frequency to contact a paging subscriber anywhere within a
service area. Each paging subscriber is assigned a distinct telephone number
which a caller dials to activate a subscriber's pager (a pocket-size radio
carried by the subscriber). The radio signal causes the pager to emit a beep or
vibrate and to provide the subscriber with information from the caller in the
form of a voice, time, numeric or alphanumeric message. "Two-way" data
applications, which allow the subscriber to acknowledge and reply to messages
and therefore require system designs akin to cellular and PCS networks, have
been implemented. The infrastructure equipment utilized by
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a paging company is not as elaborate as the infrastructure equipment which must
be installed to transmit a cellular or PCS signal. A tower, therefore, can
usually accommodate more paging antennae than cellular or PCS antennae.
LMDS and Other Services. Local Multipoint Distribution System ("LMDS") is
a fixed broadband point-to-multipoint system which provides an alternative for
offering local exchange service, wireless telephony, data, internet access,
video and other broadband services. LMDS services, wireless cable, wireless
local loop (a system that eliminates need for a wire loop connecting users to
the public switched telephone network), digital audio radio satellite systems
and satellite and wireless high speed data services represent other areas of the
wireless communications industry being developed by operators in the U.S. and
abroad. In the United States, Teligent, Winstar and ARTS are operating the first
stages of their LMDS networks, and plan to construct nationwide networks in the
near future.
Wireless Technologies
Most traditional cellular systems historically transmitted 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 that is compressed before transmission, enabling a single radio channel
to carry multiple simultaneous signal transmissions. This enhanced capacity,
along with enhancements in digital protocols (discussed below), allows
digital-based wireless technologies to offer new and enhanced services, such as
greater call privacy and single number (or "find me") service, and more data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and connecting notebook computers with computer/data
networks).
Digital signal transmission is accomplished through the use of frequency
management technologies, or "protocols." Two common protocols used in cellular
and other networks "manage" the radio channel either by dividing it into
distinct time slots (a method known as Time Division Multiple Access, or "TDMA")
or by assigning specific coding instructions to each packet of digitized data
that comprises a signal (a method known as Code Division Multiple Access, or
"CDMA"). In the U.S., the FCC has intentionally avoided mandating a universal
digital signaling protocol, and three principal digital signal protocols (which
are incompatible with each other) are currently being used in the U.S. for PCS
networks: GSM, CDMA and TDMA. European Union countries generally have agreed to
adopt GSM as a common standard protocol for cellular and PCS transmission and
approximately 60 countries, including virtually all countries in Western Europe,
have issued or propose to issue GSM 900 or 1800 MHz licenses. The universal GSM
standard is designed to allow subscribers to roam throughout Europe and wherever
else GSM technology has been adopted. Other wireless technologies are also
presently in use for a variety of different types of transmission. The Company
has expertise in all these technologies.
There is currently underway an initiative by the International
Telecommunications Union ("ITU") and regional standards bodies to define a
single next generation technology standard for the Americas, Europe, Japan,
Korea and China, to be known as "3G." This next generation of service will
enable carriers to deploy key capabilities that current so-called "2G" wireless
technologies such as TDMA, CDMA and GSM are unable to support, provide open
standards and architecture and lower cost, higher capacity and improved
performance. Anticipated 3G capabilities include wireline quality voice service,
collaborative working between multimedia and high speed data, user customization
allowing the subscriber better control over features such as voicemail routing,
announcements and call screening, mobility-enabled services such as vehicular
navigation and emergency services, wireless local loop capabilities, seamless
global roaming, zone identification and billing and satellite interworking. The
ITU has received numerous proposals from several countries and standards groups
recommending specifications for the new standard and has formed an operators'
standards forum for the purpose of forging a consensus with respect to the new
standard among operators, vendors and standards groups. It is anticipated that
the adoption of 3G will create additional licensing activity globally to
allocate spectrum for implementation of these new technologies and services.
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Operation of Two-Way Wireless Systems
Two-way mobile wireless service areas are divided into multiple regions
called "cells," each of which contains a base station consisting of a
transmitter, a receiver and signaling equipment, located on a telecommunications
tower. The cells are typically configured on a grid pattern, although terrain
factors (including natural and man-made obstructions) and signal coverage
patterns may result in irregularly shaped cells and overlaps or gaps in
coverage. Cellular system cells generally have a radius ranging from two miles
to 25 miles. PCS system cells have a radius ranging from approximately
one-quarter mile to approximately 12 miles, depending on the PCS technology
being used and the terrain. The base station in each cell is connected by
microwave, fiber optic cable or telephone wires to a switch, which uses
computers and specially developed software to control the operation of the
wireless telephone system for its entire service area. The switch controls the
transfer of calls from cells within the system and connects calls to the local
landline telephone system or to a long distance telephone carrier. Since each
cell site requires a telecommunications tower and engineering and site
acquisition services, growth in the number of cell sites is one of the key
drivers of demand for the Company's telecommunications services and
telecommunications towers.
Wireless transmission requires a certain signal strength for the parties to
hear each other or for data to be received. The signal strength of a
transmission between a handset and a base station declines as the handset moves
away from the base station, so the switch and the base stations monitor the
signal strength of calls in progress. When the signal strength of a call
declines to a predetermined level, the switch may "hand off" the call to another
base station that can establish a stronger signal with the handset. Hand-off to
an adjacent system must be effected through an appropriate technical interface
when a handset leaves the service area of the wireless service provider. The
quality of wireless transmission depends in part on signal strength, limitations
imposed by the terrain and interference from other uses of radio signals.
Transmission quality is measured in the field at various locations so that
adjustments can be made to enhance quality.
Each wireless network is designed to meet a certain level of subscriber
density and traffic demand and to provide a certain geographic coverage. Each
transmission over the wireless network requires a certain amount of radio
frequency, so a system's capacity is limited by the amount of frequency that is
available. The same frequency can be reused by each separate transmitter,
subject to certain interference limitations. The design of each wireless system
involves placement of transmission equipment in locations that will make optimal
use of available frequency based upon projected subscriber usage patterns,
subject to availability of such locations and ability to use them for wireless
transmissions under applicable zoning requirements.
After a wireless system has been installed, the system's capacity can be
increased in various ways, by (i) adding available frequency capacity to cells
as required, if such capacity is available, (ii) using directional antennae to
divide a cell into discrete multiple sectors or coverage areas, thereby reducing
the required distance between cells using the same frequency, or (iii) "cell
splitting" (i.e., dividing a single cell into a number of smaller cells served
by lower-power transmitters, thereby increasing the ability to reuse radio
frequencies and increasing the number of calls that can be handled in a given
area). Additional solutions are being designed to increase network capacity and
coverage, including (i) the introduction of microcells, which can be placed very
close together to increase frequency reuse and the total capacity of the
wireless network and which can be placed within buildings, train stations and
other structures to provide coverage where none was available before and (ii)
the introduction of digital technologies, which increase the number of
conversations which can be transported on a single radio carrier from two to
potentially more than ten times, depending on the type of digital technology
deployed.
Wireless System Life Cycle
Set forth below is a description of the life cycle of a typical wireless
system.
Phase 1. In Phase 1, the operator is pursuing the licenses necessary to
build and operate the system. A rough engineering design is often required to
determine construction costs and revenue generating ability of the system.
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Phase 2. Phase 2 involves the actual design and build-out of the wireless
system. Detailed site location designs are prepared, interference to or from
co-located antennae is checked, site performance is measured after completing
construction and, finally, the site is optimized to work with neighboring sites.
As part of this process desirable cell site locations are identified and a site
acquisition team will identify potential telecommunications towers or parcels
for construction of a telecommunications tower within the desired geographic
area, obtain rights, including required regulatory permits, for the operator to
utilize existing towers or construct new towers and, in the case of tower
construction, oversee the construction process. Wireless network operators (even
the few which have sizable internal engineering staffs) typically rely on
outside RF engineering companies, such as the Company, for Phase 2 engineering
services and often rely on outside parties to oversee the site acquisition and
construction process. Depending on the size of the system, this phase can
involve from four RF engineers for a typical small system, to 15 RF engineers
for a typical medium-sized system and up to 100 RF engineers for a nationwide
deployment over a period of 12 to 24 months. The Company believes that globally
the number of RF engineers available on an outsourcing basis is limited.
Phase 3. As the number of subscribers handled by the wireless system
increases, the system enters Phase 3, the expansion of the system by adding cell
sites or using other techniques to increase system coverage and capacity. The
system must also be optimized to meet the increased subscriber usage from the
new cell cites and to provide increased quality and coverage. In network
expansions, the operator typically continues to rely on the RF engineering
company and the external site acquisition team, such as the Company, to design
and implement the expansion and make optimization adjustments to the existing
system.
Phase 4. Eventually the system will enter Phase 4, in which the operator
must achieve greater efficiencies in service provision in order to compete in
areas where there are multiple system operators. In most European countries and
Australia, certain systems have entered Phase 4. In the U.S., with the
construction of new PCS systems in areas that already have two cellular systems
and with the rollout of a national iDEN system by Nextel Communications,
wireless networks are reaching Phase 4. Competing systems in Phase 4 generally
have the same network coverage; thus, competition is focused primarily on price
and call quality.
Services for the Wireless Industry
The planning, geographic layout, build out and operation of a wireless
network requires significant RF engineering work. The RF engineers must design
the wireless network to meet the operator's requirements for transmission over
the wireless network, which requirements are based upon a projected level of
subscriber density and traffic demand and the coverage area specified by the
operator's license or cost-benefit decisions. In addition to meeting basic
transmission requirements, the RF network design must make optimal use of
available radio frequency and result in the highest possible signal quality for
the greatest portion of projected subscriber usage within existing constraints.
These constraints may be imposed by cost parameters, terrain, limitations in the
license, interference with other operators, availability of cells, applicable
zoning requirements and other factors. Based on these initial technical
guidelines, desired cell site locations are identified. This process is known as
identifying "search rings."
The RF engineering work performed in connection with both initial system
design and buildout and subsequent system redesign and expansion must be
coordinated with cell site acquisition activities. A site acquisition team
identifies those potential sites within a given search ring (i) which most
closely match the RF engineering specifications; (ii) can be leased; (iii) are
suitable for construction; and (iv) are amenable to obtaining zoning and other
required permits. The most desirable sites fitting these criteria are further
analyzed by the RF engineers in the context of demographics, traffic patterns
and signal characteristics. If necessary, the RF engineers may re-design their
initial search rings to identify other suitable target locations.
After a suitable site has been identified, the site acquisition team
obtains either (i) a long-term lease for a rooftop or tower site, or (ii) in the
case of a tower site, an option to purchase the property. In the case of a tower
site, the site acquisition team will also obtain a title report on the site,
conduct a survey of the site, obtain an environmental survey of the site and
conduct a soil analysis of the site.
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The site acquisition team will also prepare all necessary zoning
applications, attend any necessary zoning hearings and obtain necessary land use
permits to begin construction or install equipment. Once the necessary site
acquisition steps have been completed, materials to construct a multi-tenant
tower are ordered from a tower fabricator. During this phase of development,
construction budgets and schedules are prepared, sub-contractors are hired where
necessary and construction begins. Construction involves, in the case of a tower
site, clearing the site, laying foundations, bringing in utility lines
(including interconnection with a local telephone provider) and constructing the
multi-tenant tower, and, in some cases, shelters or buildings to house
electronic equipment and, in the case of a rooftop site, assembling the
necessary equipment.
Use of Telecommunications Towers
Telecommunications towers are one of the primary infrastructure components
for wireless communications services such as cellular, PCS, SMR, iDEN, microwave
and paging. Wireless communications networks include transmission equipment such
as antennae, transmitters and receivers placed at various locations throughout
the covered area. These locations, or communications sites, utilize towers,
rooftops and other structures upon which such equipment is placed. Antennae are
typically placed on rooftops and other high structures in urban areas and on
towers in suburban and rural areas and along major interstate highways.
There are three types of towers, "lattice" and "monopole," which are both
self-supporting, and "guyed," which is supported by a series of cables attached
to the tower and anchored in the ground at points around the tower. A lattice
tower is usually tapered from the bottom up and can have three or four sides of
open-framed steel supports. A monopole is a free-standing tubular structure.
Lattice towers can reach up to 1000 feet, monopoles typically range in height
from 50-200 feet and guyed towers can reach 2000 feet or more. Guyed towers
require significantly more land and encounter more resistance in obtaining
zoning approvals. The height of the tower is an important factor in determining
the number of tenants that may use the tower. A typical tower of 200 feet can
accommodate three to four cellular, iDEN or PCS operators and four to six LMDS
or paging operators. A tower five or ten times as high can accommodate a
proportionately greater number of tenants. The type of multi-tenant tower being
constructed may determine whether a zoning application will be readily approved.
Due to their tubular low profile design, monopole towers are generally preferred
by local zoning boards in comparison to guyed and lattice towers. Guyed towers
encounter the most resistance because of their height and site size
requirements.
Regardless of type or size, towers are fixed structures that require only
minimal maintenance to prevent rust and corrosion and to maintain warning
lighting for aircraft. Tower operators generally have little customer turnover
since tenants generally do not relocate their antennae given the significant
costs associated with re-engineering and relocation and the operation and
maintenance of towers requires minimal on-site inspections. Furthermore, towers
are not subject to significant obsolescence risks because all types of wireless
communication require antennae that must be attached to towers, rooftops or
other high structures.
Wireless carriers generally own the towers used in their networks and
historically have not made space available to other carriers, except where
required by local conditions. However, wireless carriers have begun to outsource
the ownership and management of the communication towers contained in their
networks in an effort to conserve their capital and focus their operations
primarily on activities that build subscriber growth. Accordingly, industry
analysts believe that wireless carriers will seek to sell the approximately
30,000 towers located in the United States they currently own to independent
tower companies. Several contracts for large tower sales were announced in 1998
and early 1999. Furthermore, in order to speed new network deployment or
expansion and to generate efficiencies, carriers are increasingly collocating
transmission equipment with that of other network operators. The need for
collocation has also been driven by regulatory restrictions and the growing
trend by municipalities to slow the proliferation of towers by requiring that
towers accommodate multiple tenants.
During the mid-to-late 1980's, a number of independent owners of towers
began to emerge. These independent tower operators focused on owning and
managing towers with multiple tenants by adding lessees to existing and
reconstructed towers. These operators were mostly small business owners with a
small number of local towers. In the last few years, several larger independent
tower operators have emerged as demand for
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wireless services has continued to grow and as additional high frequency
licenses have been awarded for wireless services (including PCS, narrowband
paging and wireless local loop), each requiring networks with extensive tower
infrastructure. These independent tower operators have sought to acquire smaller
operators as well as suitable clusters of towers formerly owned by carriers and
broadcasters in order to establish regional and national "tower footprints."
The Company believes that, in addition to the favorable growth and
outsourcing trends in the wireless communications industry, independent tower
owners benefit from a number of favorable characteristics: (i) the ability to
efficiently increase the pace of the deployment of new networks, (ii) the
ability to avoid costly zoning and licensing disputes entailed by citizen
opposition and to obtain approval from local zoning/planning authorities, who
favor single towers with multiple tenants for safety, environmental and
aesthetic reasons; (iii) the ability to lease sites to multiple wireless
operators at costs otherwise not obtainable for a single tenant; (iv) the
ability to have a predictable and stable recurring revenue stream; and (v) the
ability to add additional tenants to existing towers and increase operating
revenues without increasing operating costs.
TELECOMMUNICATIONS SERVICES AND TOWER OWNERSHIP AND MANAGEMENT
Background
In the early 1980's, when the FCC began to issue licenses for cellular
systems, wireless system design was an unsophisticated process. Since minimal
data had been collected on system performance and limited engineering had been
done, the Company (following its formation in 1983) worked to develop a standard
method of applying design engineering principles to wireless system design. The
method included the development of software to accelerate and automate the
design process, and use of such software with digitized system coverage maps,
enabling the engineer to measure the effect of changes to various system
parameters or use of different locations for cell sites. Over time, the Company
gathered significant amounts of data on various system configurations, improving
the ability of its engineering models to predict system coverage. The Company
also developed a large staff of RF engineers experienced in conducting the
design analysis. Moreover, because the field measurement and analysis equipment
required for verification and measurement of wireless system performance in the
field was generally unsophisticated, the Company created its own field
measurement and analysis equipment.
Originally, RF engineering focused principally on the cellular industry.
Although the services provided by various wireless technologies may be similar,
the engineering requirements of each system are different. As new wireless
technologies were introduced, the Company developed engineering solutions for
the different forms of wireless transmissions. In order to distinguish itself
from a competitive standpoint, as a complement to the foregoing activities, the
Company expanded its service offerings in 1994 to include program management
services involving the deployment or management, on a turnkey basis, of wireless
systems. These services include systems integration, site acquisition, site
engineering, construction management, installation and commissioning, and
customer training services. The Company further expanded the range of its
offerings to wireless network operations in January 1997 to include
telecommunication tower ownership and management offered by Microcell. This
affords wireless network operations the opportunity to finance and outsource the
ownership and maintenance of the transmission towers utilized in their networks.
The Company recently announced a new strategy to focus on its core
telecommunications services business and leverage this core business to expand
its position in the tower ownership and management business, thereby enabling it
to offer wireless network operators a more expansive integrated solution for
accomplishing many of the significant tasks involved in system design, buildout
and operation. As part of this strategy the Company has decided to divest itself
of the Products Businesses.
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Telecommunications Services
RF Engineering and Program Management Services. Through its Telecom
Services Group the Company provides a variety of RF engineering and program
management services over the four phases of the life cycle of a wireless
telecommunications system, as follows:
Phase 1 Services. The Company's engineers help prepare applications
for network system operators seeking licenses in formal government license
grant processes. The Company also has assisted foreign governments in
preparing Requests for Proposals ("RFPs") and analyzing responses thereto.
The Company has assisted in preparing winning applications in several
(approximately nine) license tender processes worldwide, including the
second nationwide cellular license in Germany, the first cellular license
in Bombay, India and, most recently, a license in Belgium. The Company's
involvement in successful tenders has generally led to follow-on contracts
with winning applicants as they implement new systems.
Phase 2 Services. The Company offers a full range of deployment
services including analysis of customer expectations for network coverage,
capacity and other requirements, analysis of interference and other
technical factors affecting coverage, capacity and performance,
identification and rank of desirable cell sites, preparation of regulatory
filings (FCC, FAA, zoning, land use and others) required for system
deployment and attendance at regulatory hearings, assistance with systems
deployment, including identification and site acquisition and construction
management services, measurement of network performance and optimization of
systems.
Phase 3 Services. The Company's services are used by existing system
operators to plan system expansions to accommodate subscriber growth,
incorporate improvements in technology, improve system performance and
achieve efficient use of available radio spectrum. The Company also assists
in capacity expansion planning and technology changeovers, such as
conversion from analog to digital technology.
Phase 4 Services. As multiple service providers offer competing
services in the same service area, network operators will require
additional engineering services focusing on the achievement of cost savings
and quality enhancements within the existing coverage area. These services
include system analysis and network management, including redistribution or
elimination of cell sites, cost management, measurement of network
performance, including "benchmarking" performance against that of
competitors, and technology and network upgrades.
Most of the Company's RF engineers are based in McLean, Virginia, but spend
significant periods (approximately one to nine months per year) at customer
sites. The Company is one of the world's largest independent providers of RF
engineering and wireless network design services. The Company believes that its
large number of RF engineers enables it to respond quickly to customers who may
require the Company to staff a major project on a timely basis. In addition, the
Company believes that the wide-ranging experience of its RF engineers, including
exposure to and participation in the standards-setting process for new digital
technologies, helps the Company understand the changing marketplace for wireless
communications and for engineering services and products to support the wireless
industry. Since a large number of its RF engineers work on customer sites, the
Company is able to develop an understanding of many of the issues of importance
to its customers and uses this information in planning. The Company also
believes that the various nationalities of its RF engineers provides the Company
with an understanding of different practices in business and wireless telephony
in many countries around the world that will assist the Company in continuing to
pursue international opportunities. Finally, the Company believes that its
involvement in various Phase 1 activities affords it superior opportunities to
identify the likely participants, including potential operators and equipment
vendors, in a network and to market its telecommunications services and tower
ownership and management business to those entities.
The Company provides engineering services on a contract basis, usually in a
customized plan for each client. The Company generally charges for engineering
services on a time and materials basis, although Phase 1 services or other
projects of short duration may involve a fixed price or success fee. The
Company's
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revenues also include reimbursement for expenses, including the living expenses
of engineers on customer sites.
The Company offers its customers a "one stop shopping" approach to Phase 2
system build-outs and Phase 3 network expansions by packaging program management
services in a customized plan for each client. The Company provides these
services on a contract basis, on a time and materials basis or for a fixed price
per cell site.
Revenues from telecommunications services represented approximately 99.0%
of revenues for 1998.
Telecommunications Tower Ownership and Management
Tower Ownership. Since January 1997, the Company has been offering
wireless network operators the following arrangements with respect to the
transmission towers utilized in their networks: (i) build a multi-tenant tower
to suit the initial committed network operator's specifications or requirements
(including site location), lease space to that operator on a long term basis and
seek to lease space to other operators, (ii) purchase existing towers from
network operators, lease back space to the existing users and seek to lease
space to new operators or (iii) lease space on an existing tower owned by it or
to be built to its own specifications.
Build to Suit. To date, the Company has constructed most of its towers on
a build-to-suit basis. The Company constructs towers after signing an antennae
site lease agreement with an anchor tenant and determining that the Company's
capital investment will deliver adequate returns based on a number of factors,
including collocation opportunities, zoning and permitting issues, cost of
construction and land lease costs. Operators of new wireless networks, or
networks that are being expanded, have been willing to enter into long term
leases for towers constructed to meet their requirements.
Tower Acquisitions. The Company plans to pursue acquisitions of existing
domestic and international telecommunications towers. The Company evaluates
acquisitions based on the location of the tower, the ability to add tenants, the
purchase price, competitive conditions and the expected rate of return. The
Company believes that the domestic multi-tenant tower acquisition market is
highly competitive in comparison to most foreign markets and that the purchase
price for towers outside the U.S. will be more favorable. As a result, the
Company believes some of its acquisitions will be of international towers. The
Company believes that its on-site presence in providing telecommunications
services to its global customer base will enable it to identify or create tower
acquisition and build to suit opportunities.
Constructing without Anchor Leases. On occasion, the Company has built new
multi-tenant towers prior to obtaining written lease commitments in areas where
it believes wireless network expansion is likely to occur in the near future.
Existing Tower Portfolio. At December 31, 1998, the Company, through
Microcell, owned 65 completed telecommunications towers (each with at least one
contractually committed tenant), and was in the process of acquiring sites for,
or undertaking construction of, another 132 telecommunications towers (127 of
which had a contractually committed tenant). These towers are located primarily
in North Carolina, South Carolina, Virginia, Indiana and Michigan.
Tower Construction. The Company, directly or through subcontractors,
construct multi-tenant towers for the purpose of owning and operating such
multi-tenant towers for the production of rental income. Construction of
multi-tenant towers includes: (i) RF engineering and design; (ii) site
identification; (iii) site acquisition; (iv) zoning and permitting; and (v) site
construction.
Tower Leasing.
Tenants. The Company leases available antennae space on its towers. The
number of tenants on a multi-tenant tower depends on the size of the tower, the
terrain and the wireless technologies employed by the users. A typical 200 foot
tower can accommodate three cellular/PCS/iDEN tenants and four to six paging,
private radio and LMDS tenants. The number of tenants that can be accommodated
increases proportionately
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with the height and the engineered wind loading characteristics of the tower.
The Company can lease antennae space to any wireless carrier, with any frequency
spectrum allocation, using any type of technology. As a result, the Company
believes that a tower business is well positioned to benefit from the growth in
wireless communications regardless of which particular technologies or
applications are successful.
Leases. The Company generally receives monthly lease payments from
customers under written site leases. A significant portion of the Company's
outstanding customer leases are for an initial term of ten years and provides
the tenant with three renewal options of five years each. The industry has
recently favored leases with an the initial lease term of five years and with
four renewal options of five years each.
Pricing Plans. The Company offers its anchor tenant (i.e., the tenant from
whom the tower was acquired or for whom the tower was constructed) three pricing
options: (i) a variable rate plan; (ii) a flat rate plan; and (iii) a fixed rate
plan. Under the variable rate plan, an anchor tenant's initial base rent is
determined based on the build cost and the ground rent of the tower site. This
initial base rental is reduced as other tenants are added to the tower. Rent for
non-anchor tenants is based on prevailing market rates. The non-anchor tenants
are not eligible to participate in the rental reduction program available to
anchor tenants under this option. Under the flat rate plan, the base rent of the
anchor tenant is determined by the build cost and land rent but is not reduced
as other tenants are added to the tower. The Company also offers a fixed rate
pricing plan where the monthly rental charge for an anchor tenant is not based
on the build cost or land rent applicable to a specific tower site. Under this
pricing plan, the monthly rental payment for the anchor tenant is determined in
light of (i) the size, number and weight of the antennae; (ii) the location of
the tower; (iii) the competitive environment; (iv) the height requirements of
the specific tower. Pricing for all subsequent non-anchor tenants is market
driven.
Low Tenant Turnover Rates. The Company has not encountered and does not
believe that it will encounter any significant tenant turnover since a tenant
desiring to relocate to a new tower must redesign and reconfigure the network
the aggregate cost of which is far greater than any potential savings in site
rental expense.
Increase Utilization of Tower Capacity. The Company seeks to increase the
number of tenants that may be served on a tower. Because most tower costs are
fixed, leasing additional space results in minimal additional expenses
generating significant increases in operating cash flow. Once the Company has
identified a site for construction or entered into a binding tower acquisition
agreement, the Company immediately commences marketing activities to potential
tenants.
Tower Management and Maintenance. The Company generally owns, operates and
manages all of the multi-tenant towers it has acquired or constructed. The
Company provides its tenants with routine tower maintenance. Typically, these
services are performed by subcontractors; however, where clusters of towers
exist, the Company may hire personnel to provide site maintenance services.
CUSTOMERS AND BACKLOG
Customers
The Company has provided services and products to seven of the ten largest
U.S. cellular system operators; large international cellular operators,
including British Telecom, France Telecom, Mannesmann and Korea Mobile Telecom;
companies building or proposing to build PCS systems, including AT&T Wireless
Services and Pacific Bell Mobile Services; operators of iDEN systems, including
Nextel Communications; and operators of two-way messaging systems. The Company
also has established working relationships with two major telecommunications
equipment vendors, pursuant to which the Company provides services and products
on a subcontract basis.
In 1998, Nextel Communications and Bell South accounted for approximately
17.2% and 15.9%, respectively, of the Company's revenues and were the only
customers accounting for 10% or more of the Company's revenues. The Company has
an agreement with Nextel Communications pursuant to which Nextel Communications
is committed to pay a minimum amount until October 1999 for the purchase of RF
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engineering services in connection with the design and operation of its digital
mobile telephone systems in the United States (including Alaska and Hawaii),
Puerto Rico and/or the U.S. Virgin Islands.
The Company's existing and targeted customer base includes operators of all
forms of wireless communications services, operating a variety of different
network platforms and access technologies in diverse geographic markets. The
Company's experience includes the following projects:
- The Company has designed analog cellular systems throughout the
U.S., including substantially all of the largest MSAs, as well as in
several other countries.
- The Company has designed TACS/ETACS analog cellular systems in the
United Kingdom and Spain.
- In the U.S., the Company is assisting its cellular customers in
implementing the North American digital cellular standards (i.e.,
TDMA, CDMA and others).
- The Company has designed, or is currently designing, GSM digital
cellular networks in the U.S., Germany, The Netherlands, Belgium,
France, Italy, Portugal, Malaysia and other nations.
- The Company has designed, or is currently designing, iDEN systems
throughout the U.S. and in Brazil, Canada, Mexico and China.
- In the U.S., the Company is supporting narrowband PCS clients with
INFLEXION(TM) and REFLEX(TM) standards.
The Company is constructing towers for Centennial Communications and
Carolina PCS and anticipates that it will build to suit up to 118 towers during
1999.
Backlog
The Company has entered into long-term contracts with customers for the
provision of the Company's services. As of December 31, 1998 the Company had a
total backlog of $15.2 million, consisting of $6.9 million relating to services
and $8.3 million relating to tower ownership and management. The Company
includes in its backlog only committed fees or purchase prices specified in
contracts which have been executed by the Company to the extent that the Company
contemplates recognition of the related revenue.
The principal portion of the Company's present backlog arises from Nextel
Communications, which represents approximately $4.1 million (or 27.0%) of the
overall backlog. Since the Company's backlog is subject to significant timing
uncertainties, the Company cannot accurately predict the portion of the backlog
that will be filled within the current year, but expects that it will not fill
at least $6.9 million of its overall backlog in 1999. There can be no assurance
that the contracts included in the backlog will actually generate the specified
revenues or that the actual revenues will be generated within any particular
period.
SALES AND MARKETING
Telecommunications Services
The Company markets its telecommunications services to operators of
wireless telecommunications networks in North America, Europe, the Middle East,
Africa, Asia-Pacific and Latin America. The Company markets primarily through
its executives, project managers and RF engineers and other technical
professional staff. Customers generally have engineers involved in their
procurement decisions, and the Company's engineers work closely with the
customer's engineers to help them understand the Company's services and their
advantages compared to those of the competition. The Company also utilizes
independent distributors and sales agents to supplement its sales force outside
the U.S. where business practices or customs make it most effective to proceed
through local companies. The Company utilizes the offices of its British
subsidiary to supplement its European sales efforts and the offices of its
Brazilian subsidiary to supplement its Latin American sales efforts and has
established a regional sales office in the Asia-Pacific region. The Company's
managers are compensated in part on revenues generated compared to revenues
forecasted and receivables collected.
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Additional business from existing customers is pursued through the joint
efforts of both the project manager, the RF engineers and other technical staff
who have developed a service relationship and worked closely with the customer's
engineers. This combination gives the Company an advantage in pursuing follow-
on business.
The Company generates sales leads for new customers through referrals from
existing customers (including referrals to international wireless operators with
which such customers have entered into partnership arrangements) and other
industry suppliers, its reputation in the industry, contacts with bidders for
new wireless licenses and others in the industry and other sources, which
include advertising, use of explanatory literature and publications and
participation in conferences and trade shows. The Company utilizes various
strategies to attract business from new customers, particularly various
arrangements in which Phase 1 services are provided for a reduced fee or with a
success-based contingent arrangement, coupled with a commitment from, or
understanding with, the customer to retain the Company in connection with Phase
2 services and products should the customer be awarded the applicable licenses.
In addition to obtaining business directly from wireless network operators,
the Company has also established working relationships with major
telecommunications equipment vendors, pursuant to which the Company provides RF
engineering services and related products, on a subcontract basis. The Company
is seeking to establish additional relationships with telecommunications
equipment vendors.
Purchases of the Company's services by customers often entails an extended
decision-making process for the customer because of the substantial costs and
strategic implications associated with selecting the Company's services. Senior
management of the customer is often involved in this process, given the
importance of the decision as well as the risks faced by the customer if the
Company's services do not meet the customer's particular needs. Therefore, large
procurements of the Company's services involve lengthy selling cycles, often as
long as nine months.
Telecommunications Tower Ownership and Management Business
The Company markets its telecommunications tower ownership and management
business primarily through its executives with assistance from independent sales
agents outside the U.S. where business practices or customs make it most
effective to proceed through local companies. As part of its new strategy the
Company intends to use its sales capabilities more effectively to generate new
business opportunities.
COMPETITION
The current market for wireless network design services, related software
tools and field measurement and analysis equipment and program and asset
management services is highly competitive. Many companies offer such services
and products, and the Company believes that the number of other independent
firms providing a combination of these services and products to wireless network
operators throughout the world is increasing.
Telecommunications Services
Engineering Services. The Company's competition in the provision of RF
engineering services consists of (i) companies such as Wireless Facilities,
Inc., Metapath Software International, Inc., Moffett, Larson & Johnson P.C.,
Teleworx, Inc. and Comsearch, Inc., which provide a full range of RF engineering
services, (ii) companies that provide only a portion of the engineering
services, which generally act as a supplement to a wireless operator's in-house
engineering staff, (iii) telecommunications equipment vendors, which provide RF
engineering services through subcontractors as part of larger turnkey projects,
and (iv) the internal staffs of wireless network operators. The Company believes
that it is able to compete effectively against competitors in RF engineering
services procurements based upon its leadership position, pricing, reputation,
experience, ability to provide its customers "one-stop-shopping," ability to
deploy quickly a large number of RF engineers to a project and its relationships
with major wireless operators. In particular, the Company believes that its
existing customer base gives it a significant advantage in obtaining additional
business for its existing and new services. The Company has been less successful
in competing where the customer has a strong internal staff of
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wireless network operators or where RF engineering services are packaged with
large equipment procurements supported by vendor financing.
Program Management Services. Competition for the provision of program
management services is highly fragmented consisting of (i) equipment vendors
that provide program management services as part of larger turnkey projects,
(ii) companies with experience in project management in other industries, (iii)
the internal staffs of wireless network operators and (iv) small firms that
focus on a limited number of the entire range of activities involved in wireless
network deployment and expansion.
Telecommunications Tower Ownership and Management Business
Competition in the telecommunications tower ownership and management
business is becoming increasingly competitive with the emergence of several
large independent transmission tower owners and operators, such as American
Tower Corp., Crown Castle International, SpectraSite and Pinnacle Holdings,
which own, or will own, significant tower portfolios. The Company competes for
tenants and acquisition of tower and site opportunities with (i) other tower
companies, (ii) wireless service providers that own and operate their own tower
networks, (iii) broadcasters and (iv) site development companies which acquire
antennae space on existing towers for wireless service providers, manage new
tower construction and provide site development services. Other tower companies
and wireless service providers that own and operate their own tower networks (in
particular) generally are substantially larger and have greater financial
resources than the Company. The Company believes that competition for tower
acquisitions and new tower construction opportunities will increase and that
additional competitors will enter the tower market. Some of these additional
competitors have or are expected to have greater financial resources than the
Company. The Company faces stiff competition in connection with (1) the
procurement of tenants; (2) the acquisition of towers; and (3) the acquisition
of suitable tower sites.
A tower company's ability to attract tenants depends on the location of its
towers and its leasing rates. Some tower companies own clusters of towers in
areas where the Company conducts its operations and seeks to expand. Due to the
location of these towers, some of these tower companies may be able to offer
potential tenants more expansive coverage than the Company in a particular
region. Some of these tower companies may also be able to offer potential
tenants more desirable pricing options. Nevertheless, the Company believes that
its ability to provide "turnkey" services using its RF engineering and other
capabilities will distinguish the Company from other tower companies and may
ultimately attract potential tenants notwithstanding the services and pricing
options offered by its competitors.
Many U.S. tower companies are competing for domestic acquisition
opportunities. Most of these competitors are larger and have greater financial
resources than the Company. The Company believes that competition for domestic
acquisitions will increase and that the purchase prices for domestic towers may
increase, thereby reducing the return to the owner. For this reason, the Company
also intends to pursue international acquisition opportunities.
The Company competes for sites with tower operators, including wireless
communication operators and other tower companies. Some of the larger
independent multi-tenant tower companies and the wireless carriers which own and
operate their own tower networks have greater financial resources than the
Company, possess larger in-house site acquisition teams than the Company and
have cultivated affiliations with commercial real estate firms to assist and
support their site acquisition endeavors. The Company believes that tower
location, capacity and cost have been and will continue to be the most
significant competitive factors affecting tower companies.
REGULATORY MATTERS AFFECTING THE TELECOMMUNICATIONS TOWER OWNERSHIP AND
MANAGEMENT BUSINESS
Federal Regulation
Both the FCC and the FAA regulate towers used for wireless communication
transmitters and receivers. Such regulations control the siting, marking and
lighting of towers and may, depending on the characteristics of particular
multi-tenant towers, require licensing of tower facilities. Wireless
communication devices
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operating on towers are separately regulated and independently licensed based
upon the particular frequency used.
Regulations of both the FCC and the FAA require that any person proposing
to construct or alter an object that may affect the navigable airspace give
adequate notice to the FAA Administrator if the construction or alteration meets
certain conditions. The FAA will use this information as the basis to evaluate
the effect of the construction or alteration on aeronautical operational
procedures, to determine the hazardous effect of the proposed construction or
alteration on air navigation, to recommend the appropriate means to mark or
light the facility being constructed or altered, to determine the appropriate
measures to be taken for the continued safety of air navigation, and to notify
airmen of the construction or alteration. Failure to comply with this
notification requirement may lead to the assessment of civil monetary penalty.
The FCC and the FAA have developed standards to be used when considering
proposals for new or modified antenna structures. These standards mandate that
the FCC and the FAA consider the height of a proposed antenna structure, the
relationship of the height of the structure to the ground level of the structure
and the proximity of the antenna structure to airways, airports, runways and the
aircraft departure or approach paths from and to these airports and runways. All
proposals to construct or to modify an existing antenna structure are reviewed
by both the FCC and the FAA to ensure the structure will not be an obstruction
to air navigation. If the FAA determines that, absent special lighting and
paint, the structure would constitute a hazard to air navigation, the FCC will
require special lighting and painting to maximize the visibility of the
structure. Owners of telecommunication towers must maintain painting and
lighting to conform to FAA standards. In certain situations specified by FAA
regulations, there is a requirement that the FAA be notified within five days
after the construction or alteration reaches its greatest height. Tower owners
must also notify the FAA of any tower lighting malfunction or outage that lasts
more than 30 minutes if that malfunction or outage affects the top
steady-burning, or any flashing, light. Failure to comply with these
requirements may lead to civil penalties. The Company generally indemnifies its
customers against any failure by the Company to comply with regulatory standards
applicable to the telecommunications towers owned by it.
The Telecommunication Act of 1996 (the "Telecom Act") amended the
Communications Act of 1934 by giving state and local zoning authorities
jurisdiction over the construction, modification and placement of towers. The
new law preserves local zoning authority but clarifies preemption of such
authority by the FCC. The Telecom Act prohibits any action that would (i)
discriminate between different providers of personal wireless services or (ii)
ban altogether the construction, modification or placement of radio
communication towers. Finally, the Telecom Act requires the federal government
to help licensees for wireless communication services gain access to preferred
sites for their facilities. This may require that federal agencies and
departments work directly with licensees to make federal property available for
tower facilities.
All antenna structures must comply with the National Environmental Policy
Act of 1969 as well as other federal environmental statutes. The FCC's
environmental rules place responsibility on each applicant to investigate any
potential environmental effects of operations and to disclose any significant
effects on the environment in an environmental assessment prior to constructing
a tower. In the event the FCC determines the proposed tower would have a
significant environmental impact based on the standards the FCC has developed,
the FCC would be required to prepare an environmental impact statement. This
process could significantly delay the licensing of a particular tower site.
Local Regulation.
Local zoning boards govern the approval of new tower construction.
Currently, there are hundreds of moratoria on tower construction in local
communities nationwide. Industry experts estimate there have been in excess of
100 lawsuits filed by wireless carriers as a result of community actions taken
to prevent wireless build-out. In addition, several local authorities are
mandating co-location on new and existing towers, where possible.
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International Operations
The development of the Company's international operations will require the
Company to obtain the necessary approvals and remain compliant with the
applicable local regulations.
ENVIRONMENTAL MATTERS
Under various federal and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the costs of investigation, removal or remediation of soil
and groundwater contaminated by certain hazardous substances or wastes. Certain
of such laws impose cleanup responsibility and liability without regard to
whether the owner or operator of the real estate or operations thereon knew of
or was responsible for the contamination, and whether or not operations at the
property have been discontinued or title to the property has been transferred.
The owner or operator of contaminated real estate also may be subject to common
law claims by third parties based on damages and costs resulting from off-site
migration of the contamination. In connection with its former and current
ownership or operation of its properties, the Company may be potentially liable
for environmental costs such as those discussed above.
The Company believes it is in compliance in all material respects with all
applicable material environmental laws. The Company has not received any written
notice from any governmental authority or third party asserting, and is not
otherwise aware of, any material environmental non-compliance, liability or
claim relating to hazardous substances or wastes or material environmental laws.
However, no assurance can be given (i) that there are no undetected
environmental conditions for which the Company might be liable in the future or
(ii) that future regulatory action, as well as compliance with future
environmental laws, will not require the Company to incur costs that could have
a material adverse effect on the Company's financial condition and results of
operations.
RESEARCH AND DEVELOPMENT
The Company intends to continue developing new services and enhance
existing ones to maintain its position as a leader in RF engineering and
wireless network design. Such services include benchmarking, optimization and
fixed network engineering services.
DISCONTINUED OPERATIONS
On March 26, 1999, the Board of Directors of the Company approved a plan of
divestiture of the Products Businesses. This decision was the result of an
analysis of the Company's businesses conducted by management and certain members
of the Company's Board of Directors during the past several months. The Company
believes that the long-term financial interests of the Company's shareholders
would be best served by pursuing a strategy which focuses on the Company's core
telecommunications services business along with the telecommunications tower
ownership and management business to provide wireless operators with a more
expansive integrated solution for accomplishing many of the significant tasks
involved in system design, buildout and operation. The Company has engaged an
investment banking firm to assist it in the disposition of the Products
Businesses and expects to complete such disposition in 1999. Pending such
disposition, the Company intends to operate its field measurement and analysis
products business consistent with past practice, subject to implementation of
various cost saving measures, and intends to reduce significantly the operations
of its software tools business if such business is not sold in the near future.
The Company currently anticipates that any gain on the sale of the Product
Businesses would be sufficient to offset operating losses of such businesses to
the date of sale, though there can be no assurance that this will be the case.
The Products Businesses consist of software tools and field measurement and
analysis products. Revenues from the Products Businesses were $33.8 million for
the year ended December 31, 1998, approximately 27.9% of the Company's total
1998 revenues.
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The Company's software tools, which include databases for virtually all of
the U.S. and many other parts of the world containing data useful in designing
and implementing wireless networks, including data regarding terrain, building
heights, land-use, highways and secondary roads, traffic volume, political
boundaries, demographics and other parameters, are used by the Company's
engineers and by customers to design wireless networks, optimize the performance
of an existing network, adapt networks to demand growth and environmental
changes and migrate networks to new technologies. As these software tools are
used by the Company's engineers, a database for the particular customer network
is generated based upon the actual design. The software and database are used by
the customer pursuant to a license, and in many cases related maintenance
support, following implementation of the network, become the foundation of the
customer's design environment and record of network design, and are critical to
subsequent expansion or enhancement of the system. The Company regards its
software as proprietary and has implemented protective measures both of a legal
and a practical nature to ensure that the software retains that status.
The Company's line of field measurement and analysis products are used both
by the Company's engineers and by customers in connection with system design and
build out and the maintenance and improvement of operational systems. The
Company's revenues from field measurement and analysis products are generated
from sales or monthly rentals to customers and associated maintenance and
upgrade fees.
Each of the principal field measurement and analysis products is designed
for use in wireless systems employing any of the major access technologies
(TDMA, CDMA, GSM, iDEN, etc.) and may be utilized by network operators to
measure the performance of other wireless systems. The Company assembles field
measurement and analysis products by obtaining standard parts and components
from a variety of computer and electronic vendors and specially configuring
these components to produce the field measurement and analysis products. It also
engages third party contractors to assemble certain of these products based on
the Company's design specifications. The proprietary aspects of the Company's
systems are primarily in the product design, the software provided with the
equipment and the specific applications development designed for the customer.
Equipment assembly, testing and quality control are performed by the Company at
its McLean, Virginia and Oslo, Norway facilities. Certain components used in the
Company's products are presently available from limited sources. To date, the
Company generally has been able to obtain supplies of these components in a
timely manner from these sources.
The Company supports its field measurement and analysis products with
software packages which provide comprehensive data analysis functions for
coverage, interference, calls-in-progress and call quality. These programs
organize, edit and analyze RF and navigation data for both digital and analog
measurements. They provide detailed reports, multi-colored graphs and high
resolution on-screen graphic displays which can be generated on a laptop
computer for immediate field analysis.
The Company is presently developing a number of new products, including
software tools and upgrades of field measurement and analysis products. The
Company's research and development efforts are focused on making its existing
products easier to use, adding functionality, making the products compatible
with different technologies and enabling the products to interface with other
products offered by the Company or other parties.
The Company's competition for the provision of software tools consists of
(i) the companies that provide the full range of RF engineering services along
with related software, particularly Metapath Software International, Inc. and
Comsearch, Inc., which compete vigorously with the Company in this area, (ii) a
limited number of companies that have developed software tools but generally do
not provide engineering services and (iii) the internal staffs of wireless
network operators. The Company's competition for the provision of field
measurement and analysis products consists of (i) full service companies and
equipment vendors, particularly those specializing in field measurement and
analysis products, principally Safeco Technologies, Inc., Comarco, Inc. and
Erisoft and (ii) small independent entrepreneurial companies. The Company
believes that its experience in providing a range of engineering and network
services gives it an advantage in developing software and field measurement and
analysis tools for use by engineers providing network design services,
particularly because of the feedback it receives as a result of the use of the
products by its own engineers.
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The Company intends to continue to use, and make available to its customers
for use, these software tools, including databases, and field measurement and
analysis products, as well as tools and products of other vendors, following the
disposition of the Products Businesses. As part of such disposition, the Company
intends to seek a license, a supply agreement or other contractual arrangement
for such use from the acquirors of the Products Businesses as well as to enter
into arrangements with other vendors. Although there can be no assurance that
the Company will be able to make such arrangements on favorable terms, the
Company expects to be able to make such arrangements on satisfactory terms. In
addition, the Company anticipates that the software tools and field measurement
and analysis products which will be available to it in the marketplace in the
foreseeable future will be adequate for its requirements in performing
telecommunications services.
RISK FACTORS
WE MAY NEED ADDITIONAL FINANCING TO FUND OUR OPERATIONS.
In order to conduct each of our telecommunications services business, tower
ownership and management business and the Products Businesses as currently
planned, we will require outside sources of financing. We currently have in
place the credit facility with Chase under which we can draw up to the lesser of
$10 million and our receivables borrowing base plus up to an additional $12.5
million assuming that Dr. Rajendra Singh, one of our founders and Interim
President and Chief Executive Officer, provides specified collateral to secure
such advances. Dr. Singh is not contractually committed to provide any
collateral to Chase. Telcom Ventures has assured us that it intends to provide
us with funding to cover any cash shortfalls we may have during 1999 in an
amount not to exceed $12.5 million less the sum of amounts drawn under the
credit facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including reaching
agreement with us on applicable financing documents, and will apply only as long
as Telecom Ventures directly or indirectly owns at least 40% of our outstanding
common stock, other than any stock issued to MCI upon conversion of the MCI
notes. We believe that the foregoing funding sources will be sufficient to cover
our funding requirements for 1999. However, in the event that our actual
requirements exceed our estimated requirements, the full $22.5 million is not
available under the credit facility or the conditions to obtaining financing
from Telcom Ventures are not satisfied and we are unable to find other sources
of funding to cover any shortfalls resulting from the occurrence of any one or
more of these events, we may need to scale back the scope of our overall
operations.
WE MAY NOT BE ABLE TO COMPLETE SALES OF THE PRODUCTS BUSINESSES ON FAVORABLE
TERMS
As part of our new strategy, we have decided to dispose of the Products
Businesses. We may not receive a favorable price or terms within a reasonable
period of time in a disposition transaction. We will continue to rely on the
software tools and field measurement and analysis equipment produced by these
businesses, and we intend to seek a license and a supply contract to use these
tools and equipment as part of a disposition of the businesses. However, we may
not be able to obtain a license or a supply contract on favorable terms. If we
receive equity or other property for our businesses, we will be subject to the
risks that the equity or property may not provide the expected value or level of
return. Finally, the uncertainty among our employees and customers about the
future that is generated by our decision to dispose of the Products Businesses
may have an adverse effect on these businesses.
WE MAY NOT BE ABLE TO COLLECT OUR ACCOUNT RECEIVABLES
We are subject to credit risk with respect to our trade account
receivables. As of December 31, 1998, we had trade account receivables, net of
allowances for doubtful accounts, of $13.0 million. Although our existing and
potential customer base is diverse, our dependence on significant customers
increases the possibility of incurring material losses due to concentrations of
credit risk. We incurred a substantial loss and took a special charge of $28.9
million in 1996 from the financial difficulties of Pocket and NextWave, two PCS
license winners.
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In addition, the economic downturn and exchange rate fluctuations in the
Asia-Pacific region has caused some customers in that region to experience
difficulty in paying us in a timely fashion, either because of the need for
additional financing or lack of hard currency to satisfy U.S. dollar denominated
liabilities to us. As a result of the uncertainty associated with the collection
of amounts due, we recorded additional reserves of approximately $1.5 million
during 1997 to cover our potential Asia-Pacific region exposure.
Wireless communications companies generally must make substantial capital
investments and incur high fixed costs in order to enter new markets or offer
new technologies or services. As a result, many of our customers operate with
substantial leverage. This increases the risk that these customers may be unable
to make all scheduled payments or may delay these payments. We frequently cannot
enforce a policy of receiving payment within 30 days of issuing bills,
especially in the case of customers who are in the early phases of business
development. We try to use U.S. style payment terms in our international
contracts, but many of our foreign customers will not agree to pay or do not pay
their suppliers on these terms.
THERE ARE POSSIBLE ADVERSE CONSEQUENCES OF OUR LEVEL OF INDEBTEDNESS
We had $52.4 million of debt obligations as of December 31, 1998 consisting
of the notes held by MCI, and $2.4 million under our credit facility. The two
MCI notes, which are due in 2000, are exchangeable for common stock. We have
previously deferred the exercise of our option to cause the notes to be
converted into 2,841,099 shares of common stock, and will not have another
opportunity to effect an exchange until August 1999. If we default under the MCI
notes prior to this exchange (i.e. fail to pay principal or interest or become
involved in bankruptcy proceedings), or if we default under the credit facility,
there may be a material adverse effect on our business. The credit facility
prohibits us from incurring additional debt and contains numerous other
restrictive covenants. Some of the restrictions are described under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Existing Indebtedness" in Item 7.
WE EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS AND
UNCERTAINTIES RELATING TO BACKLOG
Our quarterly revenues and operating results have varied considerably in
the past and are likely to vary considerably from quarter to quarter in the
future. Fluctuations in our revenues depend on a number of factors, some of
which are beyond our control. These factors include, among others:
- the timing of receipt of new licenses or financing by potential
customers;
- the length of sales cycles;
- changes in pricing policy by us or our competitors;
- the timing of contracts; and
- customer budget changes.
Even after contracts are entered into, the timing of delivery of services
depends in part on our customer's readiness to receive the services and the pace
of the build-out of our customer's network. The timing of build-out in turn
depends on many business decisions by our customer and provision of services and
equipment by providers other than us. We significantly reduced our backlog in
early 1997 as a result of the cessation and reduction of the services to be
provided to Pocket and NextWave. We generally establish our expenditure levels
for other operating expenses based in large part on our expected future
revenues. If revenues fall below our expectations, our operating results likely
would be adversely affected.
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AN UNFAVORABLE OUTCOME IN THE MICROCELL SHAREHOLDER LITIGATION MAY HAVE AN
ADVERSE IMPACT ON OUR BUSINESS.
In February 1999 the minority shareholders of Microcell filed suit against
us, the directors appointed by us to the Microcell Board and Microcell itself,
seeking rescission of the shareholders' agreement between the Company and the
minority shareholders (which concerns management of Microcell, funding
commitments and other matters), the appointment of a custodian or receiver and
unspecified monetary damages. While we believe that the case is without merit
and we intend to contest this action vigorously, the outcome of any litigation
is always subject to uncertainty. An unfavorable outcome may have an adverse
impact on our business.
WE DEPEND ON KEY PERSONNEL
Our success depends to a significant degree upon the contribution of our
executive officers and other key personnel. We have had two chief executive
officers resign since December 1997. None of our executive officers has an
employment agreement with us, other than an agreement terminable at will. We may
not be able to retain our key managerial and other key personnel or to attract
suitable replacements or additional personnel if required.
WE DEPEND ON OUR PROFESSIONAL STAFF
We receive the majority of our revenues from the efforts of approximately
400 professionals. The success of our business therefore depends on our ability
to retain professional staff. Moreover, to achieve our present plans, we need to
attract additional RF engineers and other technical professionals. There are a
limited number of RF engineers, and many RF engineering companies and wireless
network operators want to hire them. Intense competition for such personnel has
at times made it difficult to recruit and retain qualified technical personnel.
In the program management area, although the number of available professionals
is greater, we have less experience in hiring and retaining qualified employees
or professionals. We may experience difficulties in retaining and increasing our
professional staff.
DEMAND FOR TELECOMMUNICATIONS SERVICES MAY DECREASE
The wireless telecommunications industry is undergoing significant changes
that has reduced, and may continue to reduce, the demand for our services. Those
changes include:
- operators of mature wireless networks may use their own engineers
instead of hiring us;
- equipment vendors may offer design services and financing bundled
with their equipment; and
- delays in the deployment of networks.
Operators of mature wireless networks may use their own engineers instead
of hiring us. Over the last few years, operators of several mature wireless
networks have reduced the amount of engineering services they buy from us and
have been using their own engineers. We expect this trend to continue and to
affect other types of wireless networks in the U.S. and internationally.
Equipment vendors may offer design services and financing bundled with
their equipment. Wireless network operators, particularly PCS operators and new
international licensees, depend increasingly on wireless telecommunications
equipment vendors to supply and to finance entire wireless networks. Those
vendors only make financing available for services or products that the vendors
do not provide directly if they have the right to select the providers of those
services and products, including RF engineering and network design.
We believe that the need of PCS and other wireless operators for vendor
financing and the packaging of services by equipment vendors is turning some
equipment vendors into competitors (since the vendors are providing engineering
services, generally through a subcontract arrangement). It is also turning other
vendors into customers, instead of the operators being our customers. We have
established relationships with some major telecommunications equipment vendors
and we provide services and products for wireless telecommunications projects in
which they act as prime contractors. However, these arrangements are often less
profitable for us than direct sales to the end user because the vendor generally
submits a comparatively lower bid for the
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engineering work to secure or increase its profits on equipment sales. In
addition, working through a prime contractor weakens our relationship with the
network operator and may reduce our ability to obtain continuing business from
the network operator.
Delays in deployment of networks. We believe that demand for our services
has been and will continue to be affected by delays or difficulties in
deployment of networks in the U.S. and internationally. We generate a
significant portion of our revenues from designing and building out networks for
new licensees. In the U.S. the pace of PCS network deployment has been slower
than expected, mainly because of the difficulties experienced by holders of PCS
licenses in raising the necessary financing. We had agreements with Pocket and
NextWave, the two top bidders in the C-block broadband PCS auction, to provide
services and products totaling $115 million between 1996 and 2001. Both of them
failed to pay us substantial amounts owing with respect to services and products
we provided them and, in April 1997 and June 1998, Pocket and Next Wave,
respectively voluntarily sought court protection under Chapter 11 of the U.S.
Bankruptcy Code. We suspended all work with respect to Pocket and NextWave, but
we have not been able to collect a large portion of the amounts they owed us.
Our total revenues for 1998 decreased 4.5% from total revenues for 1997. The
decrease is primarily the result of a 16.9% decrease in engineering design
services revenue caused by increased competition and a reduction in new system
deployment in the United States. Thus, orders for network design and deployment
from PCS licensees are subject to uncertainty.
WE FACE INTENSE COMPETITION
Telecommunications Services. We face intense competition in the market for
wireless network design and program management services. Many other companies
offer these services, and we believe that the number of other independent firms
providing these services to wireless network operators throughout the world is
increasing. Wireless operators themselves and system equipment vendors are also
developing capabilities competitive with those we provide.
Some of our competitors have greater resources than ours. Also, some of our
competitors have been founded by or have recruited senior engineering executives
from our current or potential customers and may have better relationships with
those customers than we may be able to develop. Increased competition
contributed to the 16.9% decrease in engineering design services revenues from
1997 to 1998. The intense competition may continue to adversely affect our
business.
Towers. The telecommunications tower ownership and management business is
also becoming increasingly competitive. We compete for tenants and acquisition
of tower and site opportunities with:
- other tower companies;
- wireless service providers that own and operate their own tower
networks;
- broadcasters; and
- site development companies which acquire antennae space on existing
towers for wireless service providers, manage new tower construction
and provide site development services.
Other tower companies and wireless service providers that own and operate
their own tower networks are generally substantially larger than us and have
greater financial resources than we do. Since the tower business requires
significant investment, having greater financial resources gives these companies
a competitive advantage. We believe that competition for tower acquisitions and
new tower construction opportunities will increase and that additional
competitors will enter the tower market. Some of these additional competitors
have or are expected to have greater financial resources than we do. If
competition for tower acquisitions increases, we may have fewer opportunities to
acquire towers and we may have to pay higher prices to acquire towers.
WE DEPEND ON SIGNIFICANT CUSTOMERS AND LARGE CONTRACTS
We derived approximately 74.4% of our revenues from our ten largest
customers in the year ended December 31, 1998. Nextel Communications, our
largest customer in the year ended December 31, 1998,
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accounted for approximately 17.2% of our revenues. Bell South accounted for an
additional 15.9% of our revenues. Although our major customers generally have
differed from year to year as we complete work under existing contracts and
begin providing services under new contracts, we depend on having large
contracts from some customers each year to meet our expected revenues. We may
not continue to receive large contracts from customers. In addition, our
contracts typically have provisions that permit customers to terminate their
contracts under various circumstances, which include our nonperformance or
unsatisfactory performance. Customers under long-term contracts may attempt to
cancel or renegotiate those contracts.
We derive a significant portion of our tower business revenues from a small
number of customers. During 1998, our three largest customers accounted for
approximately 69.0% of our revenues. AT&T, our largest customer for the year
ended December 31, 1998, accounted for 40.2% of our revenues during this period.
If we lose one or more of these major customers, or they reduce their
utilization of our tower rental space and related network services, the
prospects, financial condition or results of operations for our tower business
may experience a material adverse effect.
OUR LENGTHY SALES CYCLES RESULT IN HIGH COSTS FOR NEW BUSINESS GENERATION
Purchases of our services by customers often entail a lengthy
decision-making process for the customer. Selecting wireless network deployment
services involves substantial costs and has strategic implications. Senior
management of the customer is often involved in this process, given the
importance of the decision as well as the risks faced by the customer if the
services do not meet the customer's particular needs. Therefore, large
procurements of our services involve lengthy selling cycles, resulting in a
relatively high cost of new business generation.
FLUCTUATIONS FROM OUR INTERNATIONAL OPERATIONS MAY HAVE AN ADVERSE RESULT ON
OUR BUSINESS
Approximately 46.0% of our revenues for 1998 were generated outside of the
United States, and we expect this segment of our business to increase as a
percentage of our revenues. Selling services in foreign countries are subject to
various risks inherent in international business activities. Risks include:
- the general economic and political conditions in each country;
- the effect of applicable foreign tax structures;
- tariff and trade regulations;
- difficulties in obtaining local business licenses;
- management of a geographically diverse organization; and
- difficulties in complying with a variety of foreign laws and
regulations.
In addition, changes in the regulatory environments in foreign countries,
including delays in deregulation or privatization affecting the pace at which
licenses are awarded to wireless network system operators, affect the level and
timing of the demand for our services and products.
Providing services outside the United States carries the additional risk of
currency fluctuations and foreign exchange controls imposed by certain
countries. In particular, the economic downturn and exchange rate fluctuations
in the Asia-Pacific region has resulted in certain of our customers experiencing
difficulty in paying us in a timely fashion and obtaining hard currency to
satisfy U.S. dollar denominated liabilities to us. As a result of the
uncertainty associated with the collection of amounts due, we recorded
additional reserves of approximately $1.5 million during 1997 to cover our
potential Asia-Pacific region exposure. In addition, during the two month period
ended February 28, 1999, we recognized total foreign currency transaction losses
of approximately $2.1 million related to our 1998 Latin American operations. The
majority of these losses were from our Brazilian operations.
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OUR OPERATIONS ARE SUBJECT TO FEDERAL, STATE, LOCAL AND FOREIGN GOVERNMENT
REGULATION
The Company's services must comply with federal, state, local and foreign
laws and regulations. Local regulations, particularly city or other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers, typically require tower owners to obtain approval from local
officials or community standards organizations prior to tower construction.
These local regulations can delay or prevent new tower construction or site
upgrade projects, and may increase costs associated with new tower construction.
Existing regulatory policies may adversely affect the timing or cost of new
tower construction, and additional regulations may be adopted which increase
delays or result in additional costs to us. Our management cannot predict the
legislation and regulations that will be enacted in the future, how existing or
future laws or regulations will be enforced, or the cost to comply with new laws
or regulations. Our customers may also become subject to new regulations or
regulatory policies which adversely affect the demand for telecommunications
sites.
THE ACQUISITION AND CONSTRUCTION OF TOWERS COULD HAVE ADVERSE RESULTS
Our tower operations have limited operating history and have generated
operating losses and negative cash flow
We began tower operations in 1997 with our purchase of Microcell and have
only a limited operating history in that business. As a result of operating
expenses and development expenditures, we have incurred operating and net losses
to date. Operating losses for 1997 and 1998 were approximately $1.0 million and
$3.3 million, respectively. At December 31, 1998, we had an accumulated deficit
of $5.4 million. We expect to incur significant operating losses and to generate
negative cash flows from our tower operations during the next several years
while we develop this business and implement our tower acquisition and build-out
strategy. The revenues from the tower operations may not grow or be sustained in
future periods and we may not be able to achieve or sustain operating
profitability or positive cash flow from operations in any future period.
We need significant additional financing to pursue tower construction and
acquisitions
We currently estimate that Microcell will have at least $26.5 million of
capital expenditures during 1999 for the acquisition and construction of
telecommunications towers. There is approximately $13 million of additional
availability under Microcell's revolving line of credit and security agreement
with the Company. Therefore, to carry out its business plan, Microcell will need
additional sources of debt or equity capital prior to the end of 1999. If
Microcell cannot raise the necessary financing (from the Company or third party
sources), it will need to scale back the scope of its planned tower build-out.
Many factors may affect the construction of new towers
Our ability to construct new towers can be affected by a number of factors
beyond our control, including zoning and local permitting requirements, FAA
considerations, availability of tower components and construction equipment and
skilled construction personnel and bad weather conditions. Some communities have
placed restrictions on new tower construction or have delayed granting permits
required for construction. We may not be able to overcome these barriers to new
construction in particular cases. Some of our anchor tenant leases contain
penalty or forfeiture provisions in the event we do not complete the towers
within specified time periods.
Tower acquisitions may have adverse results
We may not be able to identify, finance and complete future tower
acquisitions on acceptable terms. We may not be able to manage and market
available space on our towers profitably. These results may have a material
adverse effect on our prospects, financial condition or results of operations.
We may not be able to manage and implement our tower expansion strategy
successfully
Our pursuit and integration of acquisitions, build-to-suit prospects,
investments, joint ventures and strategic alliances as part of our expansion
strategy may impose significant strains on our management, operating systems and
financial resources. We also anticipate that our operating expenses may increase
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significantly as we implement our strategy. If we fail to manage our growth or
we encounter unexpected difficulties in carrying out our tower expansion
strategy, the prospects, financial condition or results of operations for our
tower business may experience a material adverse effect.
Our towers are subject to natural disasters
Our towers are subject to risks associated with natural disasters such as
tornadoes, hurricanes and earthquakes. Although we maintain insurance to cover
the estimated cost of replacing damaged towers and to protect us from liability
to third parties, this insurance is subject to certain limits. A tower accident
for which we are uninsured or underinsured, or damage to a tower or group of
towers, may have a material adverse effect on our tower business.
TITLE TO OUR REAL PROPERTY MAY BE CHALLENGED
Our real property interests in our tower sites include fee interests,
leasehold interests, private easements and licenses, easements and rights-of-way
granted by government entities. For sites purchased in tower acquisitions, we
generally obtain title insurance only on the most valuable fee properties and
rely on title warranties from sellers with respect to other acquired properties.
Our ability to protect our rights against persons claiming superior rights in
tower sites depends on our ability to (i) recover under title policies, the
policy limits of which may be less than the purchase price of a particular tower
site; (ii) in the absence of title insurance coverage, realize on title
warranties given by tower sellers, which warranties often terminate after the
expiration of a specific period (typically one to three years); and (iii)
realize on title covenants from landlords contained in lease agreements. Changes
in law may affect the terms on which governmental entities have granted rights
to us.
WE MAY HAVE SIGNIFICANT EXPENDITURES TO COMPLY WITH ENVIRONMENTAL LAWS
Our operations are subject to federal, state, local and foreign
environmental laws, ordinances and regulations regarding the use, storage,
disposal, emission, release and remediation of hazardous and nonhazardous
substances, materials or wastes. Under certain of these environmental laws, an
owner of real estate or a lessee conducting operations on real estate may become
liable for the costs of investigation, removal or remediation of soil and
groundwater contaminated by hazardous substances or wastes.
Certain environmental laws also impose cleanup responsibility and liability
without regard to whether the owner or operator of the real estate knew of or
was responsible for the contamination. Liability may exist whether or not
operations at the property have been discontinued or title to the property has
been transferred. The owner or operator of contaminated real estate also may be
subject to claims by third parties for damages and costs resulting from off-site
migration of the contamination. As an owner and operator of real property, we
may be liable for environmental costs. The costs of compliance with existing or
future environmental laws and any related liability may have a material adverse
effect on our prospects, financial condition or results of operations.
WE WILL DEPEND ON PROPRIETARY TECHNOLOGY OF OTHERS
After we dispose of the Products Businesses, we will not own the rights to
the technology embodied in our software products. Instead, we will license
certain technologies from third parties pursuant to agreements which may not be
perpetual in duration. The termination of one or more of these licenses, their
renewal on terms materially less favorable to us or any other loss of the right
to use such technologies (including loss of intellectual property rights by a
licensor) could adversely affect our business.
In addition, effective copyright, trademark or trade secret protection may
be unavailable to our licensors or limited in certain circumstances. Third
parties may assert infringement claims against us in the future that may require
us to enter into royalty arrangements or result in costly litigation, damages or
injunctive relief against us for which we may not be compensated by our
licensors.
26
<PAGE> 27
YEAR 2000 ISSUES
The year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year (the
"Year 2000 Issue"). Software, hardware or firmware may recognize a date using
"00" as the year 1900, rather than the year 2000. Such an inability of computer
programs to recognize a year that begins with "20" could result in system
failures, miscalculations or errors causing disruptions of operations or other
business problems, including, among others, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
We have undertaken a program to address the Year 2000 Issue with respect to
the following: (i) our information technology and operating systems; (ii) our
non-information technology systems (such as buildings, plant, equipment and
other infrastructure systems that may contain embedded microcontroller
technology); (iii) certain systems of our major vendors and material service
providers (insofar as they relate to our business activities with such parties);
and (iv) our material clients (insofar as the Year 2000 Issue relates to our
ability to provide services to such clients). We believe that we have
substantially completed our Year 2000 modifications on mission critical
applications.
Internal Systems. We have invested in the implementation and maintenance
of accounting and reporting systems and equipment that are intended to enable us
to provide adequately for our information and reporting needs and which are also
Year 2000 compliant. Substantially all of our internal systems have already been
certified as Year 2000 compliant through testing or other mechanisms and we have
not delayed any systems projects due to the Year 2000 Issue. We believe that the
future costs associated with Year 2000 Issues for our internal systems will be
insignificant and therefore not impact our business, financial condition and
results of operations.
Company Products. Our technical personnel have completed their assessment
of the impact of the Year 2000 Issue on our products and determined that all
active products determined to be non-compliant will be modified to be Year 2000
compliant or placed on our list of discontinued products. However, there can be
no guarantee that the systems of other companies on which our systems rely will
be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on our business, financial condition and results of operations.
Third Party Systems. We initiated formal communications with all of our
significant suppliers and large customers to determine the extent to which we
are vulnerable to those third parties' failure to remediate their own Year 2000
Issue. We have received responses regarding Year 2000 compliance from some of
such third parties. The third parties that responded have indicated that their
hardware and/or software is or is expected to be Year 2000 compliant.
Contingency Plans. We are in the process of considering possible general
contingency plans for Year 2000 failures. We intend to complete its
determination of worst case scenarios after we have received and analyzed
responses to substantially all of the inquiries we have made of third parties.
As we progress in this process, we will develop remedial and contingency plans
to address such risks. We expect to complete its contingency plans by June 30,
1999.
Costs. We have utilized both internal and external resources to reprogram,
or replace, and test software for Year 2000 modifications. We have not
separately tracked the costs incurred in connection with the Year 2000 effort,
however, total cost associated with the required modifications and conversions
is not material to our consolidated results of operations and financial
position. The total costs of the program is being funded through operating cash
flows.
Risks. Although our Year 2000 efforts are intended to minimize the adverse
effects of the Year 2000 Issue on our business and operations, the actual
effects of the issue and the success or failure of our efforts described above
cannot be known until the year 2000. Failure by us or our major vendors, other
material service providers or material clients to address adequately our and
their respective Year 2000 issues in a timely manner could have a material
adverse effect on our business, results of operations and financial condition.
27
<PAGE> 28
RF INVESTORS' VOTING CONTROL MAY RESULT IN THE TAKING OF CERTAIN UNILATERAL
ACTIONS
RF Investors owns all of the outstanding shares our Class B Common Stock,
which represents 92.2% of the combined voting power of both classes of common
stock. Accordingly, RF Investors, its parent company Telcom Ventures and its
equity holders are able, without your approval, to:
- elect all of our directors;
- amend our certificate of incorporation with respect to most matters or
effect a merger, sale of assets, or other major corporate transaction;
- defeat any non-negotiated takeover attempt;
- sell its shares of common stock without your participation in the sale;
- determine the amount and timing of dividends paid, if any, with respect
to common stock; and
- otherwise control our management and operations and the outcome of
virtually all matters submitted for a stockholder vote.
RF Investors may also, by converting its shares of Class B Common Stock
into shares of Class A Common Stock, obtain a sufficient number of shares of
Class A Common Stock (54.3% of the total outstanding shares of Class A Common
Stock on March 23, 1999) to determine the outcome of any vote on which the
holders of Class A Common Stock are entitled to vote together as a class.
Dr. Rajendra and Neera Singh, who with certain Singh family trusts
indirectly own 75% of Telcom Ventures, are directors or executive officers. Mark
Ein, a designee of the Carlyle Investors, 25% owners of Telcom Ventures, is also
one of our directors.
The Telcom Ventures and RF Investors limited liability company agreements
provide that, for as long as the Carlyle Investors collectively owns at least 5%
of the total membership interests of Telcom Ventures, Telcom Ventures and RF
Investors must vote their stock in us:
- to elect as our directors up to two persons recommended by the Carlyle
Investors, upon the request of the Carlyle Investors; and
- not to take any of the following actions without the consent of the
Carlyle Investors:
(a) approve any amendment to our certificate of incorporation or
bylaws;
(b) approve our incurrence of any debt (or the granting of security
relating to the incurrence of debt) if as a result of the debt
incurrence, our debt to equity ratio exceeds 6:1 or, if as a
result of the debt incurrence, our total outstanding debt exceeds
$50 million plus or minus, as the case may be, our cumulative net
income or our net losses after January 1994;
(c) approve any new affiliated party transactions with RF Investors,
Telcom Ventures or the Singh family in excess of $150,000 or
modifications to existing transactions, subject to certain limited
exceptions;
(d) approve the appointment as our independent accountants of a firm
other than one of the "big five" accounting firms; or
(e) approve certain events relating to our bankruptcy or insolvency.
The RF Investors and Telcom Ventures limited liability company agreements
provide for certain rights of the Carlyle Investors to cause the distribution to
the Carlyle Investors, beginning September 30, 1999, of up to 25% of the common
stock held by RF Investors. Such a distribution would still leave RF Investors
with voting control over us.
28
<PAGE> 29
OUR RELATIONSHIP WITH TELCOM VENTURES MAY RESULT IN POTENTIAL CONFLICTS OF
INTEREST
Telcom Ventures, RF Investors' parent company, is principally engaged in
making investments in wireless system operators and emerging wireless
technologies. Directors of Telcom Ventures and its subsidiaries who are also our
directors or officers have certain fiduciary obligations to each organization.
Telcom Ventures and directors of Telcom Ventures and its subsidiaries who are
also our directors and officers may be subject to conflicts of interest in
transactions concerning us.
We have entered, and will enter, into arrangements with Telcom Ventures and
certain of Telcom Ventures' subsidiaries which provide for transactions and
relationships between the parties or which otherwise affect us. Our company, RF
Investors, Telcom Ventures, and the Telcom Ventures owners (the Singh family
(including companies they own) and the Carlyle Investors) have entered into an
intercompany agreement, by which, among other things, (i) the Singh Family group
is limited in its ability to compete with us in our traditional lines of
business and (ii) Telcom Ventures is limited in its ability to invest in
entities whose primary business is to compete with us in our traditional lines
of business, in each case until the earlier of (i) the date on which those
owners no longer possess 51% or more of the outstanding voting power of our
company or (ii) the occurrence of certain termination events specified in the
intercompany agreement.
Each of the Carlyle Investors (but not its affiliates) is limited in its
ability to invest in entities whose primary business is to compete with us in
our traditional line of business (excluding the program management and tower
businesses) until the earlier of (i) the date on which the Carlyle Investor no
longer owns, directly or indirectly, an interest in us or (ii) the occurrence of
certain termination events specified in the intercompany agreement.
We are free to pursue investment opportunities on our own, but we are
obligated to refer to Telcom Ventures investment opportunities prior to offering
the opportunities to any other third party. If Telcom Ventures does not elect to
pursue the investment opportunity within five days, we will then be free to
offer the opportunity to third parties. The intercompany agreement may not
eliminate or reduce conflicts of interest or inconsistent fiduciary obligations.
EMPLOYEES
As of December 31, 1998, the Company employed approximately 700 full-time
employees. The Company believes that relations with its employees are good. None
of its employees is part of any collective bargaining unit. The Company believes
that its future growth and success will depend upon its ability to attract and
retain skilled and motivated personnel.
ITEM 2. PROPERTIES
On December 31, 1998 the Company leased approximately 155,000 square feet
of office space in McLean, Virginia pursuant to a lease entered into in May
1996, with an initial annual rent of approximately $2.9 million. The term of
this lease is ten years, with two five-year renewal options. The company
subleases approximately 28% of this space to third parties. The Company entered
into another lease in May 1996 for approximately 10,000 square feet of office
space in McLean, Virginia, with an initial annual rent of approximately
$153,700. The term of this lease is five-years with three five-year renewal
options. In January 1997 and June 1998 the Company signed amendments to the
lease to expand into additional office space, bringing the total space leased at
this property to approximately 35,500 square feet, with an annualized rent in
1998 of approximately $600,900. In February 1999, the Company agreed to return
approximately 6000 square feet of leased space to the landlord. The Company has
occupied a portion of the overall space at this location since May 1996 and
since October 1997 has subleased additional portions thereof to other tenants.
The Company believes that its facilities will be adequate for its needs for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various non-material legal proceeding and claims
incidental to its business.
29
<PAGE> 30
On February 12, 1999, the minority shareholders of the Company's
majority-owned Microcell subsidiary filed a suit against the Company, the
directors appointed by the Company to the Microcell Board and Microcell itself,
seeking rescission of the shareholders' agreement between the Company and the
minority shareholders (which concerns management of Microcell, funding
commitments and other matters), the appointment of a custodian or receiver and
unspecified monetary damages. On February 16, 1999, the plaintiffs filed a
motion to expedite and a motion for appointment of a receiver or custodian. The
suit alleges breach of a fiduciary duty, usurpation of corporate opportunities,
and waste of Microcell's corporate assets, tortious interference with
Microcell's prospective business relations, and violations of the shareholders'
agreement. The Company believes the case is without merit and intends to contest
this action vigorously. Microcell and the Company have filed a motion to dismiss
and have filed a separate action against certain of the minority shareholders
for breach of fiduciary duties, tortious interference with business relations,
defamation and commercial disparagement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
30
<PAGE> 31
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Since completion of the Offering in September 1996, the Class A Common
Stock has been quoted on the Nasdaq National Market under the trading symbol
"LCCI." As of March 27, 1999, there were 111 stockholders of record of the Class
A Common Stock and, in excess of 3,000 beneficial holders thereof, and two
stockholders of record of the Class B Common Stock. The following table
summarizes the high and low closing sale prices of the Class A Common Stock by
fiscal quarter for 1997 and 1998 as reported on the Nasdaq National Market:
<TABLE>
<S> <C>
QUARTER ENDED: 1997
- -------------- ------------------
March 31.................................................... $7.75 to $18.875
June 30..................................................... $8.75 to $15.875
September 30................................................ $13.625 to $21.875
December 31................................................. $12.50 to $25.00
QUARTER ENDED: 1998
- -------------- ------------------
March 31.................................................... $8.063 to $20.625
June 30..................................................... $14.625 to $22.50
September 30................................................ $4.75 to $17.25
December 31................................................. $3.00 to $4.8125
</TABLE>
The Company has never paid any cash dividends on Common Stock and the
Company does not anticipate paying dividends on the Common Stock, cash or
otherwise, in the foreseeable future. In addition, the Credit Facility prohibits
the payment of dividends by the Company without the consent of the lenders
thereunder. Future dividends, if any, will be at the discretion of the Board of
Directors and will depend upon, among other things, the Company's operations,
capital requirements and surplus, general financial condition, contractual
restrictions and such other factors as the Board of Directors may deem relevant.
31
<PAGE> 32
ITEM 6. SELECTED FINANCIAL DATA
Set forth below are (i) selected consolidated financial data as of and for
each of the years in the five-year period ended December 31, 1998, which have
been derived from the Company's audited Consolidated Financial Statements and
(ii) unaudited pro forma net income (loss) and net income (loss) per share data
prepared as if the Company was treated as a Subchapter C Corporation for Federal
and state income tax purposes from January 1, 1995. The selected consolidated
financial data set forth below should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included, or incorporated by reference, elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1994(2) 1995(2) 1996(2) 1997(2) 1998(2)
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Service........................................... $41,063 $ 64,016 $ 93,156 $ 91,289 $ 86,328
Tower ownership and management.................... -- -- -- -- 860
------- -------- -------- -------- --------
Total revenues.................................. 41,063 64,016 93,156 91,289 87,188
------- -------- -------- -------- --------
Cost of revenues:
Service........................................... 29,185 45,682 61,581 62,263 66,238
Tower ownership and management.................... -- -- -- -- 521
------- -------- -------- -------- --------
Total cost of revenues.......................... 29,185 45,682 61,581 62,263 66,759
------- -------- -------- -------- --------
Gross profit........................................ 11,878 18,334 31,575 29,026 20,429
------- -------- -------- -------- --------
Operating expenses:
Sales and marketing............................... 445 446 1,200 2,466 3,843
General and administrative........................ 5,971 7,139 13,030 18,314 22,063
Special charge (credit)........................... -- -- 28,920 (3,894) --
Restructuring charge.............................. -- -- -- -- 1,256
Non-cash compensation............................. 3,114 4,362 6,831 514 362
Depreciation and amortization..................... 1,358 2,003 2,330 3,410 2,409
------- -------- -------- -------- --------
Total operating expenses........................ 10,888 13,950 52,311 20,810 29,933
------- -------- -------- -------- --------
Operating income (loss)............................. 990 4,384 (20,736) 8,216 (9,504)
------- -------- -------- -------- --------
Other income (expense)
Interest, net..................................... (221) (2,193) (2,125) (2,553) (1,397)
Other............................................. 703 1,027 2,385 1,275 (618)
------- -------- -------- -------- --------
Total other income (expense).................... 482 (1,166) 260 (1,278) (2,015)
------- -------- -------- -------- --------
Income (loss)from continuing operations before
income taxes...................................... 1,472 3,218 (20,476) 6,938 (11,519)
Provision (benefit) for income taxes.............. 428 1,283 (8,745) 1,548 (4,561)
------- -------- -------- -------- --------
Income (loss) from continuing operations............ 1,044 1,935 (11,731) 5,390 (6,958)
Income (loss) from discontinued operations net of
tax provision (benefit)........................... 3,926 2,805 447 2,185 (17,785)
------- -------- -------- -------- --------
Net income (loss)................................... $ 4,970 $ 4,740 $(11,284) $ 7,575 $(24,743)
======= ======== ======== ======== ========
Income (loss) per share:
Continuing operations:
Basic............................................. $ 0.37 $ (0.45)
======== ========
Diluted........................................... $ 0.34 $ (0.45)
======== ========
Discontinued operations:
Basic............................................. $ 0.15 $ (1.15)
======== ========
Diluted........................................... $ 0.14 $ (1.15)
======== ========
Net income (loss) per share:
Basic............................................. $ 0.51 $ (1.60)
======== ========
Diluted........................................... $ 0.47 $ (1.60)
======== ========
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1994(2) 1995(2) 1996(2) 1997(2) 1998(2)
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Unaudited Pro Forma Data:
Pro forma income (loss) from continuing
operations...................................... $1,931(1) $(18,693)(1)
======== ========
Pro forma income (loss) from discontinued
operations...................................... $2,798(1) $ (2,076)(1)
======== ========
Pro forma net income (loss)....................... $4,729(1) $(20,769)(1)
======== ========
Pro forma income (loss) per share:
Continuing operations:
Basic............................................. $ 0.17 $ (1.53)
======== ========
Diluted........................................... $ 0.19 $ (1.53)
======== ========
Discontinued operations:
Basic............................................. $ 0.25 $ (0.17)
======== ========
Diluted........................................... $ 0.20 $ (0.17)
======== ========
Pro forma net income (loss)
Basic............................................. $ 0.42(1) $ (1.70)(1)
======== ========
Diluted........................................... $ 0.39(1) $ (1.70)(1)
======== ========
Consolidated Balance Sheet Data (at year-end):
Working capital................................... $23,942 $ 22,808 $ 49,840 $ 59,155 $ 14,471
Intangibles, net.................................. -- -- 354 368 572
Total assets...................................... 52,727 55,325 89,363 95,420 84,204
Long term obligations............................. 23,930 28,627 50,807 50,210 50,115
Equity (deficit).................................. 13,938 (244) 8,477 20,202 229
</TABLE>
- ---------------
(1) Unaudited pro forma net income (loss) has been adjusted to reflect the pro
forma effects as if the Company was a Subchapter C Corporation in 1995.
Unaudited pro forma net income (loss) is net of a provision (benefit) for
income taxes at an assumed effective income tax rate of 40%. The total
amount of the pro forma provision (benefit) for income taxes was $3,153,000
and ($1,886,000) for the years ended December 31, 1995 and 1996,
respectively. Weighted average shares used in the computation of pro forma
net income per share was as follows:
<TABLE>
<CAPTION>
BASIC DILUTED
------ -------
<S> <C> <C>
1995.......................................... 11,364 14,205
====== ======
1996.......................................... 12,211 12,211
====== ======
</TABLE>
(2) In March 1999, the Company's Board of Directors adopted a Plan to dispose of
the operations comprising its hardware and software segments (see note 4 to
the Consolidated Financial Statements). Prior year balances have been
restated to reflect these segments as discontinued operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto and the
other financial data appearing elsewhere in this Form 10-K.
OVERVIEW
The Company is one of the world's largest independent providers of RF
engineering and program management services to the wireless telecommunications
industry. The Company has provided these services to operators of more than 200
wireless systems in more than 50 countries. In 1996 the Company entered the
tower ownership and management business, which consists of acquiring, developing
and managing telecommunications towers.
The Company's revenues are generated through contracts for RF engineering
and program management services, and lease revenue from its tower ownership and
management business. The Company provides engineering services on a contract
basis, usually in a customized plan for each client and generally charges for
engineering services on a time and materials or fixed price basis. The Company
generally provides program
33
<PAGE> 34
management services on a time and materials or fixed price basis. The Company's
service revenues also include reimbursement for expenses, including the living
expenses of engineers on customer sites.
In March 1999, the Company's Board of Directors adopted a plan to dispose
of the operations comprising its software and hardware segments. Software
products develops software and data which support the design and operation of
wireless communication systems. Hardware products are used in the
implementation, testing and maintenance of wireless communication systems. The
Company has engaged an investment banking firm to assist in the marketing and
sale of these segments. The sale of the product segments are expected to be
completed during 1999. (See note 4 to the Consolidated Financial Statements).
The Company currently anticipates that any gain on sale of the segments would be
sufficient to offset operating losses to date of sale.
Service revenues consist of revenues from engineering design services and
program management services. Tower ownership and management revenues consist of
lease revenue from the leasing of space on telecommunications towers to wireless
communication carriers. The leases generally have initial terms of 5 to 11 years
and generally include multiple options to renew upon similar terms at the option
of the leasee. In general, the lease terms include periodic adjustments to base
rent. The Company derives a significant portion of its total revenues from its
international customers (approximately 32.4% and 46.0% in 1997 and 1998,
respectively). To date, its tower ownership and management revenues have come
exclusively from the leasing of RF transmission towers in the United States.
Cost of revenues consists of costs associated with engineering design and
program management services and direct costs related to the tower ownership and
management business. Sales and marketing expenses consist of salaries, sales
commissions, bonuses, travel and other expenses required to implement the
Company's marketing, sales and customer support plans. General and
administrative expenses consist of the compensation, finance, information
systems, professional services and office and occupancy costs required to manage
the Company's business. Non-cash compensation consists of awards under a program
for key employees adopted in 1994. Such plan was accounted for as a variable
plan, and therefore, to the extent that the deemed fair market value of the
Company increased, compensation expense increased accordingly. In connection
with the Company's initial public offering in September 1996, the Company
granted stock options to replace the awards granted under this plan. (See note
15 to the Consolidated Financial Statements).
The key drivers of the Company's growth have historically been (i) the
issuances of new or additional wireless telecommunications licenses by
governmental authorities to wireless operators, (ii) increases in the number of
cell sites operated and the number of subscribers served by wireless network
operators, (iii) the introduction of new services or technologies, (iv) the
increasing complexity of the systems deployed by wireless network operators, and
(v) the expansion and optimization of existing systems by wireless network
operators.
To keep pace with the subscriber growth currently anticipated by most
industry analysts, the Company expects that there will continue to be
significant investment by network system operators over the next few years in
design, program management and tower ownership and management services.
RESULTS OF OPERATIONS
Continuing Operations
The following table sets forth certain items as a percentage of revenues
from the Company's audited consolidated statements of operations for the years
ended December 31, 1996, 1997, and 1998. The table and discussion which follows
provides information which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations and financial
condition. The discussion
34
<PAGE> 35
should be read in conjunction with the consolidated financial statements and
accompanying notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Revenues:
Service................................................... 100.0% 100.0% 99.0%
Tower ownership and management............................ -- -- 1.0
----- ----- -----
Total revenues.................................... 100.0 100.0 100.0
Cost of revenues............................................ 66.1 68.2 76.6
----- ----- -----
Gross profit................................................ 33.9 31.8 23.4
----- ----- -----
Operating expenses:
Sales and marketing....................................... 1.3 2.7 4.4
General and administrative................................ 14.0 20.1 25.3
Special charge (credit)................................... 31.0 (4.3) --
Restructuring charge...................................... -- -- 1.4
Non-cash compensation..................................... 7.4 0.6 0.4
Depreciation and amortization............................. 2.5 3.7 2.8
----- ----- -----
Total operating expenses.......................... 56.2 22.8 34.3
----- ----- -----
Operating (loss) income..................................... (22.3) 9.0 (10.9)
----- ----- -----
Other income (expense):
Interest income........................................... 1.0 0.8 1.0
Interest expense.......................................... (3.3) (3.6) (2.6)
Other..................................................... 2.6 1.4 (0.7)
----- ----- -----
Total other income (expense)...................... 0.3 (1.4) (2.3)
----- ----- -----
Income (loss) from continuing operations before income
taxes....................................................... (22.0) 7.6 (13.2)
Provision (benefit) for income taxes........................ (9.4) 1.7 (5.2)
----- ----- -----
Income (loss) from continuing operations.................... (12.6)% 5.9% (8.0)%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues for 1998 were $87.2 million compared to $91.3 million
for 1997, a decrease of $4.1 million or 4.5%. The decrease is primarily the
result of a $13.8 million or 16.9% decrease in engineering design services
revenue offset by a $8.8 million or 91.3% increase in program management
services revenue and a $0.9 million increase in tower ownership and management
revenue. The decrease in engineering design services revenue is primarily due to
a decrease in billable hours between years as a result of increased competition,
a slowdown in network deployment in the United States and a lack of effective
sales and marketing efforts. North American and Asian revenue decreased, but
were partially offset by increases in Europe and Latin America. The increase in
Latin America is the result of new system deployment and the increase in Europe
is the result of an increased Company presence in the region. The increase in
program management services revenues is primarily a result of ceasing all work
from Pocket and NextWave during the first quarter of 1997 as well as an
increased volume of work in Latin America in 1998.
Cost of Revenues. Cost of revenues was $66.8 million for 1998, compared to
$62.3 million for 1997, an increase of $4.5 million or 7.2%. As a percentage of
total revenues, cost of revenues was 76.6% and 68.2% for 1998 and 1997,
respectively. The dollar increase is due primarily to an increase in program
management services volume. The increase in cost of revenues as a percentage of
total revenues is due to increased design engineering costs primarily as a
result of decreased chargeability between years.
Gross Profit. Gross profit was $20.4 million, compared to $29.0 million
for the prior year, a decrease of $8.6 million or 29.6%. As a percentage of
total revenues, gross profit was 23.4% and 31.8% for 1998 and 1997,
35
<PAGE> 36
respectively. The decrease in gross profit was due primarily to a decrease in
chargeability related to the engineering design services business, offset by an
increase in program management services and tower ownership and management
volume.
Sales and Marketing. Sales and marketing expenses were $3.8 million,
compared to $2.5 million for the prior year, an increase of $1.3 million or
55.8%. The increase was due primarily to increased business development costs
year over year as a result of the continued regionalization of the Company's
business on a world wide basis.
General and Administrative. General and administrative expenses were $22.1
million compared to $18.3 million for the prior year, an increase of $3.8
million or 20.5%. The increase was primarily due to costs associated with the
growth of the Company's tower ownership and management business ($2.2 million),
unsuccessful merger & acquisition activities, including the Company's proposed
exchange of its hardware products business, and costs related to the office of
the former Chief Executive of the Company and related changes thereto during
1998.
Special (credit). During September 1997, the Company recognized an
approximate $3.9 million recovery of the special charge recorded in December
1996 related to Pocket Communications, Inc. and NextWave Telecom, Inc.
Restructuring Charge. In October 1998, the Company's Board of Directors
approved a restructuring plan that resulted in a total fourth quarter charge of
approximately $2.5 million, including approximately $1.2 million related to
continuing operations. The restructuring charge included $0.1 million related to
the Company's services business, $1.1 million related to corporate general and
administrative expenses, and $1.3 million related to the Company's products
businesses. The charge was taken to cover the one-time costs associated with the
closure of the Company's office in Dusseldorf, Germany, a reduction of
approximately 70 non-billable full and part-time employees and the termination
of approximately 30 contractors.
Non-Cash Compensation. Non-cash compensation was $0.4 million for 1998,
compared to $0.5 million for the prior year, a decrease of $0.1 million or
29.6%. The decrease is the result of certain awards becoming fully vested and
related expense recognition completed.
Depreciation and Amortization. Depreciation and amortization expense was
$2.4 million for 1998 compared to $3.4 million for the prior year, a decrease of
$1.0 million or 29.4%. The decrease is a result of certain equipment, primarily
computer and related equipment, becoming fully depreciated.
Interest Income. Interest income was $0.9 million for 1998 compared to
$0.7 million for the prior year, an increase of $0.2 million or 22.0%. The
increase is due primarily to earnings on funds held by the Company's overseas
operations, offset by a decrease in earnings on funds held domestically.
Interest Expense. Interest expense was $2.3 million for 1998 compared to
$3.3 million for the prior year, a decrease of $1.0 million or 30.2%. The
decrease is due primarily to a reduction in interest rates on the MCI
convertible subordinated debt. On October 23, 1997, the Company announced that
it had agreed with MCI to defer the Company's option to convert the notes in
1997. As part of the agreement, interest payable under the notes was reduced
from 6.8% to 4.4% per annum.
Other Income (Expense). Other income (expense) was $(0.6) million for 1998
compared to other income of $1.2 million for the prior year. The decrease is due
primarily to foreign currency transaction losses in 1998, the expiration of the
24-month distribution rights arrangement granted with the sale of the Company's
50.0% interest in Telemate S.A. in January 1996 and a reduction in income
recognized from the Company's 33.3% joint venture with KTS. In July 1998, the
Company acquired the remaining 66.7% membership interest in KTS, bringing its
total membership interest to 100.0%.
Provision (Benefit) for Income Taxes. The (benefit) for income taxes was
$(4.6) million for 1998 compared to a provision of $1.5 million for the prior
year. The benefit for income taxes was recorded in 1998 using a consolidated
effective income tax rate of approximately 40.0%. The provision for income taxes
was recorded in 1997 based on a consolidated effective income tax rate of
approximately 22.3%. The reduced rate in 1997 is a result of a reduction in
valuation reserves previously established as it was determined that the reserve
was no longer required.
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Income (Loss) from Continuing Operations. Income (loss) from continuing
operations was a loss of $(7.0) million in 1998 compared to income of $5.4
million for the prior year. Adjusting for the recovery of the special charge in
1997, non-cash compensation and the restructuring charge in 1998, income (loss)
from continuing operations would have been $(6.0) million compared to $2.8
million for the prior year.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues for 1997 were $91.3 million, compared to $93.2 million
for 1996, a decrease of $1.9 million or 2.0%. The decrease was primarily the
result of a $6.8 million or 41.2% decrease in program management service revenue
as a result of ceasing all work for Pocket and NextWave during the first quarter
of 1997. Engineering design services revenue increased $4.9 million or 6.4%
primarily as a result of an increase in billable hours.
Cost of Revenues. Cost of revenues were $62.3 million for 1997, compared
to $61.6 million for 1996, an increase of $0.7 million or 1.1%. As a percentage
of total revenues, cost of revenues was 68.2% and 66.1% for 1997 and 1996,
respectively. The increase is due primarily to an increase in engineering design
services volume offset, in part, by a decrease in program management work.
Gross Profit. Gross profit was $29.0 million, compared to $31.6 million
for the prior year, a decrease of $2.6 million or 8.1%. As a percentage of total
revenues, gross profit was 31.8% and 33.9% for 1997 and 1996, respectively. The
dollar decrease is due to a decline in program management services volume as a
result of ceasing all work for Pocket and NextWave in 1997. The percentage
decrease was due to a decline in program management margins due to decreased
utilization.
Sales and Marketing. Sales and marketing expense was $2.5 million, compared
to $1.2 million for the prior year, an increase of $1.3 million. The increase
was due primarily to increased marketing efforts for the service businesses
(including a $0.2 million increase in agent commissions) and the creation of a
formal global business development effort.
General and Administrative. General and administrative expenses were $18.3
million, compared to $13.0 million for the prior year, an increase of $5.3
million or 40.6%. The increase was primarily the result of costs associated with
the Company's tower ownership and management business ($0.9 million) which was
established in December 1996, costs related to becoming a public company ($1.2
million), office relocation costs related to the move of the Company's
headquarter operations ($0.4 million), the establishment of a strategic
initiatives function ($0.5 million), costs related to the Company's Brazilian
operations ($0.8 million) which were new in 1996 and an increase in the
allowance for doubtful accounts due to the continued aging of receivables from
the Company's Asia-Pacific customers ($1.5 million). The economic downturn and
exchange rate fluctuations in the Asia-Pacific region resulted in certain of the
Company's customers experiencing difficulty in arranging in a timely fashion
needed additional financing and hard currency to satisfy U.S. dollar denominated
liabilities to the Company. As a result of the uncertainty associated with the
collection of amounts due, the Company recorded additional reserves of
approximately $1.5 million to cover potential Asia-Pacific region exposure and
established procedures to require downpayment or use of letters of credit for
certain Asia-Pacific sales.
Special Charge (credit). During September 1997, the Company recognized an
approximate $3.9 million recovery of the $28.9 million special charge recorded
in December 1996 related to Pocket and NextWave. Of the $3.9 million, $2.0
million represents payments received through June 1997 under the revised payment
schedule established with NextWave on April 15, 1997 and $1.9 million represents
additional payments of $2.0 million received in April 1997 from NextWave, net of
related expenses. For financial reporting purposes, income recognition of the
entire $3.9 million balance was deferred pending the lapse in the third quarter
of a 90 day window during which such funds could have been subject to being
treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws. (See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Cash Flows"). During
calendar 1998, NextWave also sought court protection under Chapter 11 of the
U.S. Bankruptcy Code.
Non-Cash Compensation. Non-cash compensation was $0.5 million, compared to
$6.8 million for the prior year, a decrease of $6.3 million or 92.5%. The
balance recorded in the prior year includes additional compensation expense as a
result of the increase in the deemed fair market value of the Company. In
addition,
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certain awards became fully vested and related expense recognition was completed
during 1997. Awards under the related compensation plans were converted to stock
options in connection with the Company's initial public offering in September
1996.
Depreciation and Amortization. Depreciation and amortization expense was
$3.4 million, compared to $2.3 million for the prior year, an increase of $1.1
million or 46.4%. The increase was primarily the result of a generally higher
capital asset base as compared to the prior year, in part as a result of the
capitalization of $2.9 million for telecommunications towers.
Interest Expense, Net. Interest expense, net was $2.6 million in 1997
compared to $2.1 million for the prior year, an increase of $0.5 million or
20.1%. Interest expense in 1997 results from $50.0 million of convertible
subordinated debt ($30.0 million of which was assumed from Telcom Ventures in
September 1996 as a result of the merger of LCC, L.L.C. with and into the
Company), whereas during the prior year, the Company had a total of $20.0
million debt outstanding under its convertible subordinated debt instrument and
up to an additional $20.0 million outstanding under the Company's credit
facility. All amounts outstanding under the credit facility were paid from the
proceeds of the Company's initial public offering in September 1996. The
increase in interest expense, net results from the change in amount and mix of
the debt as well as related interest rates.
Other Income. Other income was $1.3 million in 1997, compared to $2.4
million in 1996, a decrease of $1.1 million or 46.5%. The decrease is primarily
due to the gain recorded on the sale of the Company's 50% interest in Telemate
S.A. in January 1996 ($0.5 million) and a decrease in the amount of income
recognized from the Company's 33 1/3% investment in KTS in 1997 as compared to
the prior year.
Provision (Benefit) for Income Taxes. The provision for income taxes was
$1.5 million in 1997, compared to a benefit of $8.7 million for the prior year.
The provision for income taxes was recorded in 1997 based on an effective income
tax rate of 22.3%. The provision for income taxes was recorded through September
26, 1996 assuming that the Company was a limited liability company. In addition,
the Company recorded a one-time deferred tax benefit of $8.7 million in 1996
($7.5 million related to continuing operations) as a result of its conversion
from a limited liability company to a Subchapter C Corporation in connection
with the merger of LCC, L.L.C. with and into the Company prior to the initial
public offering in September 1996.
Income (Loss) from Continuing Operations. Income (loss) from continuing
operations was $5.4 million in 1997 compared to a loss of ($11.7) million for
the prior year. As a percentage of total revenues, income (loss) from continuing
operations increased to 5.9% from (12.6%) in the prior year. Adjusting for the
special charge recorded by the Company in 1996, non-cash compensation, the
recovery of special charge in 1997 and assuming an effective tax rate of 40.0%
in 1996, income from continuing operations would have been $2.8 million compared
to $9.2 million for the prior year.
DISCONTINUED OPERATIONS
In March 1999, the Company's Board of Directors adopted a plan to
discontinue the operations comprising its products businesses (see note 4 to the
Consolidated Financial Statements).
Product revenues for 1998 were $33.8 million compared to $64.0 million for
1997, a decrease of $30.2 million or 47.2%. The decrease is primarily a result
of customer spending constraints due to cost cutting measures in the face of
increased competition, the continued economic downturn in the Asia-Pacific
region and a softness in the U.S. domestic market. In addition, release of the
Company's next generation network propagation modeling tool has been delayed
resulting in a significant reduction in software sales. Product gross profit was
$11.4 million compared to $32.4 million for the prior year, a decrease of $21.0
million or 64.8%. The decrease in gross profit is due primarily to the decrease
in volume between years. Operating losses were $24.8 million compared to income
of $6.0 million in the prior year, a decrease of $30.8 million. The decrease was
due primarily to the shortfall in revenue discussed above as well as a write-off
of software development costs. The loss from discontinued operations was $17.8
million in 1998 compared to income of $2.2 million in 1997.
Product revenues for 1997 were $64.0 million compared to $48.4 million for
the prior year, an increase of $15.6 million or 32.1%. The increase was
primarily due to an increase in field measurement and network
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analysis product revenues due to strong sales in North America, the ETP
Acquisition in December 1996 and new product introductions during 1997. Product
gross profit was $32.4 million compared to $22.0 million for the prior year, an
increase of $10.4 million or 47.0%. The increase is due primarily to the
increase in field measurement and network analysis product revenues. Operating
income was $6.0 million compared to a loss of $2.2 million for the prior year.
The prior year loss is due primarily to $5.6 million of in-process research and
development costs recorded as a result of the ETP Acquisition in December 1996.
Income from discontinued operations was $2.2 million compared to $0.4 million
for the prior year. Prior year income from discontinued operations resulted
primarily from a tax benefit recorded related to the hardware products business.
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
Additions to property and equipment were $16.7 million for 1998, compared
to $6.7 million for 1997 and $2.2 million for 1996. Substantially all of the
$10.0 million increase from 1997 to 1998 represents expenditures by Microcell
related to the acquisition and development of telecommunications towers. Of the
$4.5 million increase from 1996 to 1997, approximately $1.5 million was due to
the move of the Company's headquarter operations (see below) and $3.0 million
was due to additions made by Microcell. Approximately $2.9 million of the
Microcell additions represent costs related to the acquisition and development
of telecommunications towers. The Company anticipates a significant continuing
commitment for capital expenditures for its Microcell subsidiary. This effort is
currently expected to be funded from the Company's working capital, Credit
Facility (see below) and other financing sources. In May 1996, the Company
entered into 10-year and 5-year facility lease agreements effective March 1,
1997 and July 1, 1997, respectively, and moved into new office space during the
first and second quarter of 1997. This move resulted in a consolidation of the
Company's headquarter operations, decreased office facilities administration
costs and an increase in property and equipment additions in 1997 as compared to
1996.
In order to conduct each of the telecommunications services business, the
tower ownership and management business and the Products Businesses as currently
planned, the Company will require outside sources of financing. The Credit
Facility allows the Company to draw up to the lesser of $10 million and its
receivables borrowing base plus up to an additional $12.5 million assuming that
Dr. Singh provides the specified collateral to secure such advances. Dr. Singh
is not contractually committed to provide any collateral to Chase. Telcom
Ventures has assured the Company that it intends to provide the Company with
funding to cover any cash shortfalls the Company may have during 1999 in an
amount not to exceed $12.5 million less the sum of amounts drawn under the
Credit Facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including the parties
reaching agreement on applicable financing documents, and will apply only as
long as Telcom Ventures directly or indirectly owns at least 40% of the
Company's outstanding common stock, other than any stock issued to MCI upon
conversion of the MCI notes. The Company believes that the foregoing funding
sources will be sufficient to cover its funding requirements for 1999. However,
in the event that the Company's actual requirements exceed its estimated
requirements, the full $22.5 million is not available under the Credit Facility
or the conditions to obtaining financing from Telcom Ventures are not satisfied
and the Company is unable to find other sources of funding to cover any
shortfalls resulting from the occurrence of any one or more of these events, the
Company may need to scale back the scope of its overall operations.
FOREIGN CURRENCY
During December 1997, the Company increased its allowance for doubtful
accounts due to the continued aging of receivables from its Asia-Pacific
customers. Asia-Pacific export revenues were $8.1 million and $12.1 million for
the years ended December 31, 1996 and 1997, respectively. The economic downturn
and exchange rate fluctuations in the Asia-Pacific region during the latter part
of calendar 1997 resulted in certain of the Company's customers experiencing
difficulty in arranging in a timely fashion needed additional financing and hard
currency to satisfy U.S. dollar denominated liabilities to the Company. As a
result of the uncertainty associated with the collection of amounts due, the
Company recorded additional reserves of approximately $1.5 million to cover
potential Asia-Pacific region exposure and established procedures to require
downpayment or use of letters of credit for certain Asia-Pacific sales.
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During the two month period ended February 28, 1999, the Company recognized
total foreign currency transaction losses of approximately $2.1 million related
to its Latin American operations. The majority of the losses were from the
Company's 1998 Brazilian operations as a result of the devaluation of the Real
in 1999. The Company is in the process of exploring its options to limit any
future exposure from further exchange rate fluctuations.
CASH FLOWS
Cash and cash equivalents were $4.2 million at December 31, 1998, a
decrease of $10.7 million from December 31, 1997. The decrease was primarily due
to cash used in continuing operations ($8.9 million) and additions to property
and equipment ($16.7 million), offset by sales of investment securities ($8.5
million), proceeds from the exercise of stock options and from the issuance of
shares under the Company's Employee Stock Purchase Plan ($3.4 million), cash
received from Telcom Ventures under the terms of the Company's $3.5 million loan
($0.9 million) and a net increase in cash and cash equivalents from discontinued
operations ($1.9 million). Cash and cash equivalents were $14.9 million at
December 31, 1997, an increase of $1.6 million from December 31, 1996. The
increase was due primarily to cash provided by continuing operations ($12.4
million), cash received from the exercise of stock options and from the issuance
of shares under the Company's Employee Stock Purchase Plan ($4.0 million) and
cash received from Telcom Ventures under the terms of the Company's $3.5 million
loan ($1.0 million), offset by additions to property and equipment ($6.7
million), the investment of available cash on hand ($1.7 million) and a net
decrease in cash and cash equivalents from discontinued operations ($7.5
million). In September 1996, in connection with its initial public offering, the
Company issued 3,162,500 shares of Class A Common Stock at an initial public
offering price of $16.00 per share. The net proceeds to the Company (after
deducting discounts, commissions and other expenses of the offering) were
approximately $44.8 million. As of December 31, 1996, approximately $16.2
million of this amount was used to pay all remaining amounts outstanding under
the Credit Facility (as defined below), $3.5 million was advanced to Telcom
Ventures to assist in paying certain taxes due in connection with the assumption
by the Company of the Telcom Ventures Note, approximately $6.85 million was used
for vendor financing and approximately $11.85 million was being held to fund the
portion of the ETP Acquisition purchase price due at closing. The balance of
approximately $6.4 million was invested in various short-term investments and
cash equivalents. As of December 31, 1997, approximately $2.0 million of the
balance of $6.4 million at December 31, 1996 had been used for working capital
with the remainder invested in tax exempt municipals and overnight repurchase
agreements. All remaining amounts had been used for working capital at December
31, 1998.
In December 1996, the Company, through its newly formed subsidiary,
Microcell, acquired certain of the assets and liabilities of Microcell
Management, LLC, which, through the participation of the Company and others,
consisted of the acquisition, development, lease and management of
telecommunications towers. Microcell offers a package to finance the
construction of telecommunications towers on a sale-leaseback or build-to-suit
basis. Assets acquired included contracts rights of $393,000, which are being
amortized on a straight-line basis over the 10 year life of the related
contract.
Net cash used in continuing operations was $6.1 million for 1996. Net cash
used in investing activities was $11.0 million, consisting primarily of cash
paid for additions to property and equipment ($2.2 million), investment in joint
ventures ($0.8 million), net increase in short-term investments ($6.2 million),
and loans convertible into shares of common stock ($5.6 million), partially
offset by the proceeds of the sale of the Company's interest in Telemate S.A.
and certain distribution rights ($3.8 million). Net cash provided by financing
activities was $25.5 million, primarily representing net proceeds from the
Offering of $44.9 million, partially offset by a $20.0 million reduction in
short-term debt under the Credit Facility.
Dividends paid during 1996 were $16.9 million, all by the Limited Liability
Company. In September 1996, the Limited Liability Company received $16.9 million
as repayment of its loans to Telcom Ventures. Also in September 1996, the
Company advanced $3.5 million to Telcom Ventures to assist in the payment of
taxes due in connection with the assumption by the Company of $30.0 million of
convertible subordinated debt from Telcom Ventures (see notes 2 and 13 to the
Consolidated Financial Statements). In November 1997 and October 1998, the
Company received payments of approximately $1.0 million from Telcom
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Ventures representing payment of $0.7 million principal and approximately $0.3
million interest under the terms of the $3.5 million advance. No dividends were
paid by the Company in 1997 or in 1998.
In November 1996, the Company entered into master service, convertible note
and stock option agreements with Communication Consulting Services, Inc.
("CCS"), a provider of radio frequency engineering services in connection with
the design, optimization and operation of wireless systems. Under the
convertible note agreement, the Company loaned CCS a total of approximately $0.6
million. Interest accrues on the loan at a variable rate equal to the prime rate
plus 1.5%. The loan was convertible, at the Company's option, into shares
representing 50.0% of the capital stock of CCS. The stock option agreement gave
the Company an option to purchase an additional 10%, for a total purchase price
of $0.15 million. On April 7, 1997 the Company exercised both the conversion
right in the convertible note and the 10% purchase right set forth in the stock
option agreement.
On September 30, 1998, the Company sold its interest in CCS to CCS
management for $1.2 million. The $1.2 million is payable in two installments
consisting of (i) $600,000 due on May 31, 1999 and (ii) $600,000 due on November
30, 1999. Interest, equal to 9%, is due monthly on the first day of each month
beginning January 1, 1999. The initial interest payment is for the period from
October 1, 1998 to January 1, 1999. Payment of the foregoing obligation is
secured by a pledge of the transferred CCS stock and is guaranteed by CCS. As of
December 31, 1998 the Company has recorded a reserve of approximately $557,000
related to the transaction.
In March 1996, the Company made investments in Pocket and NextWave of $6.5
million and $5.0 million, respectively. The $6.5 million investment in Pocket
consisted of loans convertible into shares of non-voting common stock upon the
satisfaction of certain conditions. In connection with this investment, The
Company obtained a commitment from Pocket for the purchase of services and
products aggregating $65.0 million over the subsequent five-year period. The
$5.0 million investment in NextWave consisted of an equity investment. In
connection with this investment, the Company obtained a commitment from NextWave
for the purchase of services and products aggregating $50.0 million over the
subsequent five-year period. Through December 31, 1996, revenues recognized
under the commitments with Pocket and NextWave were approximately $2.2 million
and $12.5 million, respectively, and related amounts receivable were
approximately $2.2 million and $10.6 million, respectively. Included in the
amounts receivable are notes receivable from Pocket and NextWave of
approximately $950,000 and $5.9 million, respectively. The notes bear interest
at prime plus 2%, and were payable upon maturity of the notes on March 31, 1997.
Both customers were development stage enterprises pursuing the build-out and
operation of networks obtained in the auction of C-Block licenses by the FCC and
subject to risks typically associated with start-up entities, such as (i) the
uncertainty of securing sufficient financing, (ii) competition from other
providers of telecommunications services, (iii) dependence on key vendors and
strategic operation of its PCS networks and (iv) delays encountered in the
development and successful operation of their PCS networks.
On March 31, 1997, Pocket failed to pay interest due the Company under the
$6.5 million convertible loan agreement and failed to pay principal and interest
due the Company under the $950,000 note agreement. Also on March 31, 1997,
NextWave failed to pay principal and interest due under the $5.9 million note
agreement. In addition, on April 1, 1997, Pocket announced that it had
voluntarily sought court protection under Chapter 11 of the U.S. Bankruptcy
Code. Given these developments and the uncertainty related to Pocket's and
NextWave's ability to meet their future obligations under the agreements
outlined above, the Company fully reserved its exposure with these customers and
has consequently recorded a special charge of $28.9 million pre-tax ($23.8
million after tax) at December 31, 1996. The $28.9 million special charge
consisted of a reserve against the Company's aggregate receivable exposure at
December 31, 1996 of $12.1 million (net payments of $0.4 million received in
January 1997), the recognition of an other than temporary impairment of the
Company's investments of $11.5 million and accruals of approximately $5.3
million related to loss contracts under which the Company was obligated to
perform at December 31, 1997. The Company experienced lower than historical
margins in the first two quarters of calendar year 1997 as a result of the
decision to suspend work performed for these two customers.
On April 15, 1997, the Company and NextWave agreed to a revised payment
schedule for amounts outstanding under the note receivable and other receivables
due from NextWave to the Company. Under the
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terms of the agreement, the Company was to receive approximately $1.0 million
per month from May 15, 1997 through May 15, 1998. In addition, under certain
circumstances, in the event of the sale or issuance of any debt or equity
instruments/securities or the sale of any assets by NextWave, the Company would
be entitled to a prepayment equal to 30% of the gross proceeds from such
transaction(s). In May and June 1997, the Company agreed to defer NextWave's
obligations to prepay the foregoing obligations out of the proceeds of
NextWave's debt or equity financings to August 20, 1997. Payments of $2.0
million were received under the revised payment schedule through June 30, 1997.
NextWave has failed to make the $1.0 million monthly payments which were due
July 15, 1997 through May 15, 1998, as well as any payment that would have been
due on August 20, 1997 related to any debt or equity financings.
During September 1997, the Company recognized an approximate $3.9 million
recovery of the $28.9 million special charge. Of the $3.9 million, $2.0 million
represents the payments received through June 1997 under the revised payment
schedule and $1.9 million represents additional payments received in April 1997
from NextWave, net of related expenses. For financial reporting purposes, the
recovery of the $3.9 million balance was deferred pending the lapse in the third
quarter of a 90 day window during which such funds could have been subject to
being treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws. During calendar 1998, NextWave also sought
court protection under Chapter 11 of the U.S. Bankruptcy Code.
Working capital was $14.5 million at December 31, 1998, compared to $59.2
million at December 31, 1997, a decrease of $44.7 million. The decrease in
working capital was primarily a result of losses from continuing operations
($9.1 million pre-tax and excluding depreciation and amortization), a decrease
in net assets of discontinued operations ($19.7 million) and funds used to build
telecommunications towers. Capitalized cost related to telecommunications tower
development was $2.9 million and $17.5 million at December 31, 1997 and 1998,
respectively.
Working capital was $59.2 million at December 31, 1997, compared to $49.8
million at December 31, 1996, an increase of $9.4 million or 18.7%, The increase
in working capital was primarily due to a net increase in cash and cash
equivalents and short-term investments primarily as a result of cash provided
from continuing operations, an increase in net assets of discontinued
operations, and a decrease in accounts payable and accrued expenses, all offset
by a net decrease in receivables and deferred income taxes.
In February 1998 the Company adopted a stock repurchase program pursuant to
which the Company is authorized to purchase, through open market transactions,
privately negotiated transactions, or in such other manner as will comply with
the provisions of the Securities Exchange Act of 1934, and the rules and
regulations thereunder, up to one million shares of Class A Common Stock. The
actual timing and blocks of shares to be purchased will depend on a variety of
factors, including price and market conditions. As of March 29, 1999, the
Company had not purchased any shares pursuant to this program.
EXISTING INDEBTEDNESS
In June 1994, the Company and Telcom Ventures sold $20 million and $30
million, respectively, of notes to MCI, which notes are exchangeable, at certain
times, consisting of 45 day periods commencing in June and August of 1997, 1998,
and 1999, into 2,841,099 shares of the Company's Class A Common Stock. The $30
million owed by Telcom Ventures was assumed by the Company in connection with
its initial public offering in September 1996. On October 23, 1997, the Company
announced that it had agreed with MCI to defer the Company's option to convert
the notes in 1997. As part of the agreement, interest payable under the notes
was reduced from 6.8% to 4.4% per annum. The notes are also convertible upon the
happening of specified corporate events, including certain tender offers and a
sale of substantially all of the Company's assets. The Company is considering
exercising its option in August 1999 to cause the notes to be exchanged into
Class A Common Stock. This could result in a significant taxable gain to the
Company. Events of default under the notes (which would cause such notes to
become due and payable) include non-payment and bankruptcy.
In March 1999, the Company amended and restated its credit facility with
the Chase Manhattan Bank, as Administrative Agent ("Chase") (together with the
LCC Europe Credit Facility, the "Credit Facility") which was established in
1996. The Credit Facility, as presently in effect, consists of a revolving loan
and letter
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of credit facility in an aggregate principal amount not to exceed $20.0 million
for the Company and $2.5 million for LCC Europe (the "LCC Europe Credit
Facility"). The maximum amount available for drawing under the Credit Facility
is the sum of (1) the lesser of $10.0 million or 85% of the amount of the
Company's receivables which are deemed "eligible" as a basis for obtaining
credit and (2) an aggregate amount, not to exceed $12.5 million, which is
secured by a collateralized guaranty of Dr. Rajendra Singh, Chairman and Interim
Chief Executive Officer of the Company, to the extent that Dr. Singh has
deposited the required collateral with Chase. Dr. Singh is not contractually
committed to provide any collateral to Chase. The revolving loan commitment will
expire in March 2000. Subject to certain restrictions on the minimum permitted
amount of any prepayment and the requirement that certain notices of prepayment
be given to Chase, the principal of the revolving loans is prepayable without
penalty or premium, so long as the lenders are compensated for losses, costs and
expenses attributable to any prepayment of any loan accruing interest at the
fixed rate on a date other than the last day of the applicable interest period.
Interest under the Credit Facility (other than the LCC Europe Credit Facility)
accrues at the Company's election (subject to certain restrictions and
limitations contained in the credit agreement), at either (i) the variable rate
equal to the higher of (a) the Federal Funds Rate plus 0.50%, and (b) the
announced prime commercial lending rate of Chase plus, in each case, 0%, 0.25%
or 0.50% depending on the ratio of the Company's Consolidated Debt (as defined
in the credit agreement) to Consolidated EBITDA (as defined in the credit
agreement) for the most recently ended fiscal quarter (the "Cash Flow Leverage
Ratio") on the applicable date or (ii) the fixed rate for a designated period of
time (1, 2, 3 or 6 months) equal to the rate at which U.S. dollar deposits are
offered to leading banks in the London interbank market plus 1.0%, 1.5% or 2.0%
depending on the Company's Cash Flow Leverage Ratio on the applicable date.
Interest under the LCC Europe Credit Facility accrues at the Company's election
(subject to certain restrictions and limitations contained in the credit
agreement) at the fixed rate for a designated period of time (1, 2, 3 or 6
months) equal to the rate at which U.S. dollar deposits are offered to leading
banks in the London interbank market or at which Norwegian krone are offered to
leading banks in the Norwegian interbank market, plus, in each case 1.0%, 1.5%
or 2.0% depending on the Company's Cash Flow Leverage Ratio on the applicable
date.
The payment and performance of the obligations of the Company under the
Credit Facility are secured by substantially all of the assets of the Company
including the stock and membership interests in its subsidiaries (except that,
due to local regulatory restrictions, the assets of LCC Europe have been pledged
as security solely for the LCC Europe Credit Facility) and are guaranteed in
full by LCC Development Company, L.L.C., LCC Design Services, L.C.C. and Koll
Telecommunications Services, L.L.C., wholly-owned subsidiaries of the Company.
Such obligations are guaranteed by Microcell solely to the extent that Microcell
has outstanding borrowings under its revolving line of credit and security
agreement with the Company (the "Microcell Credit Facility"); any payments made
by Microcell to Chase under the Credit Facility shall reduce its outstanding
obligations under the Microcell Credit Facility on a dollar for dollar basis.
Any payments of principal by Microcell under the Microcell Credit Facility must
be used to prepay any outstanding loans under the Credit Facility and the amount
available under the Credit Facility shall be permanently reduced by the amount
of any such prepayment. The payment and performance obligations of the Company
under the Credit Facility are also guaranteed, up to a maximum amount of $12.5
million plus interest thereon, by Dr. Rajendra Singh, one of the Company's
founders and Interim Chief Executive Officer. All obligations arising under the
LCC Europe Credit Facility are guaranteed in full by the Company.
The Credit Facility requires that the Company satisfy certain financial
tests, including the maintenance of certain leverage, debt service and other
financial ratios, and that the Company maintain certain minimum liquidity
requirements. The Credit Facility also contains certain restrictive covenants
which impose restrictions and/or limitations on the operations and activities of
the Company including, among other things: the incurrence of indebtedness, and
the terms thereof, the creation or incurrence of certain liens, certain
investments and acquisitions, sales of assets, declaration or payment of
dividends or other payments or distributions to stockholders and capital
expenditures. The Credit Facility provides for various events of default,
including interest or principal payment default, breach of any condition or
covenant that (in certain cases) continues unremedied for 30 days, materially
adverse changes, the rendering of one or more material judgments against the
Company or any subsidiary thereof which is not vacated, satisfied, discharged,
or stayed within 30 days, and certain events relating to the bankruptcy or
insolvency of the Company. In addition, the
43
<PAGE> 44
Credit Facility provides for an event of default if, without the prior written
consent of lenders, (i) the Company sells, leases, assigns, transfers or
otherwise disposes of any of its assets, other than in the ordinary course of
business and in other limited circumstances, (ii) the Company merges with
another corporation other than a wholly-owned subsidiary, (iii) any person or
two or more persons acting in concert (other than Dr. Rajendra Singh, Neera
Singh, any trusts for their benefit or for the benefit of their family members,
and any of their respective affiliates which are controlled by any one or more
of them) acquire beneficial ownership of more than 25% of the voting stock of
the Company, or (iv) during any period of 12 consecutive months, individuals who
at the beginning of such 12-month period were directors of the Company (or other
persons nominated by such individuals) cease for any reason to constitute a
majority of the Board of Directors of the Company.
No amounts were outstanding under the Credit Facility at December 31, 1997
and 1998 with the exception of amounts outstanding under the LCC Europe Credit
Facility and outstanding letters of credit. Approximately $1.4 million and $2.4
million were outstanding under the LCC Europe Credit Facility at December 31,
1997 and 1998, respectively, and are included in net assets of discontinued
operations in the accompanying consolidated balance sheets. Outstanding letters
of credit were $2.1 million and $5.8 million at December 31, 1997 and 1998,
respectively.
From January 1, 1999 to March 31, 1999 the Company borrowed a total of $3.4
million under the Credit Facility. Borrowings were made to fund construction of
telecommunications towers and operations of the Company. Also, in January 1999,
the Company entered into a $5.0 million convertible promissory note with Telcom
Ventures. Under the terms of the note, the entire principal balance and accrued
interest at a rate of 9.0% is due on April 30, 2000, or upon the occurrence of
certain events such as the sale of all or substantially all of the assets of the
Company. At anytime from August 1, 1999 either Telcom Ventures or the Company
may convert the then outstanding principal and accrued, but unpaid interest into
shares of the Company's Class A Common Stock based on a conversion price of
$6.22 per share, subject to adjustment for stock split, stock dividend,
recapitalization or similar events.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year (the
"Year 2000 Issue"). Software, hardware or firmware may recognize a date using
"00" as the year 1900, rather than the year 2000. Such an inability of computer
programs to recognize a year that begins with "20" could result in system
failures, miscalculations or errors causing disruptions of operations or other
business problems, including, among others, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The Company has undertaken a program to address the Year 2000 Issue with
respect to the following: (i) the Company's information technology and operating
systems; (ii) the Company's non-information technology systems (such as
buildings, plant, equipment and other infrastructure systems that may contain
embedded microcontroller technology); (iii) certain systems of the Company's
major vendors and material service providers (insofar as they relate to the
Company's business activities with such parties); and (iv) the Company's
material clients (insofar as the Year 2000 Issue relates to the Company's
ability to provide services to such clients). The Company believes that it has
substantially completed its Year 2000 modifications on mission critical
applications.
Internal Systems. The Company has invested in the implementation and
maintenance of accounting and reporting systems and equipment that are intended
to enable the Company to provide adequately for its information and reporting
needs and which are also Year 2000 compliant. Substantially all of the Company's
internal systems have already been certified as Year 2000 compliant through
testing or other mechanisms and the Company has not delayed any systems projects
due to the Year 2000 Issue. Management believes that the future costs associated
with Year 2000 Issues for its internal systems will be insignificant and
therefore not impact the Company's business, financial condition and results of
operations.
Company Products. The Company's technical personnel have completed their
assessment of the impact of the Year 2000 Issue on the Company's products and
determined that all active products determined to be non-compliant will be
modified to be Year 2000 compliant or placed on the Company's list of
discontinued
44
<PAGE> 45
products. However, there can be no guarantee that the systems of other companies
on which the Company's systems rely will be timely converted, or that a failure
to convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
Third Party Systems. The Company has initiated formal communications with
all of its significant suppliers and large customers to determine the extent to
which the Company is vulnerable to those third parties' failure to remediate
their own Year 2000 Issue. The Company has received responses regarding Year
2000 compliance from some of such third parties. The third parties that
responded have indicated that their hardware and/or software is or is expected
to be Year 2000 compliant.
Contingency Plans. The Company is in the process of considering possible
general contingency plans for Year 2000 failures. The Company intends to
complete its determination of worst case scenarios after it has received and
analyzed responses to substantially all of its inquiries it has made of third
parties. As the Company progresses in this process, the Company will develop
remedial and contingency plans to address such risks. The Company expects to
complete its contingency plans by June 30, 1999.
Costs. The Company utilized both internal and external resources to
reprogram, or replace, and test software for Year 2000 modifications. The
Company has not separately tracked the costs incurred in connection with the
Year 2000 effort, however, total cost associated with the required modifications
and conversions is not material to the Company's consolidated results of
operations and financial position. The total costs of the program is being
funded through operating cash flows.
Risks. Although the Company's Year 2000 efforts are intended to minimize
the adverse effects of the Year 2000 Issue on the Company's business and
operations, the actual effects of the issue and the success or failure of the
Company's efforts described above cannot be known until the year 2000. Failure
by the Company and its major vendors, other material service providers and
material clients to address adequately their respective Year 2000 issues in a
timely manner could have a material adverse effect on the Company's business,
results of operations and financial condition.
45
<PAGE> 46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LCC International, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of LCC
International, Inc. and Subsidiaries (the "Company") as of December 31, 1997 and
1998, and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1998. In connection with our audits of the consolidated
financial statements, we have also audited the related financial statement
schedule. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule 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 financial position of LCC
International, Inc. and Subsidiaries as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
KPMG LLP
Washington, D.C.
March 26, 1999
46
<PAGE> 47
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1997 1998
-------- ------- --------
<S> <C> <C> <C>
Revenues (notes 6 and 8):
Service.................................................... $ 93,156 $91,289 $ 86,328
Tower ownership and management............................. -- -- 860
-------- ------- --------
Total revenues.............................................. 93,156 91,289 87,188
-------- ------- --------
Cost of revenues:
Service.................................................... 61,581 62,263 66,238
Tower ownership and management............................. -- -- 521
-------- ------- --------
Total cost of revenues...................................... 61,581 62,263 66,759
-------- ------- --------
Gross profit................................................ 31,575 29,026 20,429
-------- ------- --------
Operating expenses:
Sales and marketing........................................ 1,200 2,466 3,843
General and administrative................................. 13,030 18,314 22,063
Special charge (credit) (note 8)........................... 28,920 (3,894) --
Restructuring charge(9).................................... -- -- 1,256
Non-cash compensation (note 15)............................ 6,831 514 362
Depreciation and amortization.............................. 2,330 3,410 2,409
-------- ------- --------
Total operating expenses.................................... 52,311 20,810 29,933
-------- ------- --------
Operating income (loss)..................................... (20,736) 8,216 (9,504)
-------- ------- --------
Other income (expense):
Interest income............................................ 925 736 898
Interest expense........................................... (3,050) (3,289) (2,295)
Other...................................................... 2,385 1,275 (618)
-------- ------- --------
Total other income (expense)................................ 260 (1,278) (2,015)
-------- ------- --------
Income (loss) from continuing operations before income
taxes...................................................... (20,476) 6,938 (11,519)
Provision (benefit) for income taxes (note 11).............. (8,745) 1,548 (4,561)
-------- ------- --------
Income (loss) from continuing operations.................... (11,731) 5,390 (6,958)
Income (loss) from discontinued operations net of tax
benefits................................................... 447 2,185 (17,785)
-------- ------- --------
Net income (loss)........................................... $(11,284) $ 7,575 $(24,743)
======== ======= ========
Net income (loss) per share:
Continuing Operations
Basic...................................................... $ 0.37 $ (0.45)
======= ========
Diluted.................................................... $ 0.34 $ (0.45)
======= ========
Discontinued operations
Basic...................................................... $ 0.15 $ (1.15)
======= ========
Diluted.................................................... $ 0.14 $ (1.15)
======= ========
Net income (loss) per share:
Basic...................................................... $ 0.51 $ (1.60)
======= ========
Diluted.................................................... $ 0.47 $ (1.60)
======= ========
Pro forma income (loss) data (unaudited) (note 3):
Income (loss) from continuing operations before income
taxes.................................................... $(20,476)
Pro forma provision (benefit) for income taxes (note 12)... (1,783)
--------
Pro forma net income (loss) from continuing operations..... (18,693)
Pro forma loss from discontinued operations, net of tax.... (2,076)
--------
Pro forma net income (loss) (unaudited):................... $(20,769)
========
Pro forma net income (loss) per share (unaudited):
Continuing operations:
Basic.................................................... $ (1.53)
========
Diluted.................................................. $ (1.53)
========
Discontinued operations:
Basic.................................................... $ (0.17)
========
Diluted.................................................. $ (0.17)
========
Pro forma net income (loss):
Basic.................................................... $ (1.70)
========
Diluted.................................................. $ (1.70)
========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
47
<PAGE> 48
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 5)........................ $14,878 $ 4,240
Short-term investments (note 3)........................... 8,619 113
Receivables, net of allowance for doubtful accounts of
$11,929, and $10,453 at December 31, 1997 and 1998
Trade accounts receivable (note 8)..................... 10,216 13,028
Due from related parties and affiliates (note 6)....... 1,089 611
Unbilled receivables (note 8).......................... 9,590 6,078
Deferred income taxes, net (note 11)...................... 9,874 12,050
Prepaid expenses and other current assets................. 1,042 3,072
Net assets of discontinued operations (note 4)............ 28,855 9,139
------- --------
Total current assets.............................. 84,163 48,331
Property and equipment, net (note 7)........................ 7,691 22,132
Investments in joint ventures (note 10)..................... 1,300 --
Deferred income taxes, net (note 11)........................ 1,513 12,705
Other assets (note 8)....................................... 753 1,036
------- --------
$95,420 $ 84,204
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 328 $ 4,637
Accrued expenses (note 8)................................. 6,518 8,153
Accrued employee compensation and benefits................ 8,220 9,702
Deferred revenue.......................................... 801 277
Income taxes payable (note 11)............................ 7,507 7,894
Obligations under incentive plans (note 15)............... 1,106 55
Other current liabilities................................. 528 3,142
------- --------
Total current liabilities......................... 25,008 33,860
Convertible subordinated debt (note 13)..................... 50,000 50,000
Other liabilities........................................... 210 115
------- --------
Total liabilities................................. 75,218 83,975
------- --------
Commitments and contingencies (notes 1, 9 10, 11, 14, 15, 16
and 17)
Shareholders' Equity:
Preferred Stock:
10,000 shares authorized; -0- shares issued and
outstanding........................................... -- --
Class A common stock; $.01 par value:
70,000 shares authorized; 6,644 shares and 7,180 shares
issued and outstanding at December 31, 1997 and 1998,
respectively.......................................... 66 72
Class B common stock; $.01 par value:
20,000 shares authorized; 8,461 shares issued and
outstanding at December 31, 1997 and 1998............. 85 85
Paid-in capital........................................... 33,210 37,130
Accumulated deficit....................................... (8,847) (33,590)
Note receivable from shareholder (note 6)................. (2,800) (2,100)
------- --------
Subtotal.......................................... 21,714 1,597
Accumulated other comprehensive loss -- foreign currency
translation adjustments................................... (1,512) (1,368)
------- --------
Total Shareholders' equity........................ 20,202 229
------- --------
$95,420 $ 84,204
======= ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
48
<PAGE> 49
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
----------------- OTHER
PREFERRED PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
STOCK CLASS A CLASS B CAPITAL INCOME (LOSS) (DEFICIT) INCOME (LOSS)
--------- ------- ------- -------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995.............. $-- $-- $ -- $ -- $ -- $ (79)
Dividends paid............................ -- -- -- -- -- --
Net income -- pre-merger (note 2)......... -- -- -- -- -- --
Cumulative foreign currency translation
adjustment.............................. -- -- -- -- -- (132)
Loan to member............................ -- -- -- 1,640 -- --
Repayment of loan to member............... -- -- -- -- -- --
Assumption of subordinated debt (notes 2 &
13)..................................... -- -- -- (30,000) -- --
Merger of LCC, L.L.C. into LCC
International, Inc. (note 2)............ -- -- 114 (2,920) -- 211
Net proceeds of initial public offering
(note 2)................................ -- 61 (29) 44,725 -- --
Loan to shareholder (notes 2 and 6)....... -- -- -- -- -- --
Exercise/issuance of stock options (note
15)..................................... -- -- -- 14,908 -- --
Net (loss) -- post merger................. -- -- -- -- $(16,422) (16,422) --
Other comprehensive loss -- foreign
currency translation adjustments........ (100) (100)
--------
Comprehensive loss........................ -- -- -- -- $(16,522) -- --
--- --- ---- -------- ======== -------- -------
Balances at December 31, 1996.............. -- 61 85 28,353 (16,422) (100)
Payment from Shareholder.................. -- -- -- 261 -- --
Exercise/issuance of stock options........ -- 5 -- 4,148 -- --
Issuance of common stock.................. -- -- -- 448 -- --
Net income................................ -- -- -- -- $ 7,575 7,575 --
Other comprehensive loss -- foreign
currency translation adjustments........ -- -- -- -- (1,412) -- (1,412)
--------
Comprehensive loss........................ -- -- -- -- $ 6,163 -- --
--- --- ---- -------- ======== -------- -------
Balances at December 31, 1997.............. -- 66 85 33,210 (8,847) (1,512)
Payment from Shareholder.................. -- -- -- 209 -- --
Exercise/issuance of stock options........ -- 4 -- 3,012 -- --
Issuance of common stock.................. -- 2 -- 699 -- --
Net (loss)................................ -- -- -- -- $(24,743) (24,743) --
Other comprehensive income -- foreign
currency translation adjustments........ -- -- -- -- 144 -- 144
--------
Comprehensive loss........................ -- -- -- -- $(24,599) -- --
--- --- ---- -------- ======== -------- -------
Balances at December 31, 1998.............. $-- $72 $ 85 $ 37,130 $(33,590) $(1,368)
=== === ==== ======== ======== =======
<CAPTION>
NOTES
RECEIVABLE
FROM
SHAREHOLDER MEMBERS'
(NOTE 6) CAPITAL TOTAL
----------- -------- --------
<S> <C> <C> <C>
Balances at December 31, 1995.............. $(9,382) $ 9,217 $ (244)
Dividends paid............................ -- (16,950) (16,950)
Net income -- pre-merger (note 2)......... -- 5,138 5,138
Cumulative foreign currency translation
adjustment.............................. -- -- (132)
Loan to member............................ (7,568) -- (5,928)
Repayment of loan to member............... 16,950 -- 16,950
Assumption of subordinated debt (notes 2 &
13)..................................... -- -- (30,000)
Merger of LCC, L.L.C. into LCC
International, Inc. (note 2)............ -- 2,595 --
Net proceeds of initial public offering
(note 2)................................ -- -- 44,757
Loan to shareholder (notes 2 and 6)....... (3,500) -- (3,500)
Exercise/issuance of stock options (note
15)..................................... -- -- 14,908
Net (loss) -- post merger................. -- -- (16,422)
Other comprehensive loss -- foreign
currency translation adjustments........ (100)
Comprehensive loss........................ -- -- --
------- -------- --------
Balances at December 31, 1996.............. (3,500) -- 8,477
Payment from Shareholder.................. 700 -- 961
Exercise/issuance of stock options........ -- -- 4,153
Issuance of common stock.................. -- -- 448
Net income................................ -- -- 7,575
Other comprehensive loss -- foreign
currency translation adjustments........ -- -- (1,412)
Comprehensive loss........................ -- -- --
------- -------- --------
Balances at December 31, 1997.............. (2,800) -- 20,202
Payment from Shareholder.................. 700 -- 909
Exercise/issuance of stock options........ -- -- 3,016
Issuance of common stock.................. -- -- 701
Net (loss)................................ -- -- (24,743)
Other comprehensive income -- foreign
currency translation adjustments........ -- -- 144
Comprehensive loss........................ -- -- --
------- -------- --------
Balances at December 31, 1998.............. $(2,100) $ -- $ 229
======= ======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
49
<PAGE> 50
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations.................... $(11,731) $ 5,390 $ (6,958)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating
activities:
Depreciation and amortization............................. 2,330 3,410 2,409
Provision for doubtful accounts........................... 1,661 3,206 2,047
Non-cash compensation..................................... 6,831 514 362
Special charge (credit)................................... 28,920 (3,894) --
(Income) loss from investments in joint ventures, net..... (346) 350 267
Gain on disposition of joint venture, net................. (514) -- --
Changes in operating assets and liabilities:
Trade, unbilled, and other receivables.................. 274 (643) (869)
Accounts payable and accrued expenses................... 13,820 (6,953) 7,426
Other current assets and liabilities.................... (37,578) 10,513 (2,780)
Other noncurrent assets and liabilities................. (9,806) 528 (10,796)
-------- -------- --------
Net cash (used in) provided by operating activities......... (6,139) 12,421 (8,892)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities.............. 558 -- 8,506
Purchase of investment securities......................... (6,714) (1,685)
Purchases of property and equipment....................... (2,208) (6,684) (16,735)
Investment in joint ventures.............................. (787) -- 289
Issuance of notes receivable.............................. (5,602) -- --
Proceeds from sale of investment in joint venture......... 3,800 -- --
-------- -------- --------
Net cash used in investing activities....................... (10,953) (8,369) (7,940)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net............... 44,902 448 701
Proceeds from exercise of options......................... -- 3,573 2,655
Proceeds from line of credit/note......................... 10,000 -- --
Payments on line of credit/note........................... (20,000) --
Distributions and loans to member......................... (5,928) -- --
Repayment of loans to member.............................. 16,950 -- --
Payments of dividends..................................... (16,950) -- --
Loan to shareholder....................................... (3,500) -- --
Repayment of loan to shareholder.......................... -- 961 909
-------- -------- --------
Net cash provided by financing activities................... 25,474 4,982 4,265
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents -- continuing operations...................... 8,382 9,034 (12,567)
Net (decrease) increase in cash and cash
equivalents -- discontinued operations.................... (1,065) (7,469) 1,929
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 7,317 1,565 (10,638)
Cash and cash equivalents at beginning of period............ 5,996 13,313 14,878
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 13,313 $ 14,878 $ 4,240
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 3,749 $ 3,286 $ 2,250
Income taxes............................................ 3,535 1,317 1,995
Supplemental schedule of non-cash investing and financing
activities:
Assumption of convertible debt (notes 2 and 13)........... $ 30,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
50
<PAGE> 51
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(1) DESCRIPTION OF OPERATIONS
LCC International, Inc. and subsidiaries (also referred to herein as the
"Company") is a leading provider of integrated services relating to the design,
engineering and build-out of wireless communications systems. The Company's
businesses are as follows:
Services
Engineering and design services -- The Company provides engineering and
design services for cellular phone system operators, personal communication
system ("PCS") operators and other wireless communication system providers.
Program management services -- The Company provides program and
construction management services related to the build-out of wireless
communications systems.
Towers
Tower ownership and management -- The Company acquires, builds, owns and
manages multi-tenant telecommunications towers and leases space thereon to
wireless communication carriers.
The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technologies. Future revenues are
dependent upon significant additional financing to pursue tower construction and
acquisitions, the successful implementation of a tower expansion strategy, the
re-engineering of existing wireless communications systems, introduction of
existing wireless technologies into new markets, the entrance of new wireless
providers into existing markets, the introduction of new technologies and the
retention of existing management and professional staff. Although the Company
believes that its services are transferable to emerging technologies, rapid
changes in technology could have an adverse financial impact on the Company.
(2) MERGER AND INITIAL PUBLIC OFFERING
The Company is the successor to the business formerly conducted by LCC,
L.L.C. ("LCC"). Effective September 27, 1996, in connection with the Company's
initial public offering of Class A Common Stock, LCC merged with and into LCC
International, Inc. The Company is the surviving company in the merger, and owns
all of the assets and rights and is subject to all of the obligations and
liabilities of LCC. Immediately prior to the merger, LCC assumed $30.0 million
of convertible subordinated debt from Telcom Ventures, L.L.C. ("Telcom
Ventures"), its parent company. The repayment obligation for principal and
interest became the sole obligation of LCC and, following the merger, the sole
obligation of the Company. The $30.0 million of convertible subordinated debt
assumed from Telcom Ventures and the $20.0 million of existing convertible
subordinated debt (see note 14) are due to MCI Telecommunications Corporation
and are convertible at certain specified times, including during the 45 day
period commencing on June 27, 1999 ("Investor Conversion Right"), the 45 day
period commencing on August 27, 1999 ("Company Conversion Right") and upon
certain extraordinary events, such as merger or sale of all assets of the
Company, tender offer for more than 25% of the Common Stock or distribution of
assets representing 5% or more of the total assets of the Company. Any
conversion of one note must include the conversion of the other. The Company is
considering exercising the Company Conversion Right in August 1999 to cause the
convertible subordinated debt to be converted into 2,841,099 shares of Class A
Common Stock. This could result in a significant taxable gain to the Company.
Effective with the merger, the Company converted to a Subchapter C
Corporation under the Internal Revenue Code of 1986, as amended. As of September
30, 1996, the Company recorded a one-time deferred income tax benefit of $8.7
million as a result of the change in its tax status from a limited liability
51
<PAGE> 52
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
company to a Subchapter C Corporation. The income tax benefit was recorded as a
reduction of income tax expense in the accompanying 1996 consolidated statement
of operations (see note 11).
On September 30, 1996, the Company completed its initial public offering,
which involved the sale of 6,037,500 shares (3,162,500 shares were sold by the
Company and 2,875,000 shares were sold by the selling shareholder) of Class A
Common Stock at $16.00 per share. Net proceeds to the Company, after deducting
underwriting discounts, commissions and other expenses of the offering were
approximately $44.8 million.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Cash Equivalents
Cash equivalents include all highly liquid investments purchased with
original maturities of three months or less.
Short-Term Investments
Short-term investments consist primarily of municipal bonds with maturity
dates of more than three months from the date of acquisition. The portfolio of
municipal bonds held by the Company has been classified based on management's
intentions as to future investment activity. Such investments are not intended
to be held to maturity and are classified as "available for sale" and carried at
market value with temporary unrealized gains (losses) charged directly to
shareholders' equity. At December 31, 1998 and 1997, the market value of the
municipal bonds held by the Company approximated its cost. Other short-term
investments are carried at cost plus accrued interest which approximates their
market value. All short-term investments have maturity dates of one year or
less.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration
of credit risk consist primarily of trade receivables. The Company sells its
services globally. Generally, the Company does not require collateral or other
security to support customer receivables. The Company performs ongoing credit
evaluations of its customers' financial condition and maintains reserves for
potential credit losses. The Company had the following significant
concentrations of trade receivables from customers located outside the United
States at December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Latin America...................................... $ 701 $3,887
Europe............................................. 1,428 4,776
Middle East........................................ -- 29
Asia-Pacific....................................... 4,248 1,675
</TABLE>
The Company's existing and potential customer base is diverse and includes
start-up companies and foreign enterprises. Although the Company believes that
the diversity of its customer base has historically minimized the risk of
incurring material losses due to concentrations of credit risk, it may be
exposed to a declining customer base in periods of market downturns, severe
competition, exchange rate fluctuations or other international developments (see
notes 8 and 19).
52
<PAGE> 53
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
During December 1997, the Company increased its allowance for doubtful
accounts due to the continued aging of receivables from its Asia-Pacific
customers. The economic downturn and exchange rate fluctuations in the
Asia-Pacific region during the latter part of calendar 1997 has resulted in
certain of the Company's customers experiencing difficulty in arranging in a
timely fashion needed additional financing and hard currency to satisfy U.S.
dollar denominated liabilities to the Company. As a result of the uncertainty
associated with the collection of amounts due, in 1997 the Company recorded
additional reserves of approximately $1.5 million to cover potential
Asia-Pacific region exposure.
Revenues generated from one customer were approximately $12.9 million,
$16.0 million, and $15.0 million, or 13.8%, 17.5%, and 17.2% of total revenues
for 1996, 1997 and 1998 respectively. In addition, revenues from another
customer were approximately $11.9 million and $15.4 million, or 12.8% and 16.8%
of total 1996 and 1997 revenues, respectively. Revenues from another customer
were approximately $13.9 million or 15.9% of revenues in 1998.
Property and Equipment
Property and equipment are stated at cost, less an allowance for
depreciation. Replacements and major improvements are capitalized; maintenance
and repairs are charged to expense as incurred.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the related assets. Furniture and equipment are
depreciated over useful lives which range from eighteen months to seven years.
RF transmission towers are depreciated over a useful life of 25 years. The costs
of leasehold improvements are capitalized and amortized using the straight-line
method over the shorter of their estimated useful lives or the terms of the
respective leases.
Recovery of Long-Lived Assets
The Company's policy is to review its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company recognizes an impairment loss when
the sum of the expected undiscounted future cash flows is less than the carrying
amount of the asset.
Investments in Joint Ventures
The Company uses the equity method of accounting for its investments in,
advances to and equity in the earnings and losses of its joint ventures.
Revenue Recognition
The Company's principal sources of revenues are engineering and design
services, program management services, and lease revenues from its asset
management business. The Company recognizes revenues from long-term fixed price
contracts using the percentage-of-completion method, based on individual
contract costs incurred to date compared with total estimated contract costs.
Anticipated contract losses are recognized as soon as they become known and
estimable. Lease revenues from the ownership and management of RF transmission
towers are recognized over the term of the related lease. Revenues earned but
not yet billed are reflected as unbilled receivables in the accompanying
consolidated balance sheets. The Company expects substantially all unbilled and
billed receivables to be collected within one year.
Income Taxes
Deferred income taxes are determined in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109. Under this statement, temporary
differences arise as a result of the differences between
53
<PAGE> 54
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
the reported amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Certain of the Company's international operations are subject to local
income taxation. Currently, the Company is subject to taxation on income from
certain operations in Europe, Latin America, the Far East, the Middle East and
the non-U.S. portions of North America where the Company has subsidiaries, has
established branch offices or has performed significant services that constitute
a "permanent establishment" for tax reporting purposes. Foreign taxes account
for a significant portion of the provision for income taxes as reflected in the
Company's consolidated statements of operations (see note 11). The foreign taxes
paid or accrued by the Company represent a potential credit for the Company
against its Federal income taxes.
Pro Forma Income (Loss) Data (Unaudited)
The accompanying pro forma information has been prepared as if the Company
was treated as a Subchapter C Corporation for Federal and state income tax
purposes from January 1, 1995.
Pro forma net income (loss) per share information has been computed by
dividing pro forma net income (loss) by the pro forma weighted average number of
common shares outstanding (basic earnings per share) and potential dilution from
outstanding stock options after applying the treasury stock method and assumed
conversion of the Company's convertible subordinated debt, if dilutive (diluted
earnings per share).
Foreign Currency Translation
Gains and losses on translation of the accounts of the Company's foreign
operations where the local currency is the functional currency are accumulated
and included in other comprehensive loss within the accompanying consolidated
statement of shareholders' equity (deficit). Foreign currency transaction gains
and losses are recognized currently in the consolidated statements of
operations.
Pervasiveness of Estimates
The preparation of the consolidated 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 expenses during the
reporting period. Actual results could differ from those estimates.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, Accounting for Stock-Based Compensation, which establishes
financial accounting and reporting standards for stock-based compensation plans.
This statement establishes a fair value based method of accounting for stock
based compensation plans.
The Corporation will continue to account for stock-based compensation plans
using the method of accounting prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees. The Corporation will make pro-forma disclosures of
net income as if the fair value based method of accounting as defined in SFAS
No. 123 had been applied (see note 15).
54
<PAGE> 55
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Other Comprehensive Income (Loss)
During 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, which established standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed in equal
prominence as other financial statements. Comprehensive income is defined as net
income plus the changes in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. Other
comprehensive income refers to revenues, expenses, gains and losses that under
generally accepted accounting principles are included in comprehensive income,
but excluded from net income. Other comprehensive income (loss)consists solely
of foreign currency translation adjustments in 1996, 1997 and 1998. Changes in
components of other comprehensive income (loss) are reported net of income tax,
as follows (in thousands).
<TABLE>
<CAPTION>
1996 1997 1998
----------------------------- -------------------------------- -----------------------------
PRETAX TAX EXPENSE NET PRETAX TAX EXPENSE NET PRETAX TAX EXPENSE NET
AMOUNT (CREDIT) AMOUNT AMOUNT (CREDIT) AMOUNT AMOUNT (CREDIT) AMOUNT
------ ----------- ------ ------ ----------- ------ ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Foreign currency
translation
adjustments........ $(200) $(100) $(100) $(2,179) $(767) $(1,412) $222 $78 $144
===== ===== ===== ======= ===== ======= ==== === ====
</TABLE>
Reclassification of Prior-Years' Balances
Prior-years' balances have been reclassified to conform with the
current-year presentation.
(4) DISCONTINUED OPERATIONS
In March 1999, the Company's Board of Directors adopted a plan to
discontinue the operations comprising its software and hardware products
segments. Software products develops software and data which support the design
and operation of wireless communication systems. Hardware products are used in
the implementation, testing and maintenance of wireless communications systems.
The Company has engaged an investment banking firm to assist in the marketing
and sale of these segments. The sale of the product segments are expected to be
completed during 1999. The Company currently anticipates that any gain on the
sale of the product segments would be sufficient to offset operating losses of
such segments to the date of sale, though there can be no assurance that this
will be the case.
Revenue from the Products businesses were $48.4 million, $64.0 million and
$33.8 million for the years ended December 31, 1996, 1997, and 1998,
respectively. Net income (loss) was $0.4 million, $2.2 million, and $(17.8)
million for the years ended December 31, 1996, 1997 and 1998, respectively.
55
<PAGE> 56
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The components of net assets of discontinued operations included in the
Consolidated Balance Sheets at December 31, 1997 and 1998 were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Receivables, net:
Trade accounts receivable.................. $ 20,427 $ 9,429
Due from related parties................... 322 56
Unbilled receivables....................... 2,105 801
Inventory....................................... 7,400 6,841
Prepaid expenses and other current assets....... 972 190
Property and equipment, net..................... 2,439 3,170
Software development costs, net................. 6,534 1,168
Other noncurrent assets, net.................... 4,029 3,432
Note payable.................................... (1,395) (2,368)
Accounts payable................................ (4,441) (2,593)
Accrued expenses................................ (4,195) (4,379)
Deferred revenue................................ (3,849) (4,721)
Other liabilities............................... (1,493) (1,887)
-------- -------
$ 28,855 $ 9,139
======== =======
</TABLE>
(5) CASH AND CASH EQUIVALENTS
At December 31, cash and cash equivalents consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Cash in banks............................................... $ 1,899 $2,120
Overnight repurchase agreements............................. 1,195 1,082
Short-term commercial paper................................. 11,699 1,000
Short-term money market funds............................... 85 38
------- ------
$14,878 $4,240
======= ======
</TABLE>
The fair value of overnight repurchase agreements, short-term commercial
paper and short-term money market funds approximate their carrying value.
(6) RELATED PARTY TRANSACTIONS
During 1996, 1997, and 1998 the Company provided services to Telcom
Ventures and various other companies owned, in part, by Telcom Ventures or its
members, as well as the Telemate joint venture until its sale in January 1996
(see note 10). Revenues earned during 1996, 1997 and 1998 for services provided
to these customers were approximately $2.0 million, $1.1 million and $750,000,
respectively. Receivables from these related parties were $524,000 and $119,000
at December 31, 1997 and 1998, respectively, and are included in due from
related parties and affiliates in the accompanying consolidated balance sheets.
Also included in due from related parties and affiliates are unbilled
receivables and advances to employees aggregating approximately $535,000 and
$381,000 at December 31, 1997 and 1998, respectively. During calendar 1997 and
through July 22, 1998, program management services were provided to the Company
by Koll Telecommunications Services L.L.C. ("Koll") (see note 10), a joint
venture of the Company.
56
<PAGE> 57
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
During 1997 and 1998 the Company made certain payments on behalf of Telcom
Ventures and its members which consisted primarily of payroll services, fringe
benefit payments, facility related charges, business insurances, interest and
foreign tax payments. At December 31, 1997 and 1998, outstanding amounts
associated with these payments totaling $30,000 and $111,000, respectively, are
included in due from related parties and affiliates within the accompanying
consolidated balance sheets.
In September 1996, the Company loaned $3.5 million to Telcom Ventures to
assist in the payment of taxes due in connection with the assumption by the
Company of $30.0 million of convertible subordinated debt from Telcom Ventures
(see note 2). The note is payable over five-years with equal annual principal
payments over the term. Interest will accrue at the rate of LIBOR plus 1.75% and
will be payable annually. In November 1997 and October 1998, the Company
received payments of approximately $1.0 million from Telcom Ventures
representing payment of $0.7 million principal and approximately $0.3 million
interest under the terms of the note. The note is reflected as a reduction of
shareholders' equity in the accompanying statement of shareholders' equity
(deficit).
On January 30, 1997, a significant customer of the Company acquired 81% of
the outstanding shares of Wireless Ventures of Brazil, Inc. ("WVB"), an operator
of specialized mobile radio systems in Brazil, for $186 million in the
customer's stock. WVB was principally owned by Telcom Ventures.
(7) PROPERTY AND EQUIPMENT
At December 31, 1997 and 1998, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.......................................... $ 8,294 $ 8,756
Furniture and office equipment.............................. 2,517 3,533
Purchased computer software................................. 4,125 4,696
Leasehold improvements...................................... 2,910 3,019
RF transmission towers...................................... 2,880 17,461
Vehicles.................................................... 56 129
-------- --------
20,782 37,594
Less accumulated depreciation and amortization.............. (13,091) (15,462)
-------- --------
$ 7,691 $ 22,132
======== ========
</TABLE>
(8) SPECIAL CHARGE
In March 1996, the Company made investments in Pocket Communications, Inc.
("Pocket", formerly known as DCR Communications, Inc.) and NextWave Telecom,
Inc. ("NextWave") of $6.5 million and $5.0 million, respectively. The $6.5
million investment in Pocket consists of loans convertible into shares of
non-voting common stock upon the satisfaction of certain conditions. In
connection with this investment, the Company obtained a commitment from Pocket
for the purchase of services and products aggregating $65.0 million over the
subsequent five-year period. The $5.0 million investment in NextWave consists of
an equity investment. In connection with this investment, the Company obtained a
commitment from NextWave for the purchase of services and products aggregating
$50.0 million over the subsequent five-year period. Through December 31, 1996,
revenues recognized under the commitments with Pocket and NextWave were
approximately $2.2 million and $11.3 million, respectively, and related amounts
receivable were approximately $2.2 million and $9.6 million, respectively.
Included in the amounts receivable are notes receivable from Pocket and NextWave
of approximately $950,000 and $5.9 million, respectively. The notes bear
interest at
57
<PAGE> 58
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
prime plus 2%, and were payable upon maturity of the notes on March 31, 1997.
Both customers were development stage enterprises pursuing the buildout and
operation of networks pursuant to licenses obtained in the auction of C-Block
licenses by the FCC and subject to risks typically associated with start-up
entities, such as (i) the uncertainty of securing sufficient financing, (ii)
competition from other providers of telecommunications services, (iii)
dependence on key vendors and strategic partners, and (iv) delays encountered in
the development and successful operation of their PCS networks.
On March 31, 1997, Pocket failed to pay interest due the Company under the
$6.5 million convertible loan agreement and failed to pay principal and interest
due the Company under the $950,000 note agreement. Also on March 31, 1997,
NextWave failed to pay principal and interest due under the $5.9 million note
agreement. In addition, on April 1, 1997, Pocket announced that it had
voluntarily sought court protection under Chapter 11 of the U.S. Bankruptcy
Code. Given these developments and the uncertainty related to Pocket's and
NextWave's ability to meet their future obligations under the agreements
outlined above, the Company fully reserved its exposure with these customers and
consequently recorded a special charge of $28.9 million pre-tax ($23.8 million
after tax or $1.95 per share) at December 31, 1996. The $28.9 million special
charge consisted of a reserve against the Company's aggregate receivable
exposure at December 31, 1996 of $12.1 million (net of payments of $0.4 million
received in January 1997), the recognition of an other than temporary impairment
of the Company's investments of $11.5 million and accruals of approximately $5.3
million related to loss contracts under which the Company was obligated to
perform at December 31, 1996.
On April 15, 1997, the Company and NextWave agreed to a revised payment
schedule for amounts outstanding under the note receivable and other receivables
due from NextWave to the Company. Under the terms of the agreement, the Company
was to receive approximately $1.0 million per month from May 15, 1997 through
May 15, 1998. In addition, under certain circumstances, in the event of the sale
or issuance of any debt or equity instruments/securities or the sale of any
assets by NextWave, the Company would be entitled to a prepayment equal to 30%
of the gross proceeds from such transaction(s). In May and June 1997, the
Company agreed to defer NextWave's obligations to prepay the foregoing
obligations out of the proceeds of NextWave's debt or equity financing to August
20, 1997. Payments of $2.0 million were received under the revised payment
schedule through June 30, 1997. NextWave failed to make the $1.0 million monthly
payments which were due July 15, 1997 through October 15, 1997, as well as any
payment that would have been due on August 20, 1997 related to any debt or
equity financing.
During September 1997, the Company recognized an approximate $3.9 million
recovery of the $28.9 million special charge. Of the $3.9 million, $2.0 million
represents the payments received through June 1997 under the revised payment
schedule and $1.9 million represents additional payments received in April 1997
from NextWave, net of related expenses. For financial reporting purposes, the
recovery of the $3.9 million balance was deferred pending the lapse in the third
quarter of a 90 day window during which such funds could have been subject to
being treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws. During calendar 1998, NextWave also sought
court protection under Chapter 11 of the U.S. Bankruptcy Code.
(9) RESTRUCTURING CHARGE
On October 20, 1998, the Company's Board of Directors approved a
restructuring plan that resulted in a total fourth quarter charge of
approximately $2.5 million, including approximately $1.2 million related to
continuing operations. The restructuring charge included $0.1 million related to
Company's Services businesses, $1.1 million related to corporate general and
administrative expenses and $1.3 million related to the Company's products
businesses. The charge was taken to cover the one-time costs associated with the
closure of the Company's office in Dusseldorf, Germany, a reduction in
non-billable positions of approximately
58
<PAGE> 59
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
70 full and part-time employees and approximately 30 contractors. As of December
31, 1998, a total liability of $1.4 million remained, including approximately
$1.0 million related to continuing operations. The $1.0 million is included in
other current liabilities in the accompanying consolidated 1998 balance sheet.
(10) INVESTMENTS IN JOINT VENTURES
The Company's investment in joint ventures at December 31, 1997 consisted
of a 33 1/3 percent interest in Koll, which was formed in October 1994 with two
other unrelated entities. Koll provides site acquisition and construction
management services to operators of wireless communications systems in the
United States. The Company's interest in Koll was received in exchange for an
initial cash investment of $150,000. During 1996 the Company contributed an
additional $587,000. No contribution was made by the Company during 1997.
Operating costs and expenses of the Company include services provided by Koll,
in the amount of $37,000 in 1997.
The unaudited condensed financial statements of Koll as of and for the
years ended December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CONDENSED STATEMENTS OF OPERATIONS
Revenues.................................................. $20,143 $8,422
Cost and expenses......................................... 18,287 8,982
------- ------
Net income (loss)......................................... $ 1,856 $ (560)
======= ======
CONDENSED BALANCE SHEETS
Current assets............................................ $ 6,969 $3,826
Noncurrent assets......................................... 329 2,608
Current liabilities....................................... 2,487 2,799
Stockholders' equity...................................... 4,811 3,635
</TABLE>
On July 20, 1998, the Company acquired the remaining 66.7% membership
interest in Koll bringing its total membership interest to 100.0%. Prior to the
acquisition, the Company owned 33.3% of the membership interest, Castle Rock
Telecommunications Co., LLC (CRT) held approximately 36.7% of the membership
interest, and Koll Management Services, Inc. (KMS), held the remaining 30.0%. In
the transaction, Koll redeemed the ownership interests of KMS in exchange for
KMS's assumption of certain contract rights and associated assets and
liabilities. Koll also redeemed the membership interests of CRT in exchange for
an earn-out agreement entitling CRT to 40.0% of the pre-tax income, after
certain adjustments, derived by Koll from certain contracts with specified
customers.
The Company had a 50% interest in Telemate S.A. ("Telemate"), which
provides consulting services in connection with the implementation and operation
of mobile communications systems in certain countries in Europe, Asia and Latin
America. The Company provided design engineering services and software products
to Telemate. Revenues earned related to these services were approximately $1.8
million in 1995. In January 1996, the Company sold its 50% interest in Telemate
and granted certain distribution rights for the Company's software and hardware
products for $3.8 million. Approximately $1.4 million of the proceeds were
received for the Company's investment in Telemate, resulting in a gain of
approximately $514,000, which was recognized by the Company and included in
other income in its calendar 1996 first quarter results. The remaining proceeds
of $2.4 million were recorded as deferred revenue and were amortized to other
income over the 24 month life of the distribution agreement.
59
<PAGE> 60
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
During 1996, the Company entered into master service, convertible note and
stock option agreements with Communication Consulting Services, Inc. ("CCS"), a
provider of radio frequency engineering services in connection with the design,
optimization and operation of wireless systems. Under the master service
agreement, CCS provided the Company with radio frequency engineers effective
November 1, 1996. Under the convertible note agreement, the Company loaned CCS a
total of approximately $602,000 which, at December 31, 1996, was included in
long-term notes receivable in the accompanying consolidated balance sheet.
Interest accrued on the loan at a variable rate equal to the prime rate plus
1.5%. Interest was payable in arrears on the last day each of March 1997, June
1997, September 1997, and December 1997. The entire principal balance, together
with any unpaid interest, was due January 2, 1998. The loan was convertible, at
the Company's option, into shares representing 50% of the authorized capital
stock and/or equity securities of CCS. The stock option agreement gives the
Company an option to purchase an additional 10% of the common stock of CCS for a
total purchase price of $150,000. On April 7, 1997, the Company exercised both
the conversion right in the convertible note and the 10% purchase right set
forth in the stock option agreement.
On September 30, 1998, the Company sold its interest in CCS to CCS
Management for $1.2 million. The $1.2 million is payable in two installments
consisting of (i) $600,000 due on May 31, 1999 and (ii) $600,000 due on November
30, 1999. Interest, equal to 9%, is due monthly on the first day of each month,
beginning January 1, 1999. The initial interest payment is for the period from
October 1, 1998 to January 1, 1999. As of December 31, 1998, the Company has
recorded a reserve of approximately $557,000 related to the transaction.
(11) INCOME TAXES
The provision (benefit) for income taxes from continuing operations
consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................... $ 2,355 $ -- $ --
State and local................................... 329 -- --
Foreign........................................... 3,562 1,284 1,582
-------- ------ -------
6,246 1,284 1,582
-------- ------ -------
Deferred:
Federal........................................... (13,329) (308) (5,782)
State and local................................... (1,662) 572 (361)
Foreign........................................... -- -- --
-------- ------ -------
(14,991) 264 (6,143)
-------- ------ -------
Total........................................ $ (8,745) $1,548 $(4,561)
======== ====== =======
</TABLE>
The 1997 and 1998 income tax provision related to continuing operations
does not include a $0.1 million tax benefit and a $0.4 million tax charge,
respectively, related to exercising stock options which was recorded directly to
paid-in capital.
60
<PAGE> 61
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Income (loss) before income taxes from continuing operations includes the
following components:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................ $(26,071) $1,544 $(16,203)
Foreign................................................. 5,595 5,394 4,684
-------- ------ --------
Total......................................... $(20,476) $6,938 $(11,519)
======== ====== ========
</TABLE>
A reconciliation of the statutory Federal income tax rate and the effective
income tax rate from continuing operations for the years ended December 31,
1996, 1997 and 1998 follows.
<TABLE>
<CAPTION>
1996 1997 1998
----------- --------- ------
PRO FORMA
-----------
(UNAUDITED)
<S> <C> <C> <C>
Statutory Federal income tax rate.................. (35.0)% 35.0% (35.0)%
Effect of:
State and local income taxes, net of Federal
tax benefit................................. (1.2) 3.1 (2.0)
Foreign....................................... 9.7 18.2 10.0
Tax credits................................... (9.7) (18.2) (10.0)
Non deductible expenses....................... -- 7.4 9.0
Other......................................... (2.2) 2.1 1.1
Valuation Allowance........................... 29.7 (25.3) (12.7)
----- ----- ------
Effective income tax rate.......................... (8.7)% 22.3% (39.6)%
===== ===== ======
</TABLE>
61
<PAGE> 62
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax assets at December 31, 1997 and 1998 are
presented below:
<TABLE>
<CAPTION>
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts............................. $ 4,242 $ 3,610
Special charge:
Receivables...............................2,769 2,769
Investment................................1,884 1,884
Accruals................................... 371 5,024 138 4,791
-----
Inventory valuation method.......................... 886 1,117
Property and equipment.............................. 275 340
Non-cash compensation............................... 3,852 2,484
Accruals:
Vacation................................... 428 609
Incentive compensation..................... 417 20
Accrued expenses..........................2,234 3,079 4,997 5,626
-----
Deferred revenue.................................... 156 215
Net operating loss carry forward.................... 2,191 8,061
Foreign tax credit carry forward.................... 2,774 5,739
Foreign temporary differences....................... -- 155
Research tax credit carryover....................... -- 108
Other............................................... 205 490
------- -------
Total gross deferred tax assets.......................... 22,684 32,736
Less valuation allowance............................ (8,863) (7,443)
------- -------
Deferred tax assets net of valuation allowance...... 13,821 25,293
------- -------
Deferred tax liabilities:
Software development costs..................... (2,311) (440)
Other.......................................... (123) (98)
------- -------
Total gross deferred liabilities.................... (2,434) (538)
------- -------
Net deferred tax assets.................................. $11,387 $24,755
======= =======
</TABLE>
The components giving rise to the net deferred tax assets described above
have been included in the accompanying balance sheet as of December 31, 1997 and
1998 as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Current asset............................................... $ 9,874 $12,050
Noncurrent asset............................................ 1,513 12,705
------- -------
$11,387 $24,755
======= =======
</TABLE>
At December 31, 1998, the Company had $21.4 million of U.S. Federal and
state operating loss carryforwards from continuing operations which expire
between 2011 and 2018 and foreign tax credits for U.S. tax purposes of $3.6
million which expire between 2001 and 2003.
The Company also had $4.9 million of foreign operating loss carryforwards
from discontinued operations which expire between 2006 and 2008.
In addressing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
62
<PAGE> 63
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. A
valuation allowance has been provided for deferred tax assets which management
believes are not more likely than not to be realized.
Effective September 27, 1996, the Company converted to a Subchapter C
Corporation under the Internal Revenue Code of 1986, as amended ("IRC"). As a
result, the Company recorded a one-time deferred income tax benefit from
continuing operations of $7.5 million (total of $8.7 million) due to the change
in tax status. The benefit is reflected in net income from continuing operations
for the year ended December 31, 1996 as a reduction of the provision for income
taxes. In conjunction with the acquisition of the assets of ETP, the Company
recorded a deferred income tax benefit of approximately $1.6 million as a result
of the allocation of approximately $5.6 million of the purchase price to
in-process research and development expenses. The benefit is recorded as a
reduction of the net loss from discontinued operations for the year ended
December 31, 1996. Also, as a result of the reserves recorded related to the
Company's receivables from, investments in and contract costs associated with
Pocket and NextWave, the Company recorded a deferred income tax benefit of $5.1
million and a tax benefit from discontinued operations of $0.4 million, net of a
valuation allowance of $5.8 million (see note 9). The net benefit of $5.1
million is recorded as a reduction of the provision for income taxes from
continuing operations for the year ended December 31, 1996. Prior to September
27, 1996, the Company was a Limited Liability Company and was not directly
subject to U.S. Federal income taxes and certain state income taxes. Rather, the
members were responsible for Federal income taxes and certain state income taxes
on their proportionate share of taxable income. U.S. state and local income tax
expense was generated from activities conducted in the several states that did
not recognize the limited liability company as a flow-through entity and,
therefore, required the Company to be taxed as if it were a corporation.
Foreign income tax expense is generated from business conducted in
countries where the Company has subsidiaries or has established branch offices
or has performed significant services that constitute a "permanent
establishment" for tax reporting purposes.
The unaudited pro forma provision(benefit) for income taxes presented in
the consolidated statements of operations for the year ended December 31, 1996,
represents an estimate of the taxes that would have been recorded had the
Company been a Subchapter C corporation as of January 1, 1996. The unaudited pro
forma (benefit) for income taxes for the year ended December 31, 1996 consists
of the following:
<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
PRO FORMA
(UNAUDITED)
--------------
<S> <C>
Federal..................................................... $(3,383)
State....................................................... (393)
Foreign..................................................... 1,993
-------
Total............................................. $(1,783)
=======
</TABLE>
(12) NOTE PAYABLE
In March 1999, the Company amended and restated the credit facility with
the Chase Manhattan Bank, as Administrative Agent ("Chase"), (together with the
LCC Europe Credit Facility the "Credit Facility") which was established in 1996.
The Credit Facility, as presently in effect, consists of a revolving loan and
letter of credit facility in an aggregate principal amount not to exceed $20.0
million for the Company and $2.5 million for LCC Europe (the "LCC Europe Credit
Facility"). The maximum amount available for
63
<PAGE> 64
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
drawing under the Credit Facility is the sum of (1) the lesser of $10.0 million
or 85% of the amount of the Company's receivables which are deemed "eligible" as
a basis for obtaining credit and (2) an aggregate amount, not to exceed $12.5
million, which is secured by a collateralized guaranty of Dr. Rajendra Singh,
Chairman and Interim Chief Executive Officer of the Company, to the extent that
Dr. Singh has deposited the required collateral with Chase. Dr. Singh is not
contractually committed to provide any collateral to Chase. The revolving loan
commitment will expire in March 2000. Subject to certain restrictions on the
minimum permitted amount of any prepayment and the requirement that certain
notices of prepayment be given to Chase, the principal of the revolving loans is
prepayable without penalty or premium, so long as the lenders are compensated
for losses, costs and expenses attributable to any prepayment of any loan
accruing interest at the fixed rate on a date other than the last day of the
applicable interest period. Interest under the Credit Facility (other than the
LCC Europe Credit Facility) accrues at the Company's election (subject to
certain restrictions and limitations contained in the credit agreement), at
either (i) the variable rate equal to the higher of (a) the Federal Funds Rate
plus 0.50%, and (b) the announced prime commercial lending rate of Chase plus,
in each case, 0%, 0.25% or 0.50% depending on the ratio of the Company's
Consolidated Debt (as defined in the credit agreement) to Consolidated EBITDA
(as defined in the credit agreement) for the most recently ended fiscal quarter
(the "Cash Flow Leverage Ratio") on the applicable date, or (ii) the fixed rate
for a designated period of time (1, 2, 3 or 6 months) equal to the rate at which
U.S. dollar deposits are offered to leading banks in the London interbank market
plus 1.0%, 1.5% or 2.0% depending on the Company's Cash Flow Leverage Ratio on
the applicable date. Interest under the LCC Europe Credit Facility accrues at
the Company's election (subject to certain restrictions and limitations
contained in the credit agreement) at the fixed rate for a designated period of
time (1,2,3 or 6 months) equal to the rate at which U.S. dollar offered to
leading banks in the London interbank market or at which Norwegian krone are
offered to leading banks in the Norwegian interbank market, plus, in each case
1.0%, 1.5% or 2.0% depending on the Company's Cash Flow Leverage Ratio on the
applicable date.
The payment and performance of the obligations of the Company under the
Credit Facility are secured by substantially all of the assets of the Company
(except that, due to local regulatory restrictions, the assets of LCC Europe
have been pledged as security solely for the LCC Europe Credit Facility) and are
guaranteed in full by LCC Development Company, L.L.C., LCC Design Services,
L.C.C. and Koll Telecommunications Services, L.L.C.,wholly-owned subsidiaries of
the Company. Such obligations are guaranteed by Microcell solely to the extent
that Microcell has outstanding borrowings under its revolving line of credit and
security agreement with the Company (the "Microcell Credit Facility"); any
payments made by Microcell to Chase under the Credit Facility shall reduce its
outstanding obligations under the Microcell Credit Facility on a dollar for
dollar basis. Any payments of principal by Microcell under its line of credit
facility with the Company must be used to prepay any outstanding loans under the
Credit Facility and the amount available under the Credit Facility shall be
permanently reduced by the amount of any such prepayment. The payment and
performance of the obligations of the Company under the Credit Facility are also
guaranteed, up to a maximum of $12.5 million plus interest thereon, by Dr.
Rajendra Singh, one of the Company's founders and Interim Chief Executive
Officer. All obligations arising under the LCC Europe Credit Facility are
guaranteed in full by the Company.
The Credit Facility requires that the Company satisfy certain financial
tests, including the maintenance of certain leverage, debt service and other
financial ratios, and that the Company maintain certain minimum liquidity
requirements. The Credit Facility also contains certain restrictive covenants
which impose restrictions and/or limitations on the operations and activities of
the Company including, among other things: the incurrence of indebtedness, and
the terms thereof, the creation or incurrence of certain liens, certain
investments and acquisitions, sales of assets, declaration or payment of
dividends or other payments or distributions to stockholders and capital
expenditures. The Credit Facility provides for various events of default,
including interest or principal payment default, breach of any condition or
covenant that (in certain
64
<PAGE> 65
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
cases) continues unremedied for 30 days, materially adverse changes, the
rendering of one or more material judgments against the Company or any
subsidiary thereof which is not vacated, satisfied, discharged, or stayed within
30 days, and certain events relating to the bankruptcy or insolvency of the
Company. In addition, the Credit Facility provides for an event of default if,
without the prior written consent of lenders, (i) the Company sells, leases,
assigns, transfers or otherwise disposes of any of its assets, other than in the
ordinary course of business and in other limited circumstances, (ii) the Company
merges with another corporation other than a wholly-owned subsidiary, (iii) any
person or two or more persons acting in concert (other than Dr. Rajendra Singh,
Neera Singh, any trusts for their benefit or for the benefit of their family
members, and any of their respective affiliates which are controlled by any one
or more of them) acquire beneficial ownership of more than 25% of the voting
stock of the Company, or (iv) during any period of 12 consecutive months,
individuals who at the beginning of such 12-month period were directors of the
Company (or other persons nominated by such individuals) cease for any reason to
constitute a majority of the Board of Directors of the Company.
No amounts were outstanding under the Credit Facility at December 31, 1997
and 1998 with the exception of amounts outstanding under the LCC Europe Credit
Facility and outstanding letters of credit. Approximately $1.4 million and $2.4
million were outstanding under the LCC Europe Credit Facility at December 31,
1997 and 1998, respectively, and are included in net assets of discontinued
operations in the accompanying consolidated balance sheets. Outstanding letters
of credit were $2.1 million and $5.8 million at December 31, 1997 and 1998,
respectively.
(13) CONVERTIBLE SUBORDINATED DEBT
In June 1994, the Company issued to MCI a $20.0 million convertible
Subordinated Note Due 2000 (the "Subordinated Note"). The Subordinated Note bore
interest at a rate equal to 6.8 percent, payable semiannually. The entire
principal amount of the Subordinated Note is due in June 2000. Upon the
occurrence of certain specified events (including any merger of the Company with
another company or any sale of substantially all of the Company's assets), the
Subordinated Note will automatically be exchanged for 1,136,440 shares of the
Company's Class A Common Stock. In addition, the investor has the right to
exchange the Subordinated Note for 1,136,440 shares of the Company's Class A
Common Stock: (1) at any time during the 45-day period commencing on the third
through fifth anniversaries of the issuance of the Subordinated Note; and (2)
upon the occurrence of certain other specified events. The Company has the right
to exchange the Subordinated Note for 1,136,440 shares of the Company's Class A
Common Stock: (1) if the investor does not exchange the Subordinated Note during
the 45-day period commencing on the third through fifth anniversaries of the
issuance of the Subordinated Note; and (2) upon the occurrence of certain other
specified events.
In June 1994, Telcom Ventures issued a $30.0 million convertible
Subordinated Note Due 2000 (the "Telcom Ventures Subordinated Note") to the same
investor. The Telcom Ventures Subordinated Note bore interest at a rate equal to
6.8%, payable semiannually. Upon the occurrence of certain specified events
(including any merger of the Company with another company or any sale of
substantially all of the Company's assets), the Telcom Ventures Subordinated
Note will automatically be exchanged for 1,704,659 shares of the Company's Class
A Common Stock. In addition, the investor has the right to exchange the Telcom
Ventures Subordinated Note for 1,704,659 shares of the Company's Class A Common
Stock: (1) at any time during the 45-day period commencing on the third through
fifth anniversaries of the issuance of the Telcom Ventures Subordinated Note;
and (2) upon the occurrence of certain other specified events. Telcom Ventures
had the right to exchange the Telcom Ventures Subordinated Note for a 12.0
percent membership interest in the Company: (1) if the investor does not
exchange the Telcom Ventures Subordinated Note during the 45-day period
commencing on the third through fifth anniversaries of the issuance of the
Telcom Ventures Subordinated Note; and (2) upon the occurrence of certain other
specified events. The Company fully and
65
<PAGE> 66
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
unconditionally guaranteed the obligations of Telcom Ventures under the Telcom
Ventures Subordinated Note.
Effective September 27, 1996, in connection with the Company's initial
public offering of Class A Common Stock, the Company assumed the $30.0 million
Telcom Ventures Subordinated Note from Telcom Ventures. As a result of this
assumption the Company has the exclusive right to exercise all Telcom Ventures'
rights under the Telcom Ventures Subordinated Note and is solely responsible for
the payment of interest and principal thereunder (see note 2).
On October 23, 1997, the Company announced that it had agreed with MCI to
defer the Company's option to convert the notes in 1997. As part of the
arrangement, interest payable under the notes was reduced from 6.8% to 4.4% per
annum.
(14) HEALTH AND RETIREMENT PLANS
The Company has a defined contribution profit sharing plan under Section
401(k) of the IRC that provides for voluntary employee contributions of 1.0 to
15.0 percent of compensation for substantially all employees. The Company makes
a matching contribution of 50.0 percent of an employee's contribution up to 6.0
percent of each employee's compensation. Company contributions and other
expenses associated with the plan were approximately $317,000, $444,000 and
$652,000 for the years ended December 31, 1996, 1997, and 1998, respectively.
The Company is self-insured for group health, life, and short and long-term
disability claims up to certain stop losses.
(15) INCENTIVE PLANS
At December 31, 1996, 1997, and 1998 the Company had two stock-based
incentive plans, an employee stock purchase plan and an employee stock option
plan, which are described below. The Company applies APB Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and
employee stock purchase plan. Had compensation cost for the Company's
stock-based compensation plans and employee stock purchase plan been determined
on the fair value at the grant dates for awards under those plans, consistent
with Financial Accounting Standards Board Statement No. 123 ("SFAS No. 123"),
the Company's income (loss) from continuing operations and income (loss) from
continuing operations per share would have been reduced to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
(PRO FORMA) (PRO FORMA) (PRO FORMA)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Income (loss) from continuing operations
As reported...................................... $(18,693) $5,390 $(6,958)
Pro forma........................................ (19,023) 3,262 (9,312)
Income (loss) from continuing operations per share
As reported:
Basic....................................... $ (1.53) $ 0.37 $ (0.45)
Diluted..................................... (1.53) 0.34 (0.45)
Pro forma:
Basic....................................... $ (1.56) $ 0.22 $ (0.60)
Diluted..................................... (1.56) 0.20 (0.60)
</TABLE>
66
<PAGE> 67
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Income (loss) from continuing operations reflects only options granted in
1995, 1996, 1997 and 1998. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in the
pro forma net income (loss) amounts presented above as compensation cost is
reflected over the options' vesting period of up to five-years and compensation
cost for options granted prior to January 1, 1995 is not considered.
The per share weighted-average fair value of stock options granted during
1996, 1997 and 1998 was $4.25, $8.41 and $10.02, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected dividend yield...................... 0% 0% 0%
Risk-free interest rate...................... 6.4% 6.0% 5.0%
Expected life................................ 2-6 years 2-8 years 2-8 years
Volatility................................... 48.0% 65.0% 65.0%
</TABLE>
Under the Company's Employee Stock Purchase Plan, 360,000 shares of Class A
Common Stock were available for purchase by eligible employees of the Company
beginning in 1997. Rights to purchase shares are deemed granted to participating
employees as of the beginning of each applicable period, as specified by the
Compensation and Stock Option Committee of the Company's Board of Directors. The
purchase price for each share is not less than 85% of the fair market value of
the share of Class A Common Stock on the first or last trading day of such
period, whichever is lower. Under the Employee Stock Purchase Plan, the Company
sold 65,448 shares to employees in 1997 and 100,710 shares in 1998. Compensation
cost of $161,000 and $175,000, respectively, would have been recognized under
SFAS No. 123 for the fair value of the employees purchase rights and is included
in proforma net income above for 1997. Compensation cost was estimated using the
Black Scholes model with the following assumptions.
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Expected dividend yield................................ 0% 0%
Expected life.......................................... 3 months 3 months
Volatility............................................. 65% 65%
Risk-free interest rate................................ 3% 2.5-3.0%
</TABLE>
The weighted average fair value of the purchase rights granted in 1997 and
1998 was $2.46 and $1.74, respectively.
In April 1994, the Company adopted the Phantom Membership Plan (the
"Phantom Membership Plan"). Under the Phantom Membership Plan, the Members
Committee was authorized to grant awards ("Phantom Membership Awards") to those
employees of the Company whose responsibilities and decisions, in the Members
Committee's opinion, affect the long-term sustained growth and profitability of
the Company. Each Phantom Membership Award entitled the recipient thereof to
receive, no later than May 1 of each year, an annual award based on a specified
percentage of the Company's net income for the preceding fiscal year. The
Phantom Membership Plan also included a long-term award. Under the long-term
award, once a Phantom Membership Award was fully vested, the recipient had the
right to require the Company to purchase, and the Company had the right to
require such recipient to sell, all or any portion of the recipient's Phantom
Membership Award based on the fair market value of the Company as defined under
the Phantom Membership Plan. In connection with the Company's initial public
offering, all long-term awards granted under the Phantom Membership Plan were
replaced with options granted under the 1996 Employee Stock Option Plan and the
annual award feature of the Phantom Membership Plan was terminated. The options
vest
67
<PAGE> 68
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
over the original vesting period of the Phantom Membership Plan awards,
generally ratably over, or at the end of, 3 or 5 years.
Compensation expense related to the annual award feature of the Phantom
Membership Plan was $764,000 for 1996. Non-cash compensation related to the
long-term award feature of the Phantom Membership Plan, including compensation
expense for membership awards converted to stock options under the 1996 Employee
Stock Option Plan, was $6.8 million, $0.5 million, and $0.4 million for 1996,
1997, and 1998, respectively, the liability for which was included in paid-in
capital in the accompanying consolidated balance sheets.
In March 1996, LCC adopted an Employee Stock Option Plan for certain key
executives under which the Members' Committee granted options for up to an
aggregate six percent interest in the Company. Options representing
approximately a 6.0% interest were outstanding as of March 15, 1996. The Options
were granted at an exercise price equal to fair market value at time of grant,
and generally became exercisable at 20% a year over a five-year period.
Unexercised options generally expire 10 years after issuance.
In connection with its initial public offering, the Company established the
1996 Employee Stock Option Plan, which authorized the issuance of up to
3,224,000 shares of Class A Common Stock pursuant to options granted under the
plan. An additional 1,501,000 shares of Class A Common Stock were reserved under
the 1996 Employee Stock Option Plan in 1998. Options to purchase approximately
580,000 shares of Class A Common Stock at the offering price of $16 were
granted, at the time of the Offering to approximately 260 employees of the
Company under the Company's 1996 Employee Stock Option Plan. The options vest
with respect to one-third of the shares subject to option on each of the first
three anniversaries of the date of grant. Unexercised options generally expire
10 years after issuance. In addition, at the time of the Offering options to
purchase up to an aggregate of approximately 2,160,000 shares of Class A Common
Stock were issued under the 1996 Employee Stock Option Plan to certain employees
of the Company to replace the options granted by LCC in connection with the
Employee Stock Option Plan (see above) and the Phantom Membership Awards under
the LCC Membership Plan adopted in 1994 (see above). The exercise price and
number of options granted were intended to maintain a comparable value with the
options/awards under the previous plans.
Also in connection with the Company's initial public offering, the Company
established the 1996 Director's Stock Option Plan. The Director's Plan provides
for the "formula" grant of options, and authorizes the issuance of up to 60,000
shares of Class A Common Stock and 250,000 shares of Class B Common Stock. An
additional 80,000 shares of Class A Common Stock were reserved under the
Director's Plan in 1998. The option exercise price for options granted under the
Director's Plan is 100% of the fair value of the shares on the date of grant.
Each eligible director who is not eligible to hold shares of Class B Common
Stock was granted an initial option to purchase 10,000 shares of Class A Common
Stock in connection with the offering. Each eligible director who is eligible to
hold shares of Class B Common Stock and who was a director as of the offering
was granted an initial option to purchase 35,000 shares of Class B Common Stock
in connection with the offering, and will be granted additional options to
purchase 22,500 shares of Class B Common Stock as of each of the next four
annual meetings of the stockholders of the Company if the director continues to
be an eligible director. Options granted with respect to Class A Common Stock
will become immediately exercisable with respect to directors who were directors
of the Company prior to July 1, 1996, and will become exercisable with respect
to one-third of the shares of Class A Common Stock that are subject to the
options on each of the first three anniversaries of the date of grant subject to
acceleration of vesting on a change of control with respect to directors who
became directors of the Company after July 1, 1996.
The Company has reserved 85,000 shares of Class A Common Stock for issuance
pursuant to options to be granted to a person or entity designated by The
Carlyle Group. The option exercise price for these options are and will be 100%
of the fair market value of the Class A Common Stock on the date of grant of the
option. An initial option to purchase 25,000 shares of Class A Common Stock was
granted in connection with the
68
<PAGE> 69
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Offering, and an additional option was or will be granted to purchase 15,000
shares of Class A Common Stock on each of the next four anniversaries of the
initial date of grant. Options granted will vest immediately. The options will
expire no later than the fifth anniversary of the date of grant.
On December 11, 1998, the Company re-priced substantially all options
previously granted under the 1996 Employee Stock Option Plan to $5.00 per share
which exceeded the fair market value of the stock on that date. Approximately
887,000 share options were subject to re-pricing.
Changes in stock options outstanding were as follows:
<TABLE>
<CAPTION>
1997 1998
------------------------------- -------------------------------
WEIGHTED- WEIGHTED-
NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------------- -------------- -------------- --------------
(IN THOUSANDS) (PER SHARE) (IN THOUSANDS) (PER SHARE)
<S> <C> <C> <C> <C>
Balance at beginning of year..... 2,813 $ 8.54 2,509 $ 9.89
Granted.......................... 418 15.54 1,342 18.31
Exercised........................ (531) 6.08 (431) 6.74
Terminated....................... (191) 13.08 (1,207) 17.95
----- ------
Balance at end of year........... 2,509 9.89 2,213 7.42
===== ======
</TABLE>
The following table summarizes information about options at December 31,
1998.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ---------------------------------
WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG.
RANGE OF NUMBER AT REMAINING EXERCISE NUMBER AT EXERCISE
EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE PRICE DECEMBER 31, 1998 PRICE
--------------- ----------------- ---------------- ------------- ----------------- -------------
(IN THOUSANDS) (IN YEARS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$4.00................. 706 7.73 4.00 566 4.00
$5.00................. 887 8.83 5.00 285 5.00
$8.50-12.65........... 231 8.45 11.69 97 11.66
$14.875-16.00......... 259 8.14 15.41 154 15.67
$18.00-$20.38......... 130 9.00 18.97 7 19.84
----- -----
2,213 8.16 7.42 1,109 6.64
===== =====
</TABLE>
In September 1994, the Company adopted an Incentive Compensation Plan (the
"Incentive Compensation Plan"). Under the Incentive Compensation Plan, the
Members Committee was authorized to grant awards ("Incentive Awards") to those
employees of the Company whose responsibilities and decisions, in the Members
Committee's opinion, affect the long-term sustained growth and profitability of
the Company.
Each Incentive Award entitles the recipient thereof to receive a cash
payment on the date specified in the corresponding award agreement. As of
December 31, 1994 and 1995, 20 and 60 employees, respectively, had been granted
Incentive Awards under the Incentive Compensation Plan. No new grants were made
subsequent to 1995. Compensation expense accrued in connection with the
distribution of the value of vested Incentive Awards was $541,000, $409,000, and
$4,000 for the years ended December 31, 1996, 1997, and 1998, respectively,
which has been included in obligations under incentive plans, net of current
portion in the accompanying consolidated balance sheets. As of March 29, 1999,
all Incentive Awards granted under the Incentive Compensation Plan were paid in
full.
69
<PAGE> 70
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(16) LEASE COMMITMENTS
The Company leases office facilities and certain equipment, principally in
the United States, under operating leases expiring on various dates over the
next ten years. The lease agreements include renewal options and provisions for
rental escalations based on the Consumer Price Index and require the Company to
pay for executory costs such as taxes and insurance. The lease agreements also
allow the Company to elect an early out provision by giving notice and paying
certain lease termination penalties.
Benefits associated with a rent abatement period and certain lease
incentives for office facilities are reflected ratably over the period of the
lease. For leases which have been terminated (see below), the applicable portion
of the benefit has been offset against the lease termination penalty. The total
deferred rent benefit was approximately $289,000 and $763,000 at December 31,
1997 and 1998, respectively.
In November 1995 and December 1996, the Company gave notice of early lease
termination to two of its landlords and recorded the lease termination penalties
thereon in its calendar 1995 and 1996 financial statements. In May 1996, the
Company entered into 10-year and 5-year facility lease agreements effective
March 1, 1997 and July 1, 1997, respectively.
Future minimum rental payments and receivables under non-cancelable
operating leases, excluding executory costs, are as follows:
<TABLE>
<CAPTION>
RENTAL RECEIVABLES
RENTAL PAYABLE UNDER SUBLEASES
-------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
1999........................................ $ 3,651 $1,809
2000........................................ 3,724 1,877
2001........................................ 3,799 1,650
2002........................................ 3,548 249
2003........................................ 3,292 --
Thereafter.................................. 12,039 --
</TABLE>
Rent expense under operating leases was approximately $5.0 million, $5.3
million and $6.9 million for the years ended December 31, 1996, 1997, and 1998,
respectively.
The Company also incurrs rent expense for ground leases and receives rental
income from its tenants for the use of its RF transmission towers. Certain
ground leases and leases with tenants include renewal options and/or escalation
clauses. Future minimum ground/tower leasing expense/revenue under tower leases
in effect at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
RENTAL PAYABLE RENTAL RECEIVABLES
-------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
1999........................................ $664 $1,406
2000........................................ 665 1,380
2001........................................ 674 1,358
2002........................................ 622 1,276
2003........................................ 425 926
Thereafter.................................. 972 1,909
</TABLE>
(17) CONTINGENCIES
On February 12, 1999, the minority shareholders of the Company's
majority-owned Microcell subsidiary filed a suit against the Company, the
directors appointed by the Company to the Microcell Board and
70
<PAGE> 71
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Microcell itself, seeking rescission of the shareholders' agreement between the
Company and the minority shareholders (which concerns management of Microcell,
funding commitments and other matters), the appointment of a custodian or
receiver and unspecified monetary damages. On February 16, 1999, the plaintiffs
filed a motion to expedite and a motion for appointment of a receiver or
custodian. The suit alleges breach of a fiduciary duty, usurpation of corporate
opportunities, and waste of Microcell's corporate assets, tortious interference
with Microcell's prospective business relations, and violations of the
shareholders' agreement. Microcell and the Company have filed a motion to
dismiss. The Company believes that the case is without merit and intends to
contest this action vigorously.
The Company is party to various other legal proceedings and claims incidental to
their business. Management does not believe that these matters will have a
material adverse effect on the consolidated results of operations or financial
condition of the Company.
(18) EARNINGS PER SHARE
During 1997 the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128
supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share" and
its related interpretations and promulgates new accounting standards for the
computation and manner of presentation of the Company's earnings per share data.
Under SFAS No. 128 the Company is required to present basic and diluted earnings
per share. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that shared in the earnings of the Company. The
reconciliation of the basic and diluted earnings per share computations for the
years ended December 31, 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------------------ --------------------------- --------------------------
PRO FORMA PER
NET PER SHARE NET PER SHARE NET SHARE
(LOSS) SHARES AMOUNT INCOME SHARES AMOUNT (LOSS) SHARES AMOUNT
--------- ------ --------- ------ ------ --------- -------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income (loss) available
to common shareholders:
Continuing operations........ $(18,693) $5,390 $ (6,958)
Discontinued Operations...... (2,076) 2,185 (17,785)
-------- ------ --------
Total........................ $(20,769) 12,211 $7,575 14,740 $(24,743) 15,509
======== ====== ========
Continuing Operations........ $(1.53) $0.37 $(0.45)
Discontinued Operations...... (0.17) 0.15 (1.15)
------ ----- ------
Total........................ $(1.70) $0.51 $(1.60)
====== ===== ======
EFFECTIVE OF DILUTIVE
SECURITIES
Convertible debt........... -- --
Stock option plans......... -- 1,215 --
------ ------ ------
DILUTIVE EPS
Net income (loss) available
to common stockholders
and assumed conversions:
Continuing Operations...... $(18,693) $(1.53) $5,390 $0.34 $ (6,958) $(0.45)
Discontinued Operations.... (2,076) (0.17) 2,185 0.14 (17,785) (1.15)
-------- ------ ------ ----- -------- ------
Total...................... $(20,769) 12,211 $(1.70) $7,575 15,955 $0.47 $(24,743) 15,509 $(1.60)
======== ====== ====== ====== ====== ===== ======== ====== ======
</TABLE>
71
<PAGE> 72
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The Company's convertible subordinated debt, which is exchangeable into 2.8
million shares of the Company's Class A Common Stock, was outstanding during
calendar 1996, 1997 and 1998, but was not included in the computation of diluted
earnings per share because the effect of which would have been anti-dilutive.
Options to purchase 2.8 million and 2.2 million shares of Class A Common Stock
were outstanding during 1996 and 1998, respectively, but were not included in
the computation of diluted earnings per share because the effect of which would
have been anti-dilutive.
(19) SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998. SFAS No.
131 established standards for reporting information about the operating segments
in interim and annual financial reports issued to stockholders. It also
established standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and assess performance. The Company's chief
operating decision making group is the Executive Committee which is comprised of
the Chief Operating Officer and the lead executive of each of the Company's
operating segments. The operating segments are managed separately because each
operating segment represents a strategic business unit that offers distinct
services.
The Company's operating segments include Services (Engineering and Design
Services and Program Management Services) and Tower ownership and management.
Engineering and Design Services provides engineering and design services for
cellular phone system operators, personal communication system ("PCS") operators
and other wireless communication systems providers. Program Management Services
provides program and construction management services related to the build-out
of wireless communication systems. Tower ownership and management acquires,
builds, owns and manages telecommunications towers.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on stand alone operating segment profit or loss from
operations before income taxes not including nonrecurring gains and losses, and
generally accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices.
Interdivisional transactions are eliminated in consolidation. Revenues are
attributed to geographic areas based on the location of the assignment. Assets
and expenditures for property were not allocated to individual segments in 1996
as the Company did not separately account for and report segment assets until
1997. In addition, segment assets are not allocated between the Engineering and
Design and Program Management segments. All assets related to these two segments
are included as part of the Engineering and Design segment in the tables below.
72
<PAGE> 73
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
OPERATING SEGMENTS:
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOWER OWNERSHIP
ENGINEERING PROGRAM AND
AND DESIGN MANAGEMENT MANAGEMENT TOTAL
----------- ---------- --------------- -------
<S> <C> <C> <C> <C>
1996
Net revenue from external customers.......... $76,759 $16,397 $ -- $93,156
Intersegment revenues........................ -- -- -- --
------- ------- ------ -------
Total revenues............................... $76,759 $16,397 $ -- $93,156
======= ======= ====== =======
Depreciation and amortization................ $ 1,712 $ 499 $ -- $ 2,211
Interest income.............................. 207 -- -- 207
Interest expense............................. -- -- -- --
Income tax expense (benefit)................. 6,427 (2,906) -- 3,521
Net income (loss)............................ 8,621 (3,897) -- 4,724
1997
Net revenue from external customers.......... $81,650 $ 9,639 -- $91,289
Intersegment revenues........................ 81 316 -- 397
------- ------- ------ -------
Total revenues............................... $81,731 $ 9,955 $ -- $91,686
======= ======= ====== =======
Depreciation and amortization................ $ 1,617 $ 317 $ 88 $ 2,022
Interest income.............................. 147 -- -- 147
Interest expense............................. (14) -- 122 108
Income tax expense (benefit)................. 4,597 124 (256) 4,465
Net income (loss)............................ 16,016 430 (893) 15,553
Segment assets............................... 26,854 -- 3,735 30,589
Expenditures for property.................... 562 154 3,048 3,764
1998
Net revenue from external customers.......... $67,889 $18,439 $ 860 $87,188
Intersegment revenues........................ 629 551 -- 1,180
------- ------- ------ -------
Total revenues............................... $68,518 $18,990 $ 860 $88,368
======= ======= ====== =======
Depreciation and amortization................ $ 916 $ 269 $ 451 $ 1,636
Interest income.............................. 338 -- -- 338
Interest expense............................. -- -- 1,016 1,016
Income tax expense (benefit)................. 2,386 1,975 (1,692) 2,669
Net income (loss)............................ 3,638 3,012 (2,581) 4,069
Segment assets............................... 26,899 -- 18,250 45,149
Expenditures for property.................... 603 154 14,860 15,617
</TABLE>
73
<PAGE> 74
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Revenues for reportable segments....................... $93,156 $91,686 $88,368
Eliminations........................................... -- (397) (1,180)
------- ------- -------
Total consolidated revenues............................ $93,156 $91,289 $87,188
======= ======= =======
ASSETS
Total assets for reportable segments................... $30,589 $45,149
Unallocated corporate assets........................... 64,831 39,055
------- -------
Total consolidated assets.............................. $95,420 $84,204
======= =======
</TABLE>
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
UNALLOCATED
SEGMENT CORPORATE CONSOLIDATED
TOTAL EXPENDITURES ELIMINATIONS TOTAL
------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
1996
Depreciation and amortization................... $ 2,211 $ 119 $ -- $ 2,330
Interest Income................................. 207 718 -- 925
Interest expense................................ -- 3,050 -- 3,050
Income taxes.................................... 3,521 (12,266) -- (8,745)
1997
Depreciation and amortization................... $ 2,022 $ 1,388 $ -- $ 3,410
Interest Income................................. 147 711 (122) 736
Interest expense................................ 108 3,303 (122) 3,289
Income taxes.................................... 4,465 (2,895) (22) 1,548
Expenditures for property....................... 3,764 2,920 -- 6,684
1998
Depreciation and amortization................... $ 1,636 $ 773 $ -- $ 2,409
Interest Income................................. 338 1,576 (1,016) 898
Interest expense................................ 1,016 2,295 (1,016) 2,295
Income taxes.................................... 2,669 (7,089) (141) (4,561)
Expenditures for property....................... 15,617 1,118 -- 16,735
</TABLE>
Information concerning principal geographic areas was as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------------------- ------------------- -------------------
NET NET NET
REVENUES PROPERTY REVENUES PROPERTY REVENUES PROPERTY
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
North America
United States......................... $74,327 $4,031 $61,682 $7,524 $47,065 $21,721
Canada and Mexico..................... 1,805 -- 2,740 -- 3,492 --
------- ------ ------- ------ ------- -------
Total North America..................... 76,132 4,031 64,422 7,524 50,557 21,721
------- ------ ------- ------ ------- -------
</TABLE>
74
<PAGE> 75
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------------- ------------------- -------------------
NET NET NET
REVENUES PROPERTY REVENUES PROPERTY REVENUES PROPERTY
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Europe
United Kingdom........................ 2,482 -- 3,964 -- 825 3
Belgium............................... -- -- 1,230 -- 3,384 --
Netherland............................ 816 -- 1,443 -- 7,113 --
Other................................. 2,708 3 1,603 2 2,487 1
------- ------ ------- ------ ------- -------
Total Europe............................ 6,006 3 8,240 2 13,809 4
------- ------ ------- ------ ------- -------
Latin America
Brazil................................ 1,206 -- 5,513 165 14,516 407
Argentina............................. -- -- 258 -- 836 --
Other Latin America................... 1,247 -- 358 -- 326 --
------- ------ ------- ------ ------- -------
Total Latin America..................... 2,453 -- 6,129 165 15,678 407
------- ------ ------- ------ ------- -------
Asia-Pacific
Malaysia.............................. 5,203 -- 5,331 -- 4,036 --
Korea................................. 2,022 -- 1,569 -- 650 --
Phillipines........................... -- -- 1,610 -- 885 --
Other................................. 892 -- 3,543 -- 1,422 --
------- ------ ------- ------ ------- -------
Total Asia-Pacific...................... 8,117 -- 12,053 -- 6,993 --
------- ------ ------- ------ ------- -------
All other............................... 448 -- 445 -- 151 --
------- ------ ------- ------ ------- -------
Total................................... $93,156 $4,034 $91,289 $7,691 $87,188 $22,132
======= ====== ======= ====== ======= =======
</TABLE>
(20) QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1997
-----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................................... $20,224 $23,812 $24,587 $22,666
Operating income (loss)................................ 796 2,716 7,612 (2,908)
Income (loss) from continuing operations
before income taxes.................................. 455 2,113 7,086 (2,716)
Income (loss) from continuing operations............... 354 1,641 5,505 (2,110)
Income (loss) from discontinued operations............. 36 (512) 78 2,583
Net income............................................. 390 1,129 5,583 473
Pro forma income (loss) per share:
Continuing operations:
Basic................................................ $ 0.02 $ 0.11 $ 0.37 $ (0.14)
======= ======= ======= =======
Diluted.............................................. $ 0.02 $ 0.11 $ 0.32 $ (0.14)
======= ======= ======= =======
Discontinued operations:
Basic................................................ $ 0.00 $ (0.04) $ 0.01 $ 0.17
======= ======= ======= =======
Diluted.............................................. $ 0.00 $ (0.03) $ 0.00 $ 0.17
======= ======= ======= =======
Net income per share:
</TABLE>
75
<PAGE> 76
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1997
-----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Basic................................................ $ 0.03 $ 0.08 $ 0.38 $ 0.03
======= ======= ======= =======
Diluted.............................................. $ 0.02 $ 0.07 $ 0.32 $ 0.03
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................................... $22,633 $21,790 $22,236 $20,529
Operating income (loss)................................ 1,707 (981) (5,311) (4,919)
Income (loss) from continuing operations
before income taxes.................................. 1,211 (1,378) (5,838) (5,514)
Income (loss) from continuing operations............... 731 (832) (3,526) (3,331)
Income (loss) from discontinued operations............. (432) (1,364) (3,553) (12,436)
Net income (loss)...................................... 299 (2,196) (7,079) (15,767)
Income (loss) per share................................
Continuing operations:
Basic................................................ $ 0.05 $ (0.05) $ (0.23) $ (0.21)
======= ======= ======= =======
Diluted.............................................. $ 0.05 $ (0.05) $ (0.23) $ (0.21)
======= ======= ======= =======
Discontinued operations:
Basic................................................ $ (0.03) $ (0.09) $ (0.23) $ (0.80)
======= ======= ======= =======
Diluted.............................................. $ (0.03) $ (0.09) $ (0.23) $ (0.80)
======= ======= ======= =======
Net income (loss) per share:
Basic................................................ $ 0.02 $ (0.14) $ (0.45) $ (1.01)
======= ======= ======= =======
Diluted.............................................. $ 0.02 $ (0.14) $ (0.45) $ (1.01)
======= ======= ======= =======
</TABLE>
See note 8 with respect to the special charge recorded by the Company in
December 1996, note 3 with respect to the additional allowance for doubtful
accounts recorded by the Company in December 1997 as a result of the economic
downturn in the Asia-Pacific region and note 9 with respect to the restructuring
charge recorded by the company in October 1998. All periods presented have been
restated to reflect the hardware and software businesses as discontinued
operations (see note 4).
(21) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amount and estimated fair value
of the Company's financial instruments in accordance with SFAS No. 107
"Disclosure about Fair Value of Financial Instruments".
<TABLE>
<CAPTION>
1997 1998
------------------------- -------------------------
CARRYING ESTIMATED FAIR CARRYING ESTIMATED FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Liabilities:
Convertible subordinated debt.................. $50,000 $41,196 $50,000 $10,654
Shareholders' Equity:
Notes receivable from shareholder.............. 2,800 2,800 2,100 2,100
Off balance sheet--letters of credit............. -- -- 3,700 3,700
</TABLE>
76
<PAGE> 77
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts and notes receivable, the note payable as of December 31,
1997 and accounts payable approximated fair value as of December 31, 1997 and
1998 because of the relatively short duration of these instruments.
Convertible subordinated debt -- the fair value at December 31, 1997 and
1998 is based on the fair market value of the Class A Common Stock assuming
conversion into 2,841,099 shares.
Notes receivable from shareholder -- the carrying value of the note
receivable approximated the fair value as the receivable is treated as a deemed
dividend.
Letters of credit -- the fair value of letters of credit was estimated
based on fees currently charged for similar agreements or the estimated cost to
terminate or settle the obligations.
Financial guarantees are conditional commitments issued by the Company to
guarantee the payment of certain liabilities of unconsolidated affiliates. No
such guarantees were outstanding at December 31, 1997 or 1998.
(22) SUBSEQUENT EVENTS
From January 1, 1999 to March 29, 1999 the Company borrowed a total of $3.4
million under its Credit Facility with Chase.
In January 1999, the Company entered into a $5.0 million convertible
promissory note with Telcom Ventures. Under the terms of the note, the entire
principal balance and accrued interest thereon at a rate of 9.0 percent is due
on April 30, 2000 or upon the occurrence of certain events such as the sale of
all or substantially all of the assets of the Company. At anytime from August 1,
1999 either Telcom Ventures or the Company may convert the then outstanding
principal and accrued, but unpaid interest into shares of the Company's Class A
Common Stock based on a conversion price of $6.22 per share, subject to
adjustment for stock split, stock dividend, recapitalization or similar events.
During the two month period ended February 28, 1999, the Company recognized
total foreign currency transaction losses of approximately $2.1 million related
to its 1998 Latin American operations. The majority of the losses were from the
Company's Brazilian operations as a result of the devaluation of the Real in
1999.
Telcom Ventures has assured the Company that it intends to provide the
Company with funding to cover any cash shortfalls the Company may have during
1999 in an amount not to exceed $12.5 million less the sum of amounts drawn
under the Credit Facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including the parties
reaching agreement on applicable financing documents, and will apply only as
long as Telcom Ventures directly or indirectly owns at least 40% of the
Company's outstanding common stock, other than any stock issued to MCI upon
conversion of the MCI notes.
77
<PAGE> 78
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information set forth under the caption "Election
of Directors" appearing in the Proxy Statement to be filed within 120 days after
the end of the Company's fiscal year, which information is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption "Election
of Directors -- Executive Compensation" appearing in the Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year, which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information set forth under the caption
"Beneficial Ownership of Common Stock" appearing in the Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year, which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under the caption "Election
of Directors -- Compensation Committee Interlocks and Insider Participation"
and -- "Certain Relationships and Related Transactions" appearing in the Proxy
Statement to be filed within 120 days after the end of the Company's fiscal
year, which information is incorporated herein by reference.
78
<PAGE> 79
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of registrant and
its subsidiaries and report of independent auditors are included in
Item 8 hereof.
Report of Independent Auditors.
Consolidated Statements of Operations -- Years Ended December 31,
1996, 1997, and 1998.
Consolidated Balance Sheets as of December 31, 1997 and 1998.
Consolidated Statements of Shareholders' Equity (Deficit) -- Years
Ended December 31, 1996, 1997 and 1998.
Consolidated Statements of Cash Flows -- Years Ended December 31,
1996, 1997 and 1998.
Notes to Consolidated Financial Statements.
(a)(2) Except as provided below, all schedules for which provision is made
in the applicable accounting regulations of the Securities and
Exchange Commission either have been included in the Consolidated
Financial Statements or are not required under the related
instructions, or are inapplicable and therefore have been omitted.
Schedule II -- Valuation and Qualifying Accounts
(a)(3) The following exhibits are either provided with this Report or are
incorporated herein by reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
3.1 -- Restated Certificate of Incorporation of the Company.*
3.2 -- Amended and Restated Bylaws of the Company.*
4.1 -- Form of Class A and Class B Common Stock certificates.*
4.2 -- LCC International, Inc. 1996 Directors Stock Option Plan.*
4.3 -- LCC International, Inc. 1996 Employee Stock Option Plan.*
4.4 -- LCC International, Inc. 1996 Employee Stock Purchase Plan.*
4.5 -- Amendment No. 1 to LCC International, Inc. Employee Stock
Purchase Plan**
4.6 -- Amendment to LCC International, Inc. 1996 Directors Stock
Option Plan, dated April 22, 1997.
4.7 -- Amendment to LCC International, Inc. 1996 Directors Stock
Option Plan, dated April 16, 1998.
4.8 -- Amendment to LCC International, Inc. 1996 Employee Stock
Option Plan, dated April 16, 1998.
10.1 -- [Intentionally omitted]
10.2 -- [Intentionally omitted]
10.3 -- [Intentionally omitted]
10.4 -- [Intentionally omitted]
10.5 -- 1994 LCC, L.L.C. Incentive Compensation Plan.*
10.6 -- [Intentionally omitted]
10.7 -- [Intentionally omitted]
10.8 -- Subordinated Note due 2000 by Telcom Ventures, L.L.C.
payable to MCI Telecommunications Corporation dated June 28,
1994.*
</TABLE>
79
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.9 -- Subordinated Note due 2000 by LCC, L.L.C. payable to MCI
Telecommunications Corporation dated June 28, 1994.*
+10.10 -- [Intentionally omitted]
++10.11 -- Amended and Restated Service Agreement, dated as of October
1, 1996, by and between TSI, a division of LCC
International, Inc., and Nextel Communications, Inc.****
++10.12 -- Amended and Restated Software License Agreement, dated as of
October 1, 1996 by and between LCC, a division of LCC
International, Inc., and Nextel Communications, Inc.****
10.13 -- Amended and Restated Shareholders' Rights Agreement dated
February , 1996 between NextWave Telecom Inc. and LCC,
L.L.C.*
10.14 -- Letter Agreement dated March , 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
+10.15 -- Letter Agreement dated March 12, 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
10.16 -- Subscription Agreement dated March 12, 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
10.17 -- [Intentionally omitted]
10.18 -- Convertible Loan and Investment Agreement dated March 20,
1996 by and between LCC, L.L.C. and DCR Communications,
Inc.*
+10.19 -- Letter Agreement dated March 20, 1996 by and between LCC,
L.L.C. and DCR Communications, Inc.*
10.20 -- Agreement dated May 17, 1996, between LCC, L.L.C. and
West*Park Associates Limited Partnership for office space at
7925 Jones Branch Drive, McLean, Virginia, 22102.*
10.21 -- Agreement dated May 17, 1996, between LCC, L.L.C. and
West*Park Associates Limited Partnership for office space at
7927 Jones Branch Drive, McLean, Virginia, 22102.*
10.22 -- Letter Agreement dated May 31, 1996 between LCC
International, Inc. and Arno Penzias.*
10.23 -- [Intentionally omitted]
10.24 -- Security Agreement dated June 14, 1996 among LCC, L.L.C.,
LCC Design Services, L.L.C. and LCC Development Company,
L.L.C., in favor of The Chase Manhattan Bank (National
Association).*
10.25 -- Intellectual Property Security Agreement dated June 14, 1996
by LCC, L.L.C. in favor of The Chase Manhattan Bank
(National Association).*
10.26 -- Pledge Agreement dated June 14, 1996 among LCC, L.L.C., LCC
Design Services, L.L.C. and LCC Development Company, L.L.C.,
in favor of The Chase Manhattan Bank (National
Association).*
10.27 -- Intercompany Agreement dated as of August 27, 1996 among
Telcom Ventures, L.L.C., LCC, L.L.C., LCC International,
Inc., Cherrywood Holdings, Inc., Rajendra Singh, Neera
Singh, certain trusts for the benefit of members of the
Singh family, Carlyle-LCC Investors I, L.P., Carlyle-LCC
Investors II, L.P., Carlyle-LCC Investors III, L.P.,
Carlyle-LCC IV (E), L.P., MDLCC, L.L.C. and TC Group,
L.L.C.*
10.28 -- Registration Rights Agreement dated July 25, 1996 among LCC
International, Inc., RF Investors, L.L.C. and MCI
Telecommunications Corporation.*
</TABLE>
80
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.29 -- Form of Indemnity Agreement between LCC International, Inc.
and each of Rajendra Singh, Neera Singh, Piyush Sodha, Mark
D. Ein, Arno A. Penzias, Geoffrey S. Carroll, Steven J.
Gilbert, J. Michael Bonin, Kathryn M. Condello, Peter A.
Deliso, Richard Hozik, Frank F. Navarrete, Donald R. Rose,
Gerard L. Vincent, Louis R. Olsen, Stuart P. Lawson and
Michael S. McNelly.*
10.30 -- Overhead and Administrative Services Agreement dated August
27, 1996 between LCC International, Inc. and Telcom
Ventures, L.L.C.*
10.31 -- Agreement of Merger dated September 15, 1996 between LCC,
L.L.C. and LCC International, Inc.*
10.32 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for directors who will receive Class
B Common Stock.*
10.33 -- Amended and Restated Securityholders Agreement dated July
25, 1996 among Telcom Ventures, L.L.C., LCC, Incorporated,
TC Group, L.L.C., LCC, L.L.C. and MCI Telecommunications
Corporation.*
10.34 -- Amendment to Subordinated Note due 2000 by Telcom Ventures,
L.L.C. payable to MCI Telecommunications Corporation dated
July 25, 1996.*
10.35 -- Amendment to Subordinated Note due 2000 by LCC, L.L.C.
payable to MCI Telecommunications Corporation dated July 25,
1996.*
10.36 -- Form of Promissory Note by Telcom Ventures, L.L.C. to LCC
International, Inc.*
10.37 -- Form of Stock Option Agreement between LCC International,
Inc. and the Carlyle Option Designees.*
10.38 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan incentive stock option agreement.*
10.39 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan non-incentive stock option agreement.*
10.40 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan non-incentive stock option agreement (for employees who
had been eligible to participate in the LCC, L.L.C. 1994
Phantom Membership Plan or the LCC, L.L.C. 1996 Employee
Option Plan).*
10.41 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for directors who will receive Class
A Common Stock (other than Mark D. Ein).*
10.42 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for Mark D. Ein.*
10.43 -- Form of Phantom Membership Plan Exchange Agreement.*
10.44 -- [Intentionally omitted]
10.45 -- [Intentionally omitted]
10.46 -- Letter Agreement dated August 22, 1996 between LCC
International, Inc. and Arno Penzias.*
10.47 -- [Intentionally omitted]
10.48 -- Form of Notice of Assignment of Subordinated Note Due 2000
from Telcom Ventures, L.L.C. and LCC International, Inc. to
MCI Telecommunications Corporation.*
10.49 -- Form of Second Amendment to Subordinated Note Due 2000 by
Telcom Ventures, L.L.C. and LCC International, Inc. payable
to MCI Telecommunications Corporation.*
10.50 -- Form of Third Amendment to Subordinated Note Due 2000 by
Telcom Ventures, L.L.C. and LCC International, Inc. payable
to MCI Telecommunications Corporation.*
</TABLE>
81
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.51 -- Amendment to Amended and Restated Securityholders Agreement
dated September 19, 1996 among Telcom Ventures, L.L.C., LCC,
Incorporated, TC Group, L.L.C., LCC, L.L.C. and MCI
Telecommunications Corporation.*
10.52 -- Series D Convertible Debenture Due March 27, 2001 by DCR
Communications, Inc. dated March 27, 1996.*
10.53 -- Series D Convertible Debenture Due May 10, 2001 by DCR
Communications, Inc. dated May 10, 1996.*
10.54 -- [Intentionally omitted]
10.55 -- [Intentionally omitted]
10.56 -- Form of Subordination and Intercreditor Agreement dated as
of September , 1996 by and among The Chase Manhattan Bank,
as administrative agent, MCI Telecommunications Corporation
and LCC International, Inc.*
10.57 -- Asset Purchase Agreement, dated as of December 30, 1996,
between European Technology Partner AS and LCC International
AS***
10.58 -- [Intentionally omitted]
10.59 -- Second Amendment to Subordinated Note Due 2000 and Amendment
to Registration Rights Agreement, dated October 23, 1997, by
and between the Company and MCI as to the Note amendment,
and among the Company, MCI and RF Investors as the
Registration Rights Agreement amendment.*****
10.60 -- Fourth Amendment to Subordinated Note Due 2000 and Amendment
to Registration Rights Agreement, dated October 23, 1997, by
and between the Company and MCI as to the Note amendment,
and among the Company, MCI and RF Investors as the
Registration Rights Agreement amendment.*****
10.61 -- [Intentionally omitted]
10.62 -- [Intentionally omitted]
10.63 -- Third Amended and Restated Credit Agreement dated as of
December 30, 1998, among LCC International, Inc., LCC Europe
AS, LCC Design Services, L.L.C., LCC Development Company,
L.L.C., Microcell Management, Inc., Koll Telecommunications
Services, L.L.C., the Lenders signatory thereto and The
Chase Manhattan Bank.
10.64 -- Cash Collateral Account Agreement dated as of December 30,
1998 by Rajendra Singh in favor of The Chase Manhattan Bank.
10.65 -- Unconditional Guaranty dated as of December 30, 1998 by
Rajendra Singh in favor of The Chase Manhattan Bank.
10.66 -- Side letter from LCC International, Inc. to Microcell
Management, Inc., dated March 12, 1999.
10.67 -- Convertible Subordinated Promissory Note dated January 28,
1999, in the principal amount of $5,000,000 issued to Telcom
Ventures, L.L.C. by LCC International, Inc.
10.68 -- Subordination and Intercreditor Agreement dated as of
January 28, 1999 among The Chase Manhattan Bank, Telcom
Ventures, L.L.C. and LCC International, Inc.
10.69 -- Agreement Regarding Resignation of Employment and Other
Matters dated as of October 5, 1998, by Geoffrey S. Carroll
and LCC International, Inc.
10.70 -- Form of Revolving Credit Note dated September 30, 1996, in
the principal amount of $20,000,000 issued to The Chase
Manhattan Bank by LCC International, Inc.****
10.71 -- Form of Swingline Note dated December 15, 1997, in the
principal amount of 2,500,000 issued to The Chase Manhattan
Bank by LCC Europe AS.****
</TABLE>
82
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.72 -- Revolving Credit Facility and Security Agreement, dated as
of December 31, 1996, by LCC International, Inc. and
Microcell Management, Inc.
10.73 -- Revolving Credit Note dated December 31, 1996, in the
principal amount of $35,000,000 issued to LCC International,
Inc. by Microcell Management, Inc.
10.74 -- Shareholders' Agreement of Microcell Management, Inc., dated
as of December 31, 1996 among LCC International, Inc.,
Albert F. Grimes, Donald G. McClure, Jr., R. Michael Gill,
Roy R. Markert, III, Joseph D. Croft, III, Pamela H.
O'Neill, and Gary L. Grimes.
10.75 -- Letter, dated November 7, 1996, from LCC International, Inc.
to MCI Telecommunications Corporation.
11 -- Calculation of Pro Forma Net Income (Loss) Per Share.
21 -- Subsidiaries of the Company.
23.1 -- Consent of KPMG LLP.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference to the Exhibits on the Company's Registration
Statement on Form S-1 (Registration No. 333-6067).
** Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-8 (File No. 333-17803) which was filed with the
Securities and Exchange Commission on December 13, 1996.
*** Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K which was filed with the Securities and Exchange Commission
on January 14, 1997.
**** Incorporated by reference to the Exhibits to the Company's Annual Report
on Form 10-K which was filed with the Securities and Exchange Commission
on April 15, 1997.
***** Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K which was filed with the Securities and Exchange Commission
on October 27, 1997.
+ Confidential treatment has been granted for certain portions of this
document. The copy filed as an exhibit omits the information subject to
the confidential treatment request.
++ Confidential treatment has been granted for certain portions of this
document. The copy filed as an exhibit omits the information subject to
the confidential treatment request.
++ (b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
(b) Reports on Form 8-K.
On September 30, 1998, the Company filed a Current Report on Form 8-K which
reported that, on September 18, 1998, the Company entered into an Asset Exchange
Agreement with Allen Telecom Inc., Allen Telecom Investments, Inc. and LCC
Europe GmbH for the acquisition by the Company of the Comsearch Division of
Allen Telecom Inc. and the sale to Allen Telecom Inc. of the products division
of the Company. The September 30, 1998 Current Report also explained that
consummation of the transactions under the Asset Exchange Agreement were subject
to the satisfaction of certain conditions.
On October 7, 1998, the Company filed a Current Report on Form 8-K which
reported that, on October 5, 1998, the Company announced the resignation of Dr.
Geoffrey Scott Carroll as President and Chief Executive Officer of the Company
and the appointment of Dr. Rajendra Singh, Chairperson of the Company's Board of
Directors, as interim chief executive.
83
<PAGE> 84
On October 20, 1998 the Company filed a Current Report on Form 8-K which
reported that, on October 19, 1998, the Company and Allen Telecom Inc. announced
the termination of the Asset Exchange Agreement, dated September 18, 1998, among
the Company, Allen Telecom Inc., Allen Telecom Investments, Inc. and LCC Europe
GmbH.
(c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.
(d) None.
84
<PAGE> 85
GLOSSARY OF TERMS
"A-block auction" -- An auction held by the FCC to award 30 MHz PCS
licenses for 51 MTAs. The A-block auction, held in conjunction with the B-block
auction, was concluded in March 1995, and licenses were awarded on June 23,
1995.
"alphanumeric " -- A message or other type of readout containing both
letters ("alphas") and numbers ("numerics"). In cellular, "alphanumeric memory
dial" is a special type of dial-from-memory option that displays both the name
of the individual and that individual's phone number on the cellular phone
handset. The name also can be recalled by using the letters on the phone keypad.
By contrast, standard memory dial recalls numbers from number-only locations.
"AMPS " -- Advanced Mobile Phone Service. The United States analog cellular
standard.
"analog " -- A method of storing, processing and transmitting information
through the continuous variation of a signal.
"antenna " -- A device for transmitting and/or receiving signals.
"B-block auction " -- An auction held by the FCC to award 30 MHz PCS
licenses for 51 MTAs. The B-block auction, held in conjunction with the A-block
auction, was concluded in March 1995, and licenses were awarded on June 23,
1995.
"base station " -- A central radio transmitter/receiver that maintains
communications with the mobile phone within a specified range.
"Broadband PCS " -- High frequency, next generation wireless services.
"BTA" -- Basic Trading Area. A service area designed by Rand McNally and
adopted by the FCC to promote the rapid deployment and ubiquitous coverage of
PCS and providers. There are 493 BTAs in the United States.
"C-block auction " -- An auction held by the FCC to award 30 MHz PCS
licenses for 493 BTAs to entrepreneurial businesses having gross revenues of
less than $125 million in each of the last two years and total assets of less
than $500 million. Bidding credits and installment payment options were granted
to small businesses having average gross revenues for the preceding three years
of less than $40 million. The C-block auction was concluded in May 1996.
Licenses were awarded in late 1996 and early 1997.
"CDMA " -- Code Division Multiple Access. A digital wireless transmission
technology for use in wireless telephone communications. CDMA is a spread
spectrum technology in which calls are assigned a pseudo random code to encode
digital bit streams. The coded signals are then transmitted over the air on a
frequency between the end user and a cell site, where they are processed by a
base station. CDMA allows more than one wireless user to simultaneously occupy a
single RF band.
"cell " -- The basic geographic area covered by a single
transmitter/receiver in a wireless phone system.
"cellular network " -- A telephone system based on a grid of "cells"
deployed primarily at 800 and 900 MHz. Each cell contains transmitters,
receivers and antennas, and is connected to switching gear and control
equipment.
"cell-splitting " -- Adding a cell to overlap coverage of an existing site,
which adds capacity to the area served by that existing site.
"channel " -- A single path, either RF or voice, for transmitting
electrical signals.
"D-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The D-block auction, held in conjunction with the E-block
and F-block auctions, was concluded on January 14, 1997.
"DCS " -- Digital Communications Service. A GSM-based system in the
1800/1900 band.
85
<PAGE> 86
"digital " -- A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission/switching technologies employ a
sequence of discrete, distinct pulses to represent information, as opposed to
the continuously variable analog signal.
"digital protocols " -- Methodologies that serve to manage the
communication for digital signal transmission. CDMA and TDMA are examples of
high level digital protocols.
"E-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The E-block auction, held in conjunction with the D-block
and F-block auctions, was concluded on January 14, 1997.
"ETACS " -- Enhanced Total Access Cellular System. The European analog
cellular standard.
"F-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The F-block auction, held in conjunction with the D-block
and E-block auctions, was concluded on January 14, 1997.
"FCC " -- Federal Communications Commission. The government agency
responsible for regulating telecommunications in the United States.
"frequency " -- The number of cycles per second, measured in hertz, of a
periodic oscillation or wave in radio propagation.
"Global Positioning System " -- A satellite-based network provided by the
U.S. government which allows the user thereof to pinpoint precisely his or her
location at any place in the world.
"GSM " -- Global System for Mobile Communications. A distributed open
networking architecture standard for digital wireless systems world-wide. GSM is
a TDMA technology which assigns calls into multiple time slots.
"hand-off " -- The act of transferring communication with a mobile unit
from one base station to another. A hand-off transfers a call from the current
base station to the new base station.
"hertz " -- A measurement of electromagnetic energy, equivalent to one
"wave" or cycle per second.
"iDEN " -- Integrated Dispatch Enhanced Network. iDEN is a technology and a
network solution for providing communications services in the SMR spectrum.
"INFLEXION " -- A technology for providing voice narrowband PCS developed
by Motorola.
"infrastructure equipment " -- Fixed infrastructure equipment consisting of
base stations, base station controllers, antennas, switches, management
information systems and other equipment making up the backbone of the wireless
communication system that receives, transmits and processes signals from and to
subscriber equipment and/or between wireless systems and the public switched
telephone network.
"IS-54 " -- The first U.S. Digital Cellular Standard, based on TDMA and
adopted by the CTIA in 1990.
"IS-136 " -- North American Interim Standard-digital TDMA system
specification.
"ITU " -- International Telecommunications Union
"KHz " -- Kilohertz (one thousand hertz).
"LMDS " -- Local Multipoint Distribution System. A fixed broadband
point-to-multipoint system. Initially designed as an alternative multichannel
video programming service, LMDS has emerged as an alternative for offering local
exchange service, wireless telephony, data, internet access, video and other
broadband services.
"MHz " -- Megahertz (millions of hertz).
"microcells " -- Cell sites with small coverage radius. Antenna heights are
generally low, being 40 feet in height or less and typically have a service area
of 1/4 to 2 miles.
86
<PAGE> 87
"microcell site " -- comprised of a microcell base station and electrical
and transmission termination equipment. This equipment provides the radio
interface between the PCS network and the customer's handset, and differs from
the mini base station in its reduced physical dimensions and included integrated
antennas. These units are the size of a medium-sized suitcase, allowing mounting
on walls and poles.
"MTA " -- Major Trading Area. A PCS area designed by Rand McNally and
adopted by the FCC. There are 51 MTAs in the United States.
"MTSO " -- Mobile Telephone Switching Office. The central computer that
connects a wireless phone call to the public switching telephone network (PSTN).
The MTSO controls the entire system's operations, including monitoring calls,
billing and handoffs.
"Narrowband PCS " -- Identifier given by the FCC for PCS spectrum in the
900 MHz frequency range. 50/50 KHz (paired), 50/12.5 KHz (paired) and 50 KHz
(unpaired) were recently auctioned by the FCC and purchased by companies such as
PageNet, Inc., Mtel, and AT&T Corporation. Narrowband PCS is expected to provide
advanced data and voice communications for devices traditionally known as radio
pagers, including acknowledgment and two-way paging capability.
"network equipment " -- The fixed infrastructure consisting of base
stations, base station controllers, mobile switching centers and related
information processing control points that manages communications between the
mobile unit and the public switched telephone network.
"PCS " -- Personal Communications Services. FCC terminology describing
intelligent, digital wireless, personal two-way communications systems at the
1900 MHz band.
"PCS 1900 " -- 1900 MHz GSM-based digital cellular radio technology.
"Public Switched Telephony Network " -- The wireline telephone network.
"REFLEX (TM)" -- Two way narrowband PCS protocol developed by Motorola.
"RF " -- Radio frequency. Frequencies of the electromagnetic spectrum that
are associated with radio wave propagation.
"SMR " -- Specialized Mobile Radio, referring to systems that serve
non-public special mobile communication markets (for example, taxi cabs). Recent
FCC rulings have permitted these operators to offer cellular-like services to
the public.
"switch " -- A central facility capable of routing calls from one point to
another. Usually a point of connection to the PSTN.
"TDMA " -- Time Division Multiple Access. A digital wireless transmission
technology that converts analog voice signals into digital data and puts more
than one voice channel on a single RF channel by separating the users in time.
"3G " -- A single next generation standard for the Americas, Europe, Japan,
Korea and China which the ITU and other standard bodies are attempting to
develop. This next generation of service will enable carriers to deploy key
capabilities that current so-called "2G" wireless technologies such as TDMA,
CDMA and GSM are unable to support, provide open standards and architecture and
lower cost, higher capacity and improved performance. Anticipated 3G
capabilities include wireline quality voice service, collaborative working
between multimedia and high speed data, user customization allowing the
subscriber better control over features such as voicemail routing, announcements
and call screening, mobility-enabled services such as vehicular navigation and
emergency services, wireless local loop capabilities, seamless global roaming,
zone identification and billing and satellite interworking. The ITU has received
numerous proposals from several countries and standards groups recommending
specifications for the new standard and has formed an operators' standards forum
for the purpose of forging a consensus with respect to the new standard among
operators, vendors and standards groups.
"UNIX " -- A multiuser, multitasking operating system.
87
<PAGE> 88
"uplink " -- The radio path from a handset or mobile user to the cell site.
"wireless " -- A radio-based system allowing transmission of telephone
and/or data signals through the air without a physical connection, such as a
metal wire or fiber optic cable.
"wireless local loop " -- A system that eliminates the need for a wire loop
connecting users to the public switched telephone network, which is used in
conventional wired telephone systems, by transmitting voice messages over radio
waves for the "last mile" connection between the location of the customer's
telephone and a base station connected to the network equipment.
88
<PAGE> 89
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the 30th day of
March, 1999.
LCC INTERNATIONAL, INC.
By: /s/ RAJENDRA SINGH
--------------------------------------
Rajendra Singh
Interim President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ RAJENDRA SINGH Interim President and Chief March 30, 1999
- --------------------------------------------------- Executive Officer and
Rajendra Singh Chairperson of the Board
of Directors
/s/ RICHARD HOZIK Senior Vice President, March 30, 1999
- --------------------------------------------------- Treasurer and Chief
Richard Hozik Financial Officer
(Principal Financial
Officer)
/s/ GEOFFREY S. CARROLL Director March 30, 1999
- ---------------------------------------------------
Geoffrey S. Carroll
Director March , 1999
- ---------------------------------------------------
Mark D. Ein
/s/ ARNO A. PENZIAS Director March 30, 1999
- ---------------------------------------------------
Arno A. Penzias
/s/ NEERA SINGH Director March 30, 1999
- ---------------------------------------------------
Neera Singh
</TABLE>
89
<PAGE> 90
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
-----------------------------------
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
- -------------------------------------- ------------------- ----------------------------------- ------------- -------------
BALANCE AT CHARGED TO CHARGES TO BALANCE AT
DESCRIPTION BEGINNING OF PERIOD COSTS AND EXPENSES OTHER ACCOUNTS DEDUCTIONS(1) END OF PERIOD
- -------------------------------------- ------------------- ------------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts..... $ 1,919 $13,731 $-- $1,881 $13,769
Year ended December 31, 1997
Allowance for doubtful accounts..... 13,769 3,206 -- 5,046 11,929
Year ended December 31, 1998
Allowance for doubtful accounts..... 11,929 2,047 -- 3,523 10,453
</TABLE>
- ---------------
(1) Deduction for write-off of receivables to allowance account.
90
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
3.1 -- Restated Certificate of Incorporation of the Company.*
3.2 -- Amended and Restated Bylaws of the Company.*
4.1 -- Form of Class A and Class B Common Stock certificates.*
4.2 -- LCC International, Inc. 1996 Directors Stock Option Plan.*
4.3 -- LCC International, Inc. 1996 Employee Stock Option Plan.*
4.4 -- LCC International, Inc. 1996 Employee Stock Purchase Plan.*
4.5 -- Amendment No. 1 to LCC International, Inc. Employee Stock
Purchase Plan**
4.6 -- Amendment to LCC International, Inc. 1996 Directors Stock
Option Plan, dated April 22, 1997.
4.7 -- Amendment to LCC International, Inc. 1996 Directors Stock
Option Plan, dated April 16, 1998.
4.8 -- Amendment to LCC International, Inc. 1996 Employee Stock
Option Plan, dated April 16, 1998.
10.1 -- [Intentionally omitted]
10.1 -- [Intentionally omitted]
10.2 -- [Intentionally omitted]
10.3 -- [Intentionally omitted]
10.4 -- [Intentionally omitted]
10.5 -- 1994 LCC, L.L.C. Incentive Compensation Plan.*
10.6 -- [Intentionally omitted]
10.7 -- [Intentionally omitted]
10.8 -- Subordinated Note due 2000 by Telcom Ventures, L.L.C.
payable to MCI Telecommunications Corporation dated June 28,
1994.*
10.9 -- Subordinated Note due 2000 by LCC, L.L.C. payable to MCI
Telecommunications Corporation dated June 28, 1994.*
+10.10 -- [Intentionally omitted]
++10.11 -- Amended and Restated Service Agreement, dated as of October
1, 1996, by and between TSI, a division of LCC
International, Inc., and Nextel Communications, Inc.****
++10.12 -- Amended and Restated Software License Agreement, dated as of
October 1, 1996 by and between LCC, a division of LCC
International, Inc., and Nextel Communications, Inc.****
10.13 -- Amended and Restated Shareholders' Rights Agreement dated
February , 1996 between NextWave Telecom Inc. and LCC,
L.L.C.*
10.14 -- Letter Agreement dated March , 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
+10.15 -- Letter Agreement dated March 12, 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
10.16 -- Subscription Agreement dated March 12, 1996 between NextWave
Telecom, Inc. and LCC, L.L.C.*
10.17 -- [Intentionally omitted]
</TABLE>
91
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.18 -- Convertible Loan and Investment Agreement dated March 20,
1996 by and between LCC, L.L.C. and DCR Communications,
Inc.*
+10.19 -- Letter Agreement dated March 20, 1996 by and between LCC,
L.L.C. and DCR Communications, Inc.*
10.20 -- Agreement dated May 17, 1996, between LCC, L.L.C. and
West*Park Associates Limited Partnership for office space at
7925 Jones Branch Drive, McLean, Virginia, 22102.*
10.21 -- Agreement dated May 17, 1996, between LCC, L.L.C. and
West*Park Associates Limited Partnership for office space at
7927 Jones Branch Drive, McLean, Virginia, 22102.*
10.22 -- Letter Agreement dated May 31, 1996 between LCC
International, Inc. and Arno Penzias.*
10.23 -- [Intentionally omitted]
10.24 -- Security Agreement dated June 14, 1996 among LCC, L.L.C.,
LCC Design Services, L.L.C. and LCC Development Company,
L.L.C., in favor of The Chase Manhattan Bank (National
Association).*
10.25 -- Intellectual Property Security Agreement dated June 14, 1996
by LCC, L.L.C. in favor of The Chase Manhattan Bank
(National Association).*
10.26 -- Pledge Agreement dated June 14, 1996 among LCC, L.L.C., LCC
Design Services, L.L.C. and LCC Development Company, L.L.C.,
in favor of The Chase Manhattan Bank (National
Association).*
10.27 -- Intercompany Agreement dated as of August 27, 1996 among
Telcom Ventures, L.L.C., LCC, L.L.C., LCC International,
Inc., Cherrywood Holdings, Inc., Rajendra Singh, Neera
Singh, certain trusts for the benefit of members of the
Singh family, Carlyle-LCC Investors I, L.P., Carlyle-LCC
Investors II, L.P., Carlyle-LCC Investors III, L.P.,
Carlyle-LCC IV (E), L.P., MDLCC, L.L.C. and TC Group,
L.L.C.*
10.28 -- Registration Rights Agreement dated July 25, 1996 among LCC
International, Inc., RF Investors, L.L.C. and MCI
Telecommunications Corporation.*
10.29 -- Form of Indemnity Agreement between LCC International, Inc.
and each of Rajendra Singh, Neera Singh, Piyush Sodha, Mark
D. Ein, Arno A. Penzias, Geoffrey S. Carroll, Steven J.
Gilbert, J. Michael Bonin, Kathryn M. Condello, Peter A.
Deliso, Richard Hozik, Frank F. Navarrete, Donald R. Rose,
Gerard L. Vincent, Louis R. Olsen, Stuart P. Lawson and
Michael S. McNelly.*
10.30 -- Overhead and Administrative Services Agreement dated August
27, 1996 between LCC International, Inc. and Telcom
Ventures, L.L.C.*
10.31 -- Agreement of Merger dated September 15, 1996 between LCC,
L.L.C. and LCC International, Inc.*
10.32 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for directors who will receive Class
B Common Stock.*
10.33 -- Amended and Restated Securityholders Agreement dated July
25, 1996 among Telcom Ventures, L.L.C., LCC, Incorporated,
TC Group, L.L.C., LCC, L.L.C. and MCI Telecommunications
Corporation.*
10.34 -- Amendment to Subordinated Note due 2000 by Telcom Ventures,
L.L.C. payable to MCI Telecommunications Corporation dated
July 25, 1996.*
</TABLE>
92
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.35 -- Amendment to Subordinated Note due 2000 by LCC, L.L.C.
payable to MCI Telecommunications Corporation dated July 25,
1996.*
10.36 -- Form of Promissory Note by Telcom Ventures, L.L.C. to LCC
International, Inc.*
10.37 -- Form of Stock Option Agreement between LCC International,
Inc. and the Carlyle Option Designees.*
10.38 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan incentive stock option agreement.*
10.39 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan non-incentive stock option agreement.*
10.40 -- Form of LCC International, Inc. 1996 Employee Stock Option
Plan non-incentive stock option agreement (for employees who
had been eligible to participate in the LCC, L.L.C. 1994
Phantom Membership Plan or the LCC, L.L.C. 1996 Employee
Option Plan).*
10.41 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for directors who will receive Class
A Common Stock (other than Mark D. Ein).*
10.42 -- Form of LCC International, Inc. Directors Stock Option Plan
stock option agreement for Mark D. Ein.*
10.43 -- Form of Phantom Membership Plan Exchange Agreement.*
10.44 -- [Intentionally omitted]
10.45 -- [Intentionally omitted]
10.46 -- Letter Agreement dated August 22, 1996 between LCC
International, Inc. and Arno Penzias.*
10.47 -- [Intentionally omitted]
10.48 -- Form of Notice of Assignment of Subordinated Note Due 2000
from Telcom Ventures, L.L.C. and LCC International, Inc. to
MCI Telecommunications Corporation.*
10.49 -- Form of Second Amendment to Subordinated Note Due 2000 by
Telcom Ventures, L.L.C. and LCC International, Inc. payable
to MCI Telecommunications Corporation.*
10.50 -- Form of Third Amendment to Subordinated Note Due 2000 by
Telcom Ventures, L.L.C. and LCC International, Inc. payable
to MCI Telecommunications Corporation.*
10.51 -- Amendment to Amended and Restated Securityholders Agreement
dated September 19, 1996 among Telcom Ventures, L.L.C., LCC,
Incorporated, TC Group, L.L.C., LCC, L.L.C. and MCI
Telecommunications Corporation.*
10.52 -- Series D Convertible Debenture Due March 27, 2001 by DCR
Communications, Inc. dated March 27, 1996.*
10.53 -- Series D Convertible Debenture Due May 10, 2001 by DCR
Communications, Inc. dated May 10, 1996.*
10.54 -- [Intentionally omitted]
10.55 -- [Intentionally omitted]
10.56 -- Form of Subordination and Intercreditor Agreement dated as
of September , 1996 by and among The Chase Manhattan Bank,
as administrative agent, MCI Telecommunications Corporation
and LCC International, Inc.*
</TABLE>
93
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.57 -- Asset Purchase Agreement, dated as of December 30, 1996,
between European Technology Partner AS and LCC International
AS***
10.58 -- [Intentionally omitted]
10.59 -- Second Amendment to Subordinated Note Due 2000 and Amendment
to Registration Rights Agreement, dated October 23, 1997, by
and between the Company and MCI as to the Note amendment,
and among the Company, MCI and RF Investors as the
Registration Rights Agreement amendment.*****
10.60 -- Fourth Amendment to Subordinated Note Due 2000 and Amendment
to Registration Rights Agreement, dated October 23, 1997, by
and between the Company and MCI as to the Note amendment,
and among the Company, MCI and RF Investors as the
Registration Rights Agreement amendment.*****
10.61 -- [Intentionally omitted]
10.62 -- [Intentionally omitted]
10.63 -- Third Amended and Restated Credit Agreement dated as of
December 30, 1998, among LCC International, Inc., LCC Europe
AS, LCC Design Services, L.L.C., LCC Development Company,
L.L.C., Microcell Management, Inc., Koll Telecommunications
Services, L.L.C., the Lenders signatory thereto and The
Chase Manhattan Bank.
10.64 -- Cash Collateral Account Agreement dated as of December 30,
1998 by Rajendra Singh in favor of The Chase Manhattan Bank.
10.65 -- Unconditional Guaranty dated as of December 30, 1998 by
Rajendra Singh in favor of The Chase Manhattan Bank.
10.66 -- Side letter from LCC International, Inc. to Microcell
Management, Inc., dated March 12, 1999.
10.67 -- Convertible Subordinated Promissory Note dated January 28,
1999, in the principal amount of $5,000,000 issued to Telcom
Ventures, L.L.C. by LCC International, Inc.
10.68 -- Subordination and Intercreditor Agreement dated as of
January 28, 1999 among The Chase Manhattan Bank, Telcom
Ventures, L.L.C. and LCC International, Inc.
10.69 -- Agreement Regarding Resignation of Employment and Other
Matters dated as of October 5, 1998, by Geoffrey S. Carroll
and LCC International, Inc.
10.70 -- Form of Revolving Credit Note dated September 30, 1996, in
the principal amount of $20,000,000 issued to The Chase
Manhattan Bank by LCC International, Inc.****
10.71 -- Form of Swingline Note dated December 15, 1997, in the
principal amount of 2,500,000 issued to The Chase Manhattan
Bank by LCC Europe AS.****
10.72 -- Revolving Credit Facility and Security Agreement, dated as
of December 31, 1996, by LCC International, Inc. and
Microcell Management, Inc.
</TABLE>
94
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
10.73 -- Revolving Credit Note dated December 31, 1996, in the
principal amount of $35,000,000 issued to LCC International,
Inc. by Microcell Management, Inc.
10.74 -- Shareholders' Agreement of Microcell Management, Inc., dated
as of December 31, 1996, among LCC International, Inc.,
Albert F. Grimes, Donald G. McClure, Jr., R. Michael Gill,
Roy R. Markert, III, Joseph D. Croft, III, Pamela H. O'Neil,
and Gary L. Grimes.
10.75 -- Letter, dated November 7, 1996, from LCC International, Inc.
to MCI Telecommunications Corporation.
11 -- Calculation of Pro Forma Net Income (Loss) Per Share.
21 -- Subsidiaries of the Company.
23.1 -- Consent of KPMG LLP.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference to the Exhibits on the Company's Registration
Statement on Form S-1 (Registration No. 333-6067)
** Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-8 (File No. 333-17803) which was filed with the
Securities and Exchange Commission on December 13, 1996.
*** Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K which was filed with the Securities and Exchange Commission on
January 14, 1997.
**** Incorporated by reference to the Exhibits to the Company's Annual Report
on Form 10-K which was filed with the Securities and Exchange Commission
on April 15, 1997.
***** Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K which was filed with the Securities and Exchange Commission on
October 27, 1997.
+ Confidential treatment has been granted for certain portions of this
document. The copy filed as an exhibit omits the information subject to
the confidential treatment request.
++ Confidential treatment has been granted for certain portions of this
document. The copy filed as an exhibit omits the information subject to
the confidential treatment request.
95
<PAGE> 1
EXHIBIT 4.6
AMENDMENT
TO
LCC INTERNATIONAL, INC. 1996 DIRECTORS STOCK OPTION PLAN
Effective April 22, 1997, Section 7 of the LCC International, Inc. 1996
Directors Stock Option Plan is amended by deleting the last sentence thereof in
its entirety and substituting therefor the following:
Each Eligible Director on the Effective Date who is not eligible to
hold Class B Common Stock shall be granted an Initial Option to
purchase 10,000 shares of Class A Common Stock as of the Effective
Date or, if such Eligible Director's Commencement of Service is
after the Effective Date, as of such Eligible Director's
Commencement of Service. Each Eligible Director who is not eligible
to hold Class B Common Stock also may be granted an Additional
Options to purchase shares of Class A Common Stock as determined
from time to time by the Board in its sole discretion.
This Amendment to the LCC International, Inc. Directors Stock Option
Plan was duly approved by the Board of Directors of the Corporation on April 22,
1997.
/s/ PETER A. DELISO
-------------------
Secretary
<PAGE> 1
EXHIBIT 4.7
AMENDMENT
TO
LCC INTERNATIONAL, INC. 1996 DIRECTORS STOCK OPTION PLAN
Effective April 16, 1998, the LCC International, Inc. 1996 Directors
Stock Option Plan (the "Plan") is amended as follows:
1. The reference to "60,000" in the first sentence of Section 4 of
the Plan is replaced by "140,000".
2. Section 19.4 of the Plan is deleted in its entirety.
This Amendment to the LCC International, Inc. Directors Stock Option
Plan was duly approved by the Board of Directors of the Corporation on April 16,
1998 and by the shareholders of the Corporation on May 19, 1998.
/s/ PETER A. DELISO
----------------------------------
Secretary
<PAGE> 1
EXHIBIT 4.8
AMENDMENT
TO
LCC INTERNATIONAL, INC. 1996 EMPLOYEE STOCK OPTION PLAN
Effective April 16, 1998, the LCC International, Inc. 1996 Employee
Stock Option Plan (the "Plan") is amended as follows:
1. The reference to "3,224,000" in the second sentence of Section
4 of the Plan is replaced by "4,725,000".
This Amendment to the LCC International, Inc. Employee Stock Option
Plan was duly approved by the Board of Directors of the Corporation on April 16,
1998 and by the shareholders of the Corporation on May 19, 1998.
/s/ PETER A. DELISO
--------------------------
Secretary
<PAGE> 1
Exhibit 10.63
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 30, 1998
among
LCC INTERNATIONAL, INC.
LCC EUROPE AS
LCC DESIGN SERVICES, L.L.C.
LCC DEVELOPMENT COMPANY, L.L.C.
MICROCELL MANAGEMENT, INC.
KOLL TELECOMMUNICATIONS SERVICES, L.L.C.
THE LENDERS SIGNATORY HERETO
and
THE CHASE MANHATTAN BANK
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS .................................1
Section 1.01. Definitions. ............................................1
Section 1.02. Accounting Terms. ........................................24
ARTICLE 2. THE CREDIT .....................................................24
Section 2.01. Loans. ...................................................24
Section 2.02. The Notes. ...............................................24
Section 2.03. Purpose. .................................................25
Section 2.04. Borrowing Procedures. ....................................25
Section 2.05. Optional Prepayments and Conversions. ....................25
Section 2.06. Mandatory Prepayments. ...................................25
Section 2.07. Interest Periods: Renewals. ..............................26
Section 2.08. Changes of Commitments. ..................................27
Section 2.09. Certain Notices. .........................................27
Section 2.10. Minimum Amounts. .........................................28
Section 2.11. Interest. ................................................28
Section 2.12. Fees. ....................................................29
Section 2.13. Payments Generally. ......................................29
ARTICLE 3. THE LETTERS OF CREDIT ........................................30
Section 3.01. Letters of Credit. .......................................30
Section 3.02. Purposes. ................................................30
Section 3.03. Procedures for issuance of Letters of Credit .............30
Section 3.04. Participating Interests . ................................31
Section 3.05. Payments . ...............................................31
Section 3.06. Further Assurances. ......................................32
Section 3.07. Obligations Absolute. ....................................32
Section 3.08. Cash Collateral Account. .................................34
Section 3.09. Letter of Credit Fees. ...................................34
ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC ..............................34
Section 4.01. Additional Costs. ........................................34
Section 4.02. Limitation on Fixed Rate Loans. ..........................36
Section 4.03. Illegality. ..............................................37
Section 4.04. Certain Conversions Pursuant to Sections 4.01
and 4.03. .......................................................37
Section 4.05. Certain Compensation. ....................................38
Section 4.06. Taxes. ...................................................39
ARTICLE 5. CONDITIONS PRECEDENT ...........................................40
Section 5.01. Documentary Conditions Precedent. ........................40
Section 5.02. Additional Conditions Precedent. .........................42
Section 5.03. Deemed Representations. ..................................42
ARTICLE 6. REPRESENTATIONS AND WARRANTIES .................................42
-i-
<PAGE> 3
Section 6.01. Organization. Good Standing_and Due Qualification ........42
Section 6.02. Power and Authority: No Conflicts ........................42
Section 6.03. Legally Enforceable Agreements. ..........................43
Section 6.04. Litigation. ..............................................43
Section 6.05. Financial Statements. ....................................43
Section 6.06. Ownership and Liens ......................................45
Section 6.07. Taxes ....................................................45
Section 6.08. ERISA ....................................................45
Section 6.09. Subsidiaries and Affiliates ..............................45
Section 6.10. Credit Arrangements ......................................46
Section 6.11. Material Contracts .......................................46
Section 6.12. Proprietary Rights. ......................................46
Section 6.13. Hazardous Materials ......................................47
Section 6.14. No Default on Outstanding Judgments or Orders ............47
Section 6.15. No Defaults on Other Agreements ..........................48
Section 6.16. Labor Disputes and Acts of God ...........................48
Section 6.17. Governmental Regulation ..................................48
Section 6.18. No Forfeiture ............................................48
Section 6.19. Solvency .................................................48
Section 6.20. Subordinated Note Documents ..............................49
Section 6.21. Security Documents .......................................50
Section 6.22. Senior Debt ..............................................50
ARTICLE 7. AFFIRMATIVE COVENANTS ..........................................50
Section 7.01. Maintenance of Existence .................................50
Section 7.02. Conduct of Business ......................................50
Section 7.03. Maintenance of Properties ................................50
Section 7.04. Maintenance of Records ...................................50
Section 7.05. Maintenance of Insurance .................................51
Section 7.06. Compliance with Laws .....................................51
Section 7.07. Right of Inspection ......................................51
Section 7.08. Reporting Requirements ...................................51
Section 7.09. Additional Guarantors. ...................................56
Section 7.10. After Acquired Real Property. ............................56
ARTICLE 8. NEGATIVE COVENANTS .............................................56
Section 8.01. Debt .....................................................56
Section 8.02. Guaranties ...............................................57
Section 8.03. Liens ....................................................58
Section 8.04. Leases ...................................................59
Section 8.05. Sale and Leaseback .......................................59
Section 8.06. Investment ...............................................59
Section 8.07. Restricted Payments ......................................60
Section 8.08. Sale of Assets ...........................................60
Section 8.09. Transactions with Affiliates .............................61
Section 8.10. Mergers ..................................................61
Section 8.11. Acquisitions .............................................62
Section 8.12. No Activities Leading to Forfeiture ......................62
-ii-
<PAGE> 4
Section 8.13. Capital Expenditures. ....................................62
Section 8.14. Amendments or Waivers of Certain Documents ...............62
Section 8.15. Restrictions. ............................................62
ARTICLE 9. FINANCIAL COVENANTS ............................................62
Section 9.01. Interest Coverage Ratio ..................................63
Section 9.02. Minimum Net Worth ........................................63
Section 9.03. Current Ratio ............................................63
Section 9.04. Balance Sheet Leverage Ratio .............................63
Section 9.05. Consolidated EBIT ........................................63
ARTICLE 10. EVENTS OF DEFAULT. ............................................63
Section 10.01. Events of Default .......................................63
Section 10.02. Remedies. ...............................................66
ARTICLE 11. UNCONDITIONAL GUARANTY ........................................66
Section 11.01. Guarantied Obligations. .................................66
Section 11.02. Performance Under This Agreement ........................67
Section 11.03. Waivers. ................................................67
Section 11.04. Releases ................................................69
Section 11.05. Marshaling ..............................................69
Section 11.06. Liability. ..............................................70
Section 11.07. Unconditional Obligation ................................70
Section 11.08. Election to Perform Obligations .........................70
Section 11.09. No Election. ............................................70
Section 11.10. Severability. ...........................................71
Section 11.11. Other Enforcement Rights. ...............................71
Section 11.12. Delay or Omission: No Waiver ............................71
Section 11.13. Restoration of Rights and Remedies. .....................71
Section 11.14. Cumulative Remedies .....................................72
Section 11.15. Survival. ...............................................72
Section 11.16. No Setoff. Counterclaim or Withholding: Gross-Up ........72
Section 11.17. Payment in Applicable Currency. .........................72
ARTICLE 12. THE ADMINISTRATIVE AGENT ......................................72
Section 12.01. Appointment. Powers and Immunities of
Administrative Agent ............................................72
Section 12.02. Reliance by Administrative Agent. .......................73
Section 12.03. Defaults. ...............................................73
Section 12.04. Rights of Administrative Agent as a
Lender. .........................................................74
Section 12.05. Indemnification of Administrative Agent. ................74
Section 12.06. Documents. ..............................................75
Section 12.07. Non-Reliance on Administrative Agent and Other
Lenders .........................................................75
Section 12.08. Failure of Administrative Agent to Act. .................75
Section 12.09. Resignation or Removal of Administrative Agent. .........75
Section 12.10. Amendments Concerning Agency Function ...................76
Section 12.11. Liability of Administrative Agent .......................76
Section 12.12. Transfer of Agency Function .............................76
Section 12.13. Non-Receipt of Funds by the Administrative Agent. .......76
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<PAGE> 5
Section 12.14. Withholding Taxes. ......................................77
Section 12.15. Several Obligations and Rights of Lenders. ..............77
Section 12.16. Pro Rata Treatment of Loans Etc. ........................77
Section 12.17. Sharing of Payments Among Lenders. ......................78
Section 12.18. Security Documents. .....................................78
Section 12.19. Collateral. .............................................79
Section 12.20. Amendment of Article 12. ................................79
ARTICLE 13. MISCELLANEOUS .................................................79
Section 13.01. Amendments and Waivers ..................................79
Section 13.02. Usury ...................................................80
Section 13.03. Expenses ................................................80
Section 13.04. Survival. ...............................................81
Section 13.05. Assignment: Participations. .............................81
Section 13.06. Notices. ................................................82
Section 13.07. Setoff ..................................................82
Section 13.08. JURISDICTION; IMMUNITIES ................................82
Section 13.09. Table of Contents: Headings .............................84
Section 13.10. Severability ............................................84
Section 13.11. Counterparts. ...........................................84
Section 13.12. Integration. ............................................84
Section 13.13. GOVERNING LAW ...........................................84
Section 13.14. Confidentiality .........................................84
Section 13.15. Treatment of Certain Information. .......................85
Section 13.16. Assumption: Reaffirmation. ..............................85
Section 13.17. Revised Schedules. ......................................86
Section 13.18. Refund of Taxes .........................................86
Section 13.19. Judgment Currency .......................................87
Section 13.20. Limited Waive ...........................................87
Section 13.21. Subordination Agreements. ...............................87
EXHIBITS
Exhibit A1 Revolving Credit Note
Exhibit A2 Swingline Note
Exhibit B1 Form of Compliance Certificate
Exhibit B2 Form of Borrowing Base Certificate
Exhibit C1 Opinion of Counsel to the LCC Consolidated Entities and the
Individual Guarantor
Exhibit C2 Opinion of Norwegian Counsel to the Subsidiary Borrower
Exhibit D Singh Guaranty
Exhibit E Cash Collateral Account Agreement
SCHEDULES
-iv-
<PAGE> 6
Schedule 6.04 Litigation
Schedule 6.07 Taxes
Schedule 6.09 Subsidiaries and Affiliates
Schedule 6.10 Credit Arrangements
Schedule 6.11 Material Contracts
Schedule 6.12 Proprietary Rights
Schedule A Schedule A to the Security Agreement
Schedule B Schedule A to the Intellectual Property Security Agreement
Schedule C Schedule A to the Pledge Agreement
-v-
<PAGE> 7
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 30,
1998 among LCC INTERNATIONAL, INC., a corporation organized under the laws of
Delaware and successor by merger to Old LCC (including its successors and
assigns, the "Borrower"); LCC EUROPE AS, a limited liability company organized
under the laws of Norway (including its successors and assigns, the "Subsidiary
Borrower"); LCC DESIGN SERVICES, L.L.C., a limited liability company organized
under the laws of Delaware, LCC DEVELOPMENT COMPANY, L.L.C., a limited liability
company organized under the laws of Delaware, MICROCELL MANAGEMENT, INC., a
corporation organized under the laws of Delaware ("Microcell"), and KOLL
TELECOMMUNICATIONS SERVICES, L.L.C., a limited liability company organized under
the laws of Delaware (the "New Subsidiary Guarantor") (each of the foregoing
entities other than the Subsidiary Borrower, together with each of the
Subsidiaries of the Borrower which shall become a party hereto as a "Subsidiary
Guarantor" from time to time in accordance with Section 7.09 hereof, are
referred to herein collectively as the "Subsidiary Guarantors" and, together
with the Borrower and the Subsidiary Borrower, the "Obligors"); each of the
financial institutions which is a signatory hereto as a "Lender" or which shall
become a party hereto as a "Lender" from time to time (individually a "Lender"
and collectively the "Lenders"); and THE CHASE MANHATTAN BANK, a bank organized
under the laws of New York and successor by merger to The Chase Manhattan Bank
(National Association), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
WHEREAS, the Borrower, the Subsidiary Borrower, the Subsidiary
Guarantors (other than the New Subsidiary Guarantor), the Lenders and the
Administrative Agent have entered into that certain Second Amended and Restated
Credit Agreement dated as of December 15, 1997 (the "Existing Credit
Agreement"), pursuant to which the Lenders have (a) extended credit to the
Borrower in the aggregate amount of $20,000,000 evidenced by the Revolving
Credit Notes issued by the Borrower and the Letters of Credit issued thereunder
and guarantied by each of the Subsidiary Guarantors (other than the New
Subsidiary Guarantor) and (b) extended credit to the Subsidiary Borrower in
Norwegian Krone in an aggregate amount of $2,500,000 evidenced by the Swingline
Notes issued by the Subsidiary Borrower and guarantied by the Borrower and the
Subsidiary Guarantors (other than the New Subsidiary Guarantor);
WHEREAS, the Borrower, the Subsidiary Borrower, the Subsidiary
Guarantors, the Lenders and the Administrative Agent have entered into this
Agreement to amend and restate the Existing Credit Agreement to provide for,
among other things, the extension of the Termination Date to March 31, 2000, the
entering of the Singh Guaranty by the Individual Guarantor, the addition of the
New Subsidiary Guarantor as a "Subsidiary Guarantor" and modifications of
certain covenants and definitions contained therein; and
<PAGE> 8
WHEREAS, the Obligors have requested that the Lenders make loans to the
Borrower and the Subsidiary Borrower, the repayment of which will be guarantied
by the Subsidiary Guarantors; each Obligor will receive direct economic and
financial benefits from the Debt incurred under this Agreement and the other
Facility Documents and the incurrence of such Debt is in the best interest of
such Obligor; and each Obligor acknowledges that the Lenders would not provide
the financing hereunder but for the joint and several obligations of such
Obligor.
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS
SECTION 1.01. DEFINITIONS As used in this Agreement the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
"Acquisition" means any transaction pursuant to which any LCC
Consolidated Entity (a) acquires a majority of the voting Capital Stock (or
warrants, options or other rights to acquire such Capital Stock) of any Person,
(b) causes or permits any Person to be merged into such LCC Consolidated Entity,
in any case pursuant to a merger, purchase of assets or any reorganization
providing for the delivery or issuance to the holders of such Person's then
outstanding Capital Stock, in exchange for such Capital Stock, of cash or
Capital Stock of any LCC Consolidated Entity, or a combination thereof, or (c)
purchases all or substantially all of the business or assets of any Person.
"Additional Costs" shall have the meaning assigned to such term in
Section 4.01.
"Administrative Agent" shall have the meaning assigned to such term in
the introductory paragraph hereof.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any LCC
Consolidated Entity; (b) which directly or indirectly beneficially owns or holds
20% or more of any class of voting Capital Stock of any LCC Consolidated Entity;
(c) 20% or more of the voting Capital Stock of which is directly or indirectly
beneficially owned or held by any LCC Consolidated Entity; or (d) which is a
partnership in which any LCC Consolidated Entity is a general partner. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting Capital Stock, by contract, or otherwise.
"Agreement" means this Third Amended and Restated Credit Agreement, as
amended or supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections, Exhibits,
Schedules and the like of this Agreement unless otherwise indicated.
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<PAGE> 9
"Applicable Rate" means, for any day, with respect to any Loan, or with
respect to the facility fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption "Fixed Rate Margin",
"Facility Fee Rate" or "Variable Rate Margin", as the case may be, based upon
the Cash Flow Leverage Ratio applicable on such date:
<TABLE>
<CAPTION>
VARIABLE
CASH FLOW LEVERAGE FIXED RATE FACILITY FEE RATE
RATIO RATE
MARGIN MARGIN
<S> <C> <C> <C> <C>
CATEGORY 1 Less than 1.50 to 1 1.000% .250% .000%
CATEGORY 2 Greater than or equal 1.500% .375% .250%
to 1.50 to 1 but less
than 3.00 to 1
CATEGORY 3 Greater than or equal 2.000% .500% .500%
to 3.00 to 1
</TABLE>
For purposes of the foregoing, (a) the Cash Flow Leverage Ratio shall
be determined as of the end of each fiscal quarter of the Borrower based upon
the Borrower's consolidated financial statements delivered pursuant to Section
7.08(a) or (b); and (b) each change in the Applicable Rate resulting from a
change in the Cash Flow Leverage Ratio shall be effective during the period
commencing on and including the date of delivery to the Administrative Agent of
such consolidated financial statements indicating such change and ending on the
date immediately preceding the effective date of the next change in the
Applicable Rate; provided that the Cash Flow Leverage Ratio shall be deemed to
be in Category 3 (i) at any time an Event of Default has occurred and is
continuing and has not been waived or (ii) if the Borrower fails to deliver the
consolidated financial statements required to be delivered by it pursuant to
Section 7.08(a) or (b), during the period from the expiration of the time for
delivery thereof until such consolidated financial statements are delivered. The
initial Applicable Rate shall be determined by reference to Category 3.
"Assigned Agreements" shall have the meaning assigned to such term in
the Security Agreement.
"Assumption Agreements" means the Assumption Agreements in the form of
Exhibit J to the Credit Agreement, dated as of June 14, 1996, among the
Borrower,
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<PAGE> 10
LCC Design Services, L.L.C., LCC Development Company, L.L.C., the Lenders and
the Administrative Agent delivered under Section 7.09.
"Available Liquidity" means, at any time, the result of (a) the sum of
(i) the Cap plus (ii) Domestic Cash Equivalents and 50% of the Foreign Cash
Equivalents held by the Borrower at such time minus (b) the Loans and the Letter
of Credit Obligations outstanding at such time.
"Balance Sheet Leverage Ratio" means, at any date of determination
thereof, the ratio of (a) Consolidated Total Liabilities to (b) Consolidated Net
Worth.
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York, New York and, whenever such day
relates to a Fixed Rate Loan or notice with respect to any Fixed Rate Loan, a
day on which dealings in Dollar or Norwegian Krone deposits are also carried out
in the London or Norwegian interbank market.
"Borrowing Base" means, at any date of determination thereof, an amount
determined by the Administrative Agent with reference to the most recent
Borrowing Base Certificate to be equal to 85% of the aggregate book value (net
of credit balances) of Eligible Receivables.
"Borrowing Base Certificate" means the borrowing base certificate
substantially in the form of EXHIBIT B2 to be delivered by the Borrower under
the terms of this Agreement.
"Borrower" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"Business" means the business, anywhere in the world, of (i) wireless
telecommunications network planning, design, engineering and consulting
(including, without limitation, construction management services, site
acquisition services and system deployment services), (ii) engineering advice
and management services relating to the acquisition of wireless
telecommunications systems, (iii) developing, providing, distributing and
marketing of specialized cellular and other wireless telecommunications software
for photogrammetry, planning, system management, optimization, fraud control,
billing, customer information and other functions, (iv) developing, producing,
distributing and marketing of wireless telecommunications measurement and
evaluation hardware, (v) acquiring (whether by sale/leaseback or on a
build-to-suit basis), constructing and operating telecommunications towers and
related site components for supporting antennae and housing and base stations in
a wireless network, (vi) leasing space on such towers and at such sites and
(vii) any other business functionally interrelated with or incidental to any of
the foregoing.
"Cap" means the lesser of (a) the sum of (i) the lesser of (A) the
Borrowing Base and (B) $10,000,000 plus (ii) the lesser of (A) the amount of
cash deposited
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<PAGE> 11
with the Administrative Agent to the extent such cash secures the Guarantied
Obligations under the Cash Collateral Account Agreement and (B) $12,500,000 and
(b) the aggregate amount of the Commitments.
"Capital Expenditures" means, with respect to any Person, any
expenditure of such Person to acquire, construct or lease fixed or capital
assets or additions to equipment (including renewals, improvements, capitalized
repairs, replacements and incurrence of obligations under Capital Leases) which
has been or should be capitalized on the books of such Person in accordance with
GAAP but, in any event, excluding all amounts expended with respect to the
design, development, introduction and marketing of new products and services or
improvements to existing products and services (including, without limitation,
software development costs).
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Capital Stock" means (a) any shares, interests, participations or
other equivalents of or interests in (however designated) corporate stock,
including, without limitation, shares of preferred or preference stock, (b) any
limited liability company interests, membership interests or other equivalent
interests or participations (however designated) in any limited liability
company and (c) any general or limited partnership interests or other interests
or participations in any partnership, joint venture, trust or similar entity, in
each case whether or not evidenced by stock certificates or similar instruments.
"Cash Collateral Account Agreement" means the Cash Collateral Account
Agreement in the form of Exhibit E to be delivered by the Individual Guarantor
under the terms of this Agreement, as amended or supplemented from time to time.
"Cash Flow Leverage Ratio" means, at any date of determination thereof,
the ratio of (a) Consolidated Debt to (b) Consolidated EBITDA for the most
recently ended Fiscal Quarter.
"'class' of Loans" shall have the meaning assigned to such term in
Section 2.01(c).
"Closing Date" means the date this Agreement has been executed by the
Borrower, the Subsidiary Borrower, the Subsidiary Guarantors, the Lenders and
the Administrative Agent.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all of any Obligor's right, title and interest in
and to Property in which such Obligor has granted a Lien to the Administrative
Agent under any Facility Document.
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<PAGE> 12
"Commitments" means the Revolving Credit Commitments and the Swingline
Loan Commitments.
"Compliance Certificate" means the compliance certificate in the form
of EXHIBIT B1 to be delivered by the Borrower under the terms of this Agreement.
"Consolidated Capital Expenditures" means, with respect to any fiscal
period, the aggregate amount of Capital Expenditures made by the LCC
Consolidated Entities (other than Microcell) for such period, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Current Assets" means, at any date of determination
thereof, all assets of the LCC Consolidated Entities treated as current assets,
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" means, at any date of determination
thereof, all liabilities of the LCC Consolidated Entities treated as current
liabilities (other than the current portion of the Notes and the Telcom
Subordinated Note), as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Debt" means, at any date of determination thereof, the
aggregate amount of Debt of the LCC Consolidated Entities, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated EBIT" means, with respect to any fiscal period, the sum
of (a) Consolidated Net Income for such period, plus (b) the aggregate amount of
(i) Consolidated Income Tax Expense and (ii) Consolidated Interest Expense, to
the extent that such aggregate amount was deducted in the computation of
Consolidated Net Income for such period.
"Consolidated EBITDA" means, with respect to any fiscal period, the sum
of (a) Consolidated EBIT for such period, plus (b) the aggregate amount of
depreciation, amortization expense and non-cash accruals under the Phantom
Membership Plan, to the extent that such aggregate amount was deducted in the
computation of Consolidated EBIT for such period.
"Consolidated Income Tax Expense" means, with respect to any fiscal
period, the amount of taxes accrued by the LCC Consolidated Entities during such
period, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any fiscal
period, the amount of interest accrued on, and with respect to, Consolidated
Debt during such period (including, without limitation, amortization of debt
discount and financing fees and imputed interest on Capital Leases) plus all
finance charges, premiums and other fees, charges and expenses extracted from
any LCC Consolidated Entity in exchange for the forbearance from the collection
of money during such period, as determined on a consolidated basis in accordance
with GAAP.
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<PAGE> 13
"Consolidated Net Income" means, with respect to any fiscal period, net
income of the LCC Consolidated Entities for such period (but in any event
excluding income resulting from the reversal of reserves taken against
receivables, promissory notes or investments in DCR or NextWave), as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, at any date of determination thereof,
the sum of (i) all amounts which would be included under stockholders' equity on
a consolidated balance sheet of the LCC Consolidated Entities plus (ii)
Consolidated Subordinated Debt, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Rentals" means, with respect to any fiscal period, all
rental expense due under the leases (other than Capital Leases) of the
Consolidated Entities during such period, as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Senior Interest Expense" means, with respect to any
fiscal period, the result of (a) Consolidated Interest Expense minus (b) the
amount of interest accrued on, and with respect to, Consolidated Subordinated
Debt, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Subordinated Debt" means, at any date of determination
thereof, the Debt under the MCI Subordinated Notes, the Debt under the Telcom
Subordinated Note and any other indebtedness of any LCC Consolidated Entity for
borrowed money which is subordinated to the Obligations on terms and conditions
acceptable to the Required Lenders, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Liabilities" means, at any date of determination
thereof, all liabilities of the LCC Consolidated Entities (other than the MCI
Subordinated Notes and the Telcom Subordinated Note), as determined on a
consolidated basis in accordance with GAAP.
"Currency Protection Agreement" means any foreign exchange contract,
currency swap agreement or other financial agreement or arrangement between one
or more Lenders and an Obligor designed to protect against fluctuations in
currency values.
"Current Ratio" means, at any date of determination thereof, the ratio
of (a) Consolidated Current Assets to (b) Consolidated Current Liabilities.
"Customer" means the account debtor with respect to any of the
Receivables.
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<PAGE> 14
"DCR" means Pocket Communications, Inc., a Maryland corporation,
formerly known as DCR Communications, Inc.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
Property or services (except trade payables in the ordinary course of business);
(c) Unfunded Benefit Liabilities of such Person; (d) all reimbursement
obligations (whether or contingent or otherwise) of any outstanding letters of
credit issued for the account of such Person; (e) obligations arising under
acceptance facilities; (f) liabilities under Guaranties of Debt of any other
Person; (g) obligations secured by any Lien on Property of such Person; (h)
obligations of such Person as lessee under Capital Leases; (i) the net
obligations of such Person in respect of Interest Rate Protection Agreements and
Currency Protection Agreements; and (j) all Capital Stock of such Person subject
to repurchase or redemption during the term of this Agreement, other than at the
sole option of such Person.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and, to
the extent permitted by law, any other amount payable by any Obligor under this
Agreement, any Note or any other Facility Document that is not paid when due
(whether at stated maturity, by acceleration or otherwise), a rate per annum
during the period from and including the due date, to, but excluding the date on
which such amount is paid in full equal to two percent (2%) above the Variable
Rate as in effect from time to time plus the Applicable Rate (if any); provided
that, if the amount so in default is principal of a LIBO Rate Loan and the due
date thereof is a day other than the last day of the Interest Period therefor,
the "Default Rate" for such principal shall be, for the period from and
including the due date and to but excluding the last day of the Interest Period
therefor, two percent (2%) above the interest rate for such LIBO Rate Loan as
provided in Section 2.11 and, thereafter, the rate provided for above in this
definition; provided further that, if the amount so in default is principal of a
NIBO Rate Loan, the "Default Rate" for such principal shall be two percent (2%)
above the interest rate for such NIBO Rate Loan as provided in Section 2.11.
"Denomination Date" means, in relation to any borrowing, conversion or
renewal in Norwegian Krone, the date that is three Banking Days before the date
such borrowing, conversion or renewal is made.
"Dollar Equivalent" means, with respect to an amount of Norwegian Krone
on any date, the amount of Dollars that may be purchased with such amount of
Norwegian Krone at the Spot Exchange Rate with respect to Norwegian Krone on
such date.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
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<PAGE> 15
"Domestic Cash Equivalents" means (a) direct obligations of the United
States of America or any agency thereof with maturities of one year or less from
the date of acquisition, (b) commercial paper of a domestic issuer rated at
least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors
Service, Inc., (c) certificates of deposit, time deposits, repurchase
agreements, reverse repurchase agreements and bankers' acceptances with
maturities of one year or less from the date of acquisition issued by any
commercial bank operating within the United States of America having capital and
surplus in excess of $500,000,000 or (d) money market or mutual funds whose sole
investments are comprised of investments permitted under the foregoing clauses
(a) through (c).
"Domestic Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Consolidated
Entities or any ERISA Affiliate and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Domestic Subsidiary" means any Subsidiary of the Borrower which is not
a Foreign Subsidiary.
"Eligible Receivables" means, as of any date of determination thereof,
all Receivables of the Obligors as to which the Administrative Agent holds a
first priority perfected security interest, provided that such Receivables: (a)
arose in the ordinary course of business of the Obligors; (b) do not represent
amounts owed to the Obligors for goods shipped on a consignment or "bill and
hold" basis; (c) represent amounts owed for goods sold or leased or services
rendered to a Customer; (d) are payable in Dollars or Norwegian Krone; (e) do
not include any amount which is not due or has not been paid within 90 days of
the due date; (f) do not have as the Customer a Person that is the subject of
any proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution or liquidation law; (g) do not have as the Customer any LCC
Consolidated Entity and, to the extent that the aggregate amount of such
Receivables exceeds 10% of all Receivables, any other Affiliate; (h) do not have
as the Customer a Person located outside the United States to the extent that
the aggregate amount of such Receivables exceeds 25% of all Receivables; (i) do
not include any portion of any Receivable as to which the Customer has asserted
any defense; (j) do not include that portion of any Receivable as to which any
offset or counterclaim has been asserted; (k) do not include the amount by which
the aggregate unpaid principal balance of all Receivables from a Customer
exceeds 15% of the aggregate unpaid principal balance of all Receivables from
all Customers; (l) do not include any Receivable due from a Customer if 50% or
more of the aggregate Receivables from that Customer have not been paid within
90 days of the due date; (m) do not include any Receivable arising out of any
Assigned Agreement which by its terms, forbids or prohibits the assignment of
such Receivable for collateral purposes; and (n) do not include any Receivable
the Required Lenders in the exercise of their reasonable discretion have deemed
ineligible because of the impairment of the value thereof to
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<PAGE> 16
the Lenders, the impairment of the Lenders to realize such value thereof or the
uncertainty as to the creditworthiness of the Customer thereunder.
"Environmental Laws" means any and all domestic, foreign, federal,
state and local statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, licenses, agreements with Governmental Authorities or
other governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which any LCC Consolidated Entity is a member, or (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which any LCC Consolidated Entity is a member.
"Event of Default" shall have the meaning assigned to such term in
Section 10.01.
"Existing Credit Agreement" shall have the meaning assigned to such
term in the recitals hereof.
"Facility Documents" means this Agreement, the Notes, the Letters of
Credit, the Assumption Agreements, the Singh Guaranty, the Interest Rate
Protection Agreements, the Currency Protection Agreements, the MCI Subordination
Agreement, the Telcom Subordination Agreement and the Security Documents, as
each may be amended or supplemented from time to time.
"Federal Funds Rate" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of New York for such day (or for any day
that is not a Banking Day, for the immediately preceding Banking Day).
"Fiscal Quarter" means any calendar quarter.
"Fiscal Quarter Net Worth Increase Amounts" means, with respect to each
Fiscal Quarter, (a) the greater of (i) Zero Dollars ($0) and (ii) 50% of
Consolidated
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<PAGE> 17
Net Income for such Fiscal Quarter plus (b) 75% of the proceeds (net of
underwriting commissions and discounts and reasonable fees and expenses) from
the issuance of Capital Stock of the Borrower (other than via the conversion of
the MCI Subordinated Notes or the conversion of the Telcom Subordinated Note)
plus (c) 100% of the proceeds (net of underwriting commissions and discounts and
reasonable fees and expenses) from the incurrence of Consolidated Subordinated
Debt during such Fiscal Quarter plus (d) 100% of income resulting from the
reversal of reserves taken against receivables, promissory notes or investments
in DCR or NextWave during such Fiscal Quarter.
"Fiscal Year" means any calendar year.
"Fixed Rate Loan" means any LIBO Rate Loan or NIBO Rate Loan.
"Foreign Cash Equivalents" means: (a) direct obligations of, or
obligations fully guarantied or insured by, the government of the country in
which any Foreign Subsidiary is incorporated or has its principal place of
business with maturities of one year or less from the date of acquisition; and
(b) direct demand obligations issued by the principal banking institutions
located in any such country.
"Foreign Plan" means any pension plan or other deferred compensation
plan, program or arrangement maintained by any Foreign Subsidiary which may or
may not, under applicable local law, be required to be funded through a trust or
other funding vehicle.
"Foreign Subsidiary" means any Subsidiary of the Borrower which was
organized under the laws of a jurisdiction other than the United States of
America, any state thereof or the District of Columbia.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting any LCC Consolidated Entity or any Affiliate before any Governmental
Authority or the receipt of notice by any such party that any of them is a
suspect in or a target of any governmental inquiry or investigation, which may
result in an indictment of any of them or the seizure or forfeiture of any of
their respective Properties.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 6.05(a) (except for changes concurred in by the LCC Consolidated
Entities' independent public accountants).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
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<PAGE> 18
"Guarantied Obligations" means (a) the sum of (i) the principal amount
of Loans and Letter of Credit Obligations incurred in excess of the lesser of
(A) the Borrowing Base and (B) $10,000,000, plus (ii) if, at any time, after
giving effect to clause (i), the principal amount of the outstanding Loans and
Letter of Credit Obligations is greater than $7,500,000 and was equal to or less
than the Borrowing Base when incurred, the amount by which such principal amount
exceeds the Borrowing Base at such time up to a maximum of $2,500,000; provided
that in no event shall the aggregate amount of Guarantied Obligations under this
clause (a) exceed $12,500,000; (b) all unpaid interest thereon (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding); and (c) all unpaid fees, indemnities, costs and expenses relating
to the collection thereof (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or any Lender). For
purposes of illustration only, (w) if the Borrowing Base was $10,000,000 at the
time of incurrence of $12,000,000 of Obligations and the Borrowing Base later
drops to $8,000,000, the Guarantied Obligations under clause (a) equals
$4,000,000 [(i) $2,000,000+ (ii) $2,000,000)]; (x) if the Borrowing Base was
$7,500,000 at the time of incurrence of $12,500,000 of Obligations and the
Borrowing Base later drops to $5,000,000, the Guarantied Obligations under
clause (a) equals $5,000,000 [((i) $5,000,000+ (ii) $0)]; (y) if the Borrowing
Base was $10,000,000 at the time of incurrence of $22,500,000 of Obligations and
the Borrowing Base later drops to $7,500,000, the Guarantied Obligations under
clause (a) equals $12,500,000 [(i) $12,500,000+ (ii)$2,500,000 but $12,500,000
cap]; and (z) if the Borrowing Base was $9,000,000 at the time of incurrence of
$15,000,000 of Obligations and the Borrowing Base later drops to $7,000,000, the
Guarantied Obligations under clause (a) equals $7,500,000 [(i)
$6,000,000+(ii)$1,500,000].
"Guaranty" means, with respect to any Person, guaranties, endorsements
(other than for collection in the ordinary course of business) and other
contingent obligations of such Person with respect to the obligations of any
other Person (including, but not limited to, an agreement to purchase any
obligation, stock, assets, goods or services or to supply or advance any funds,
assets, goods or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the
creditors of any such other Person against loss).
"Hazardous Materials" means any and all pollutants, contaminants, toxic
or hazardous wastes or any other substances, the removal of which is required or
the generation, manufacture, refining, production, processing, treatment,
storage, handling, transportation, transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is restricted, prohibited or penalized
by any applicable law.
"Individual Guarantor" means Dr. Rajendra Singh.
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<PAGE> 19
"Intellectual Property Security Agreement" means the Intellectual
Property Security Agreement dated as of June 14, 1996 between the Borrower and
the Administrative Agent, as amended or supplemented from time to time.
"Interest Coverage Ratio" means, at any date of determination thereof,
the ratio of (a) Consolidated EBIT for the most recently ended calendar month to
(b) Consolidated Senior Interest Expense for such calendar month.
"Interest Period" means, with respect to any Fixed Rate Loan, the
period commencing on the date such Fixed Rate Loan is made, converted from a
Variable Rate Loan or renewed, as the case may be, and ending, as the Borrower
or the Subsidiary Borrower may select pursuant to Section 2.07, on (a) in the
case of LIBO Rate Loans, the numerically corresponding day in the first, second,
third, or sixth calendar month thereafter or (b) in the case of NIBO Rate Loans,
the numerically corresponding day in the first or second week or the first,
second, third, or sixth calendar month thereafter, provided that each such
Interest Period determined on the basis of calendar months which commences on
the last Banking Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Banking Day of the appropriate calendar month.
"Interest Rate Protection Agreement" means an interest rate swap, cap
or collar agreement or similar arrangement between one or more Lenders and an
Obligor providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.
"Investment" means any loan or advance to any Person or any purchase or
other acquisition of any capital stock, assets, obligations or other securities
of and Person, or any capital contribution to, investment in, or other
acquisition of any interest in, any Person.
"Issuing Lender" means The Chase Manhattan Bank, a bank organized under
the laws of New York, acting in its capacity as a Lender hereunder.
"Judgment Currency" shall have the meaning assigned to such term in
Section 13.18 hereof.
"Judgment Currency Conversion Date" shall have the meaning assigned to
such term in Section 13.18 hereof.
"LCC Consolidated Entities" means the Borrower and the Subsidiaries of
the Borrower.
"Lender" shall have the meaning assigned to such term in the
introductory paragraph hereof.
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<PAGE> 20
"Lending Office" means, for each Lender and for each type of Loan, the
lending office of such Lender (or of an affiliate of such Lender) designated as
such for such type of Loan on its signature page hereof or such other office of
such Lender (or of an affiliate of such Lender) as such Lender may from time to
time specify to the Administrative Agent and the Borrower or the Subsidiary
Borrower, as applicable, as the office by which its Loans of such type are to be
made and maintained.
"Letter of Credit Availability" means, at any date of determination
thereof, the amount by which (a) the lesser of (i) the result of (A) the
aggregate amount of the Revolving Credit Commitments as of such date, minus (B)
the unpaid aggregate principal amount of the Revolving Credit Loans then
outstanding and (ii) $5,000,000 exceeds (b) the aggregate amount of the Letter
of Credit Obligations at such date.
"Letter of Credit Funding" shall have the meaning assigned to such term
in Section 3.05(b) hereof.
"Letter of Credit Obligations" means, at any date of determination
thereof, all liabilities of the Borrower with respect to Letters of Credit,
whether or not any liability is contingent, including (without limitation) the
sum (without duplication) of (a) the aggregate amount available to be drawn
under the Letters of Credit then outstanding plus (b) the aggregate amount of
all unpaid Reimbursement Obligations.
"Letters of Credit" shall have the meaning assigned to such term in
Section 3.01(a) hereof.
"LIBO Base Rate" means with respect to any Interest Period for a LIBO
Rate Loan: the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of one percent (1%)) quoted at approximately 11:00 a.m. London time by the
principal London branch of the Reference Lender two Banking Days prior to the
first day of such Interest Period for the offering to leading banks in the
London interbank market of Dollar or Norwegian Krone deposits in immediately
available funds, for a period, and in an amount, comparable to the Interest
Period and principal amount of the LIBO Rate Loan which shall be made.
"LIBO Rate" means, for any LIBO Rate Loan for any Interest Period
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of one percent (1%)) reasonably determined by the Administrative Agent to be
equal to the quotient of (i) the LIBO Base Rate for such LIBO Rate Loan for such
Interest Period, divided by (ii) one minus the Reserve Requirement for such LIBO
Rate Loan for such Interest Period.
"LIBO Rate Loan" means any Loan when and to the extent the interest
rate therefor is determined on the basis of the definition "LIBO Rate."
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"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loan" means any loan made by a Lender pursuant to Section 2.01.
"Material Adverse Effect" means any material adverse effect on (a) the
business, profits, Properties or condition of the LCC Consolidated Entities,
taken as a whole, (b) the ability of any Obligor to perform their respective
obligations under each of the Facility Documents to which it is a party, (c) the
binding nature, validity or enforceability of any of the Facility Documents or
(d) the validity, perfection, priority or enforceability of the Liens in favor
of the Administrative Agent securing the Obligations hereunder, which, in each
case, arises from, or reasonably could be expected to arise from, any action or
omission of action on the part of any LCC Consolidated Entity or the occurrence
of any event or the existence of any fact or condition in respect of any LCC
Consolidated Entity or any of their respective Properties.
"Material Contract" means any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement to which any LCC
Consolidated Entity is a party, a copy of which would be required to be filed
with the Securities and Exchange Commission as an exhibit to a registration
statement pursuant to Item 601(b)(10) of Regulation S-K of the Securities and
Exchange Commission if such LCC Consolidated Entity were registering securities
under the Securities Act.
"Material Contract Termination" means, at any date of determination
thereof, that (a) during the 90 day period ending on such date, one or more
revenue-producing contracts between any LCC Consolidated Entity and another
Person or other Persons have been terminated by the other Person or not renewed
or extended by the other Person(s) pursuant to a renewal or extension option
therein contained, (b) such contracts represented, in the aggregate, more than
5% of the gross revenues of the LCC Consolidated Entities during the then most
recently ended Fiscal Year and (c) giving effect to the gross revenues
reasonably anticipated during the-then current Fiscal Year, the reasonably
anticipated gross revenues of the LCC Consolidated Entities for the then current
Fiscal Year will be less than 85% of those set forth for the then-current Fiscal
Year in the operating plan delivered to the Lenders.
"Material Revenue-Producing Contract" means any revenue- producing
contract between any LCC Consolidated Entity and another Person or other Persons
which represents more than 2.5% of the gross revenues of the LCC Consolidated
Entities during the then most recently ended Fiscal Year and, in the case of any
new such revenue-producing contract, any revenue-producing contract entered into
during such Fiscal Year which would represent more than 2.5% of the
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gross revenues of the LCC Consolidated Entities for the then current Fiscal Year
as set forth in its operating plan.
"MCI" means MCI Telecommunications Corporation, a Delaware corporation.
"MCI Note Purchase Agreement" means that certain Revolving Credit Note
Purchase Agreement dated as of June 27, 1994 among the Parent, the other members
of Old LCC and MCI, as amended by that certain Waiver and Amendment dated as of
May 30, 1995.
"MCI Note Purchase Documents" means the MCI Subordinated Notes, the MCI
Securityholders Agreement, the MCI Subordination Agreement and the other
agreements and instruments to be executed pursuant to the terms of each of such
MCI Note Purchase Documents.
"MCI Securityholders Agreement" means the Amended and Restated
Securityholders Agreement dated as of July 25, 1996 among the Parent, LCC,
Incorporated, TC Group, L.L.C., Old LCC and MCI, as amended by that certain
Amendment to Securityholders Agreement dated as of September 29, 1996.
"MCI Subordinated LCC Note" means that certain convertible Subordinated
Note Due 2000 in the principal amount of $20,000,000 issued by Old LCC to MCI
pursuant to the MCI Note Purchase Agreement, as amended by that certain
Amendment to Subordinated Note due 2000 dated as of July 25, 1996 and as further
amended by the Second Amendment to Subordinated Note due 2000 dated as of
October 23, 1997.
"MCI Subordinated Notes" means (a) the MCI Subordinated LCC Note and
(b) the MCI Subordinated Telcom Note.
"MCI Subordinated Telcom Note" means that certain convertible
Subordinated Note Due 2000 in the principal amount of $30,000,000 issued by the
Parent to MCI pursuant to the MCI Note Purchase Agreement, as amended by that
certain Amendment to Subordinated Note due 2000 dated as of July 25, 1996 among
the Parent, the Borrower and MCI, as further amended by that certain Second
Amendment to Subordinated Note due 2000 dated as of September 27, 1996 among the
Parent, Old LCC and MCI, as further amended by the Third Amendment to
Subordinated Note due 2000 dated as of September 27, 1996 among the Parent, Old
LCC and MCI and as further amended by the Fourth Amendment to Subordinated Note
due 2000 dated as of October 23, 1997 between the Borrower and MCI.
"MCI Subordination Agreement" means the Subordination and Intercreditor
Agreement dated as of September 30, 1996 among MCI, the Administrative Agent and
the Borrower, as amended by that certain letter dated November 7, 1996 between
MCI and the Borrower, as amended or supplemented from time to time.
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"Merger" means the merger of Old LCC with and into the Borrower, with
the Borrower being the surviving entity.
"Microcell" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"Microcell Loan Agreement" means that certain Revolving Credit Facility
and Security Agreement dated as of December 31, 1996 between the Borrower and
Microcell.
"Microcell Note" means that certain Revolving Credit Note dated
December 31, 1996 in the principal amount of $35,000,000 issued by Microcell to
the Borrower pursuant to the Microcell Loan Agreement.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by any LCC Consolidated Entity or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"New Subsidiary Guarantor" shall have the meaning assigned to such term
in the introductory paragraph hereof.
"NextWave" means NextWave Telecom, Inc., a Delaware corporation.
"NIBO Base Rate" means with respect to any Interest Period for a NIBO
Rate Loan: the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of one percent (1%)) quoted at approximately 11:00 a.m. Norwegian time by
the principal Norwegian branch of the Reference Lender two Banking Days prior to
the first day of such Interest Period for the offering to leading banks in the
Norwegian interbank market of Norwegian Krone deposits in immediately available
funds, for a period, and in an amount, comparable to the Interest Period and
principal amount of the NIBO Rate Loan which shall be made.
"NIBO Rate" means, for any NIBO Rate Loan for any Interest Period
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of one percent (1%)) reasonably determined by the Administrative Agent to be
equal to the quotient of (i) the NIBO Base Rate for such NIBO Rate Loan for such
Interest Period, divided by (ii) one minus the Reserve Requirement for such NIBO
Rate Loan for such Interest Period.
"NIBO Rate Loan" means any Loan when and to the extent the interest
rate therefor is determined on the basis of the definition "NIBO Rate."
"Norwegian Krone" and the sign "NOK" means lawful money of the Kingdom
of Norway.
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"Norwegian Krone Equivalent" means, with respect to an amount of
Dollars on any date, the amount of Norwegian Krone that may be purchased with
such amount of Dollars at the Spot Exchange Rate with respect to Dollars on such
date.
"Notes" means the Revolving Credit Notes and the Swingline Notes.
"Obligation Currency" shall have the meaning assigned to such term in
Section 13.18 hereof.
"Obligations" means the unpaid principal of and interest on (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Notes and all other obligations and liabilities of any Obligor
to the Administrative Agent or any Lender, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, this Agreement, any Note,
any Letter of Credit, any Interest Rate Protection Agreement, any Currency
Protection Agreement, any other Facility Document and any other document made,
delivered or given in connection therewith or herewith, whether on account of
principal, interest, Guaranties, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or any Lender) or otherwise.
"Obligors" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"Old ETP" means European Technology Partner AS, a Norwegian
corporation, prior to the closing under the ETP Asset Purchase Agreement.
"Old LCC" means LCC, L.L.C., a Delaware limited liability company,
prior to the effectiveness of the Merger.
"Parent" means Telcom Ventures, L.L.C., a Delaware limited liability
company.
"Participating Interest" means, with respect to each Letter of Credit,
(a) in the case of the Issuing Lender, its interest in such Letter of Credit
after giving effect to the granting of any participating interest therein
pursuant hereto and (b) in the case of each Participating Lender, its undivided
participating interest in such Letter of Credit.
"Participating Lender" means, with respect to any Letter of Credit, any
Lender (other than the Issuing Lender) with respect to its Participating
Interest in each Letter of Credit.
"Payor" shall have the meaning assigned to such term in Section 12.13.
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Phantom Membership Plan" means the LCC, L.L.C. 1994 Phantom Membership
Plan, as may amended or supplemented from time to time.
"Pledge Agreement" means the Pledge Agreement dated as of June 14, 1996
among the Obligors and the Administrative Agent, as amended or supplemented from
time to time.
"Prime Rate" means that rate of interest from time to time announced by
The Chase Manhattan Bank as its prime commercial lending rate.
"Principal Office" means the principal office of the Administrative
Agent, presently located at 270 Park Avenue, New York, New York 10017.
"Pro Forma Balance Sheet" shall have the meaning assigned to such term
in Section 6.05(c).
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Proprietary Rights" means all of the following along with all income,
royalties, damages and payments thereon (including damages and payments for past
or future infringements or misappropriations thereof), the rights to sue and
recover for past infringements and misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: (i) patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice) and any
reissues, continuations, continuations-in-part, revisions, extensions or
reexaminations thereof; (ii) trademarks, service marks, trade dress, trade names
and corporate names and registrations, renewals and applications for
registration thereof, together with the goodwill associated therewith; (iii)
copyrights and copyrightable works and registrations, renewals and applications
for registration thereof; (iv) mask works and registrations and applications for
registration thereof; (v) computer software (including all databases, data and
documentation); (vi) trade secrets and other confidential information (including
ideas, formulas, compositions, inventions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information); (vii) other intellectual property rights; and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
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"Purchase Money Lien" means a Lien on any Property acquired by any LCC
Consolidated Entity or placed on any Property of any LCC Consolidated Entity in
order to finance the acquisition or construction of such Property or the
construction of improvements located on such Property, or the assumption of any
Lien on Property existing at the time of the acquisition of such Property or of
the Person holding such Property or a Lien incurred in connection with any
conditional sale or other title retention agreement or a Capital Lease.
"Receivables" shall have the meaning assigned to such term in the
Security Agreement.
"Reference Lender" means The Chase Manhattan Bank (or, with respect to
Fixed Rate Loans, if The Chase Manhattan Bank no longer quotes on the London or
Norwegian interbank market, such successor leading bank in the London or
Norwegian interbank market which shall be reasonably appointed by the
Administrative Agent and shall be reasonably acceptable to the Borrower).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any bank, any change after
the date of this Agreement in United States federal, state, municipal or foreign
laws or regulations (including without limitation Regulation D) or the adoption
or making after such date of any written interpretations, directives or requests
applying to a class of banks of which such bank is a member, of or under any
United States, federal, state, municipal or foreign laws or regulations (whether
or not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender in accordance with the terms of this Agreement for
the payment made by the Issuing Lender under any Letter of Credit.
"Required Lenders" means, at any time while no Obligations are
outstanding, Lenders having at least 51% of the aggregate amount of the
Commitments and, at any time while Obligations are outstanding, Lenders holding
at least 51% of the aggregate amount of Obligations.
"Required Payment" shall have the meaning assigned to such term in
Section 12.13.
"Reserve Requirement" means for any Fixed Rate Loan for any Interest
Period therefor, the average maximum rate (expressed as a decimal) at which
reserves (including any marginal, supplemental or emergency reserves) are
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required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding $1,000,000,000 against "Eurocurrency liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the LIBO Base Rate or
NIBO Base Rate for Fixed Rate Loans is to be determined as provided in the
definition of "LIBO Base Rate" or "NIBO Base Rate" in this Section 1.01 or (ii)
any category of extensions of credit or other assets which include Fixed Rate
Loans.
"Restricted Payment" means, with respect to any Person, (a) the
declaration or payment of any dividends by such Person, or the purchase,
redemption, retirement or other acquisition for value of any of its Capital
Stock now or hereafter outstanding, or the making of any distribution of assets
to its stockholders, partners or members as such whether in cash, assets or in
obligations of such Person, or the allocation or other setting apart of any sum
for the payment of any dividend or distribution on, or for the purchase,
redemption, retirement or other acquisition of any shares of its Capital Stock,
or the making of any other distribution, by reduction of capital or otherwise,
in respect of any shares of its Capital Stock (including, without limitation,
any distributions made with respect to measurement shares for which stock
appreciation rights or phantom rights have been issued but in any event
excluding non-cash accruals under the Phantom Membership Plan) or (b) the making
of payments of interest on, or payments or prepayments of principal of, or
payments (or setting apart of money for a sinking or other analogous fund) for
the purchase, redemption, retirement or other acquisition of principal or
interest, on Consolidated Subordinated Debt.
"Revolving Credit Commitment" means, with respect to each Lender, the
obligation of such Lender to make its Revolving Credit Loans under this
Agreement in the aggregate principal amount set forth in SCHEDULE I, as such
amount may be reduced or otherwise modified from time to time.
"Revolving Credit Commitment Percentage" means, as to any Lender at any
date of determination thereof, the percentage of the aggregate Revolving Credit
Commitments constituted by such Lender's Revolving Credit Commitment at such
date.
"Revolving Credit Loan" means any loan made by a Lender pursuant to
Section 2.01(a).
"Revolving Credit Notes" means the promissory notes issued by the
Borrower in the form of EXHIBIT A1 hereto evidencing the Revolving Credit Loans
made by a Lender hereunder and all promissory notes delivered in substitution or
exchange therefor, as amended or supplemented from time to time.
"Revolving Credit Termination Date" means March 31, 2000.
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"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement dated as of June 14,
1996 among the Obligors and the Administrative Agent, as amended or supplemented
from time to time.
"Security Documents" means the Security Agreement, the Intellectual
Property Security Agreement, the Pledge Agreement, the Cash Collateral Account
Agreement and each other security document that may from time to time be
delivered to the Administrative Agent (including all financing statements,
fixture filings, mortgages, assignments and stock certificates delivered to the
Administrative Agent).
"Significant Subsidiary" means any Subsidiary of the Borrower other
than a Subsidiary of the Borrower which, if aggregated with all other
Subsidiaries of the Borrower which are not Obligors and considered as a single
Subsidiary, would not meet the definition of a "significant subsidiary"
contained in Regulation S-X of the Securities and Exchange Commission, as in
effect on the date hereof.
"Singh Guaranty" means the Unconditional Guaranty in the form of
Exhibit D to be delivered by the Individual Guarantor under the terms of this
Agreement, as amended or supplemented from time to time.
"Spot Exchange Rate" means, on any date of determination thereof, (a)
with respect to Norwegian Krone, the spot rate at which Dollars are offered on
such day by the principal London branch of the Reference Lender at approximately
11:00 a.m. (London time) and (b) with respect to Dollars, the spot rate at which
Norwegian Krone is offered on such date by the principal London branch for
Dollars at approximately 11:00 a.m. (London time). For purposes of determining
the Spot Exchange Rate in connection with a borrowing, conversion or renewal in
Norwegian Krone, such Spot Exchange Rate shall be determined as of the
Denomination Date for such borrowing, conversion or renewal with respect to
transactions in Norwegian Krone that will settle on the date of such borrowing,
conversion or renewal.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which at least a
majority of the Voting Stock having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by such Person.
"Wholly-Owned Subsidiary" means, with respect to any Person, any such
corporation, partnership, limited liability company or other entity of which all
of such Capital Stock are so owned by such Person.
"Subsidiary Borrower" shall have the meaning assigned to such term in
the introductory paragraph hereof.
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"Subsidiary Guarantors" shall have the meaning assigned to such term in
the introductory paragraph hereof.
"Swingline Loan" means any loan made by a Lender pursuant to Section
2.01(b).
"Swingline Loan Commitment" means, with respect to each Lender, the
obligation of such Lender to make its Swingline Loans under this Agreement in
the aggregate principal amount set forth in SCHEDULE I, as such amount may be
reduced or otherwise modified from time to time.
"Swingline Loan Termination Date" means March 31, 2000.
"Swingline Notes" means the promissory notes issued by the Subsidiary
Borrower in the form of EXHIBIT A2 hereto evidencing the Swingline Loans made by
a Lender hereunder and all promissory notes delivered in substitution or
exchange therefor, as amended or supplemented from time to time.
"Taxes" shall have the meaning assigned to such term in Section 4.06
hereof.
"Telcom Documents" means the Telcom Subordinated Notes, the Telcom
Subordination Agreement and the other agreements and instruments to executed
pursuant to the terms of each of such Telcom Documents.
"Telcom Subordinated Note" means that certain Convertible Subordinated
Promissory Note dated January 28, 1999 in the principal amount of $5,000,000
issued by the Borrower to the Parent due April 30, 2000.
"Telcom Subordination Agreement" means that certain Subordination and
Intercreditor Agreement dated as of January 28, 1999 among the Parent, the
Borrower and the Administrative Agent, as amended or supplemented from time to
time.
"Termination Date" means, with respect to any Revolving Credit Loan,
the Revolving Credit Termination Date and, with respect to any Swingline Loan,
the Swingline Loan Termination Date.
"'type' of Revolving Credit Loans" shall have the meaning assigned to
such term in Section 2.01(c).
"'type' of Swingline Loans" shall have the meaning assigned to such
term in Section 2.01(c).
"UCP" means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce, Publication No. 500.
"Unconditional Guaranty" shall have the meaning assigned to such term
in Section 11.01.
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"Unfunded Benefit Liabilities" means, with respect to any Domestic Plan
or Foreign Plan, the amount (if any) by which the present value of all benefit
liabilities (within the meaning of Section 4001(a)(16) of ERISA or within the
meaning of any similar foreign law) under such Domestic Plan or Foreign Plan
exceeds the fair market value of all assets of such Domestic Plan or Foreign
Plan allocable to such benefit liabilities, as determined on the most recent
valuation date of such Domestic Plan or Foreign Plan and in accordance with the
provisions of ERISA or such similar foreign law for calculating the potential
liability of any LCC Consolidated Entity or any ERISA Affiliate under Title IV
of ERISA or such similar foreign law.
"Variable Rate" means, for any day, the higher of (a) the Federal Funds
Rate for such day plus 1/2 of one percent and (b) the Prime Rate for such day.
"Variable Rate Loan" means any Revolving Credit Loan when and to the
extent the interest rate for such Revolving Credit Loan is determined in
relation to the Variable Rate.
"Voting Stock" means, with respect to any Person, the Capital Stock of
such Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of members of the
Board of Directors (or Persons performing similar functions, including, without
limitation, the members of any members' committee or similar committee of a
limited liability company) of such Person, including in any event, without
limitation, any membership interest or other interest in a limited liability
company which is ordinarily, in the absence of contingencies, entitled to vote
or consent with respect to matters affecting the management or conduct of
business of such limited liability company.
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SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
ARTICLE 2. THE CREDIT.
SECTION 2.01. LOANS. (a) Subject to the terms and conditions of this
Agreement, each of the Lenders severally agrees to make revolving credit loans
(the "Revolving Credit Loans") to the Borrower from time to time from and
including the Closing Date to but excluding the Revolving Credit Termination
Date, in such amounts that the sum of (i) the aggregate principal amount of such
Lender's Revolving Credit Loans at any one time outstanding plus (ii) such
Lender's pro rata share of the Letter of Credit Obligations then outstanding
does not exceed the amount of its Revolving Credit Commitment. The Revolving
Credit Loans shall be due and payable on the Revolving Credit Termination Date.
(b) Subject to the terms and conditions of this Agreement, each of
the Lenders severally agrees to make a swingline loan (the "Swingline Loans") to
the Subsidiary Borrower from time to time from and including the date hereof to
and including the Swingline Termination Date, in an amount up to but not
exceeding in the aggregate principal amount, the amount of its Swingline
Commitment. The Swingline Loans shall be due and payable on the Swingline
Termination Date.
(c) The Loans shall be outstanding as Revolving Credit Loans or
Swingline Loans (each a "class" of Loans). The Revolving Credit Loans may be
outstanding at the Borrower's option as Variable Rate Loans or LIBO Rate Loans
(each a "type" of Revolving Credit Loans) and the Swingline Loans may be
outstanding at the Subsidiary Borrower's option as LIBO Rate Loans or NIBO Rate
Loans (each a "type" of Swingline Loans). Each type of Loans of each Lender
shall be made and maintained at such Lender's Lending Office for such type of
Loans.
(d) The Swingline Loans shall be made in Norwegian Krone in an
amount equal to the Norwegian Krone Equivalent of the Dollar amount specified in
the notice of each borrowing pursuant to Section 2.09, as determined by the
Administrative Agent as of the Denomination Date for such borrowing (which
determination shall be conclusive absent manifest error). For purposes of
determining the amount outstanding under any Lender's Swingline Loan
Commitments, each Swingline Loan shall be the Dollar Equivalent for such
Swingline Loan as of the Denomination Date.
SECTION 2.02. THE NOTES. The Revolving Credit Loans of each Lender
shall be evidenced by a single promissory note in favor of such Lender in the
form of EXHIBIT A1, dated September 30, 1996, duly completed and executed by the
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Borrower. The Swingline Loans of each Lender shall be evidenced by a single
promissory note in favor of such Lender in the form of EXHIBIT A2, dated
December 15, 1997, duly completed and executed by the Subsidiary Borrower.
SECTION 2.03. PURPOSE. The Borrower and the Subsidiary Borrower shall
use the proceeds of the Loans for general corporate purposes including, without
limitation, working capital. Such proceeds shall not be used for the purpose,
whether immediate, incidental or ultimate, of buying or carrying "margin stock"
within the meaning of Regulation U.
SECTION 2.04. BORROWING PROCEDURES. The Borrower or the Subsidiary
Borrower, as applicable, shall give the Administrative Agent notice (which may
be telephonic if confirmed by telex, telecopy or other writing) of each
borrowing to be made hereunder as provided in Section 2.09. Not later than 12:00
noon New York, New York time on the date specified for such borrowing hereunder,
each Lender shall, through its Lending Office, subject to the conditions of this
Agreement, make the amount of the Loan to be made by it on such day available to
the Administrative Agent at the Principal Office in immediately available funds
for the account of the Administrative Agent. The amount so received by the
Administrative Agent shall, subject to the conditions of this Agreement, be made
available to the Borrower or the Subsidiary Borrower, as applicable, in
immediately available funds, on the date specified for such borrowing in such
Person's notice, by the Administrative Agent by crediting an account of the
Borrower or the Subsidiary Borrower, as applicable, designated by such Person
and maintained with the Administrative Agent at the Principal Office.
SECTION 2.05. OPTIONAL PREPAYMENTS AND CONVERSIONS. The Borrower or the
Subsidiary Borrower, as applicable, shall have the right to make prepayments of
principal without penalty or premium, or to convert one type of Revolving Credit
Loans into another type of Revolving Credit Loans or to convert one type of
Swingline Loans into another type of Swingline Loans, at any time or from time
to time; provided that: (a) the Borrower or the Subsidiary Borrower, as
applicable, shall give the Administrative Agent notice of each such prepayment
or conversion as provided in Section 2.09; and (b) Fixed Rate Loans may be
prepaid or converted only on the last day of an Interest Period for such Fixed
Rate Loans unless the Borrower or the Subsidiary Borrower, as applicable, agrees
to provide to the Administrative Agent for the account of each Lender
compensation in accordance with Section 4.05.
SECTION 2.06. MANDATORY PREPAYMENTS. (a) The aggregate amount of the
Loans and the Letter of Credit Obligations outstanding at any time shall never
exceed the Cap. If any time prior to the Termination Date, the aggregate amount
of all Loans and the Letter of Credit Obligations shall exceed the Cap, the
Borrower or the Subsidiary Borrower shall repay the Lenders forthwith such
amounts as may be necessary to eliminate such excess (and if the Loans cannot be
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repaid to eliminate any such excess which is due to the amount of outstanding
Letters of Credit, the Borrower shall deposit with the Administrative Agent
sufficient cash collateral to cover such excess), and the failure of the
Borrower or the Subsidiary Borrower to make and the Lenders to receive such
payment (or the failure of the Borrower to deposit such cash collateral) shall
constitute an Event of Default.
(b) The aggregate amount of Available Liquidity shall not be less
than $2,500,000. If any time prior to the Termination Date, the aggregate amount
of Available Liquidity is less than $2,500,000, the Borrower or the Subsidiary
Borrower shall repay the Lenders within 15 days of such occurrence such amounts
as may be necessary to eliminate such deficit (and if the Loans cannot be repaid
to eliminate any such deficit which is due to the amount of outstanding Letters
of Credit, the Borrower shall deposit with the Administrative Agent sufficient
cash collateral to cover to eliminate such deficit), and the failure of the
Borrower or the Subsidiary Borrower to make and the Lenders to receive such
payment (or the failure of the Borrower to deposit such cash collateral) shall
constitute an Event of Default.
(c) There shall be at all times an amount in cash deposited with
the Administrative Agent under the Cash Collateral Account Agreement equal to
the aggregate amount of the then outstanding Guarantied Obligations (but
specifically excluding amounts due under clause (a)(ii) of the definition of
"Guarantied Obligations", interest thereon and fees relating thereto). If any
time prior to the Termination Date, the aggregate amount of all Guarantied
Obligations exceeds the cash so deposited, either (i) the Individual Guarantor
shall forthwith deposit additional cash as may be necessary to eliminate such
excess (provided that the Individual Guarantor shall not have the obligation to
deposit cash in excess of that required under the first sentence of this Section
2.06(c)) or (ii) the Borrower or the Subsidiary Borrower shall repay the Lenders
forthwith such amounts as may be necessary to eliminate such excess (and if the
Loans cannot be repaid to eliminate any such excess which is due to the amount
of outstanding Letters of Credit, the Borrower shall deposit with the
Administrative Agent sufficient cash collateral to cover such excess), and the
failure of the Individual Guarantor to deposit such cash or the Borrower or the
Subsidiary Borrower to make and the Lenders to receive such payment (or the
failure of the Borrower to deposit such cash collateral) shall constitute an
Event of Default.
(d) Any payments of principal under the Microcell Note and the
Microcell Loan Agreement shall be used to prepay the principal of Loans
outstanding (and, to the extent that all Loans are repaid, to cash collateralize
Letters of Credit) and the Commitments shall be permanently reduced in the
amount of such payments.
SECTION 2.07. INTEREST PERIODS: RENEWALS. (a) In the case of each Fixed
Rate Loan, the Borrower or the Subsidiary Borrower, as applicable, shall
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select an Interest Period of any duration in accordance with the definition of
Interest Period in Section 1.01, subject to the following limitations: (i) no
Interest Period may extend beyond the Termination Date; (ii) notwithstanding
clause (i) above, no Interest Period shall have a duration less than one month
(or, in the case of NIBO Rate Loans, two weeks), and if any such proposed
Interest Period would otherwise be for a shorter period, such Interest Period
shall not be available; (iii) if an Interest Period would end on a day which is
not a Banking Day, such Interest Period shall be extended to the next Banking
Day, unless such Banking Day would fall in the next calendar month in which
event such Interest Period shall end on the immediately preceding Banking Day;
and (iv) no more than ten Interest Periods of each Lender may be outstanding at
any one time.
(b) Upon notice to the Administrative Agent as provided in Section
2.09, the Borrower or the Subsidiary Borrower, as applicable, may renew any
Fixed Rate Loan on the last day of the Interest Period therefor as the same type
of Loan with an Interest Period of the same or different duration in accordance
with the limitations provided above. If the Borrower or the Subsidiary Borrower,
as applicable, shall fail to give notice to the Administrative Agent of such a
renewal, (i) in the case of a Fixed Rate Loan denominated in Dollars, such Fixed
Rate Loan shall automatically become a Variable Rate Loan on the last day of the
current Interest Period and (ii) in the case of a Fixed Rate Loan denominated in
Norwegian Krone, such Fixed Rate Loan shall automatically be a NIBO Loan
denominated in Norwegian Krone having an Interest Period of one month.
SECTION 2.08. CHANGES OF COMMITMENTS. The Borrower or the Subsidiary
Borrower, as applicable, shall have the right to reduce or terminate the amount
of unused Commitments at any time or from time to time, provided that: (i) the
Borrower or the Subsidiary Borrower, as applicable, shall give notice of each
such reduction or termination to the Administrative Agent as provided in Section
2.09; and (ii) each partial reduction shall be in an aggregate amount at least
equal to $1,000,000. The Commitments once reduced or terminated may not be
reinstated.
SECTION 2.09. CERTAIN NOTICES. Notices by the Borrower or the
Subsidiary Borrower, as applicable, to the Administrative Agent of each
borrowing pursuant to Section 2.04, each prepayment or conversion pursuant to
Section 2.05 and each renewal pursuant to Section 2.07, and each reduction or
termination of the Commitments pursuant to Section 2.08 shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
11:00 a.m. New York, New York time, and (a) in the case of borrowings and
prepayments of, conversions into and (in the case of Fixed Rate Loans) renewals
of (i) Variable Rate Loans, given the same Banking Day; and (ii) Fixed Rate
Loans, given three Banking Days prior thereto; and (b) in the case of reductions
or termination of the Commitments, given three Banking Days prior thereto. Each
such notice shall specify the class and type of the Loans to be borrowed,
prepaid, converted or renewed and the amount thereof
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(subject to Section 2.11) (and, in the case of a conversion, the type of Loan to
result from such conversion, and, in the case of a Fixed Rate Loan, the Interest
Period therefor) and the date of the borrowing, prepayment, conversion or
renewal (which shall be a Banking Day). Each such notice of reduction or
termination shall specify the amount of the Commitments to be reduced or
terminated. The Administrative Agent shall promptly notify the Lenders of the
contents of each such notice.
SECTION 2.10. MINIMUM AMOUNTS. Except for borrowings which exhaust the
full remaining amount of the Commitments, prepayments or conversions which
result in the prepayment or conversion of all Loans of a particular type or
class or conversions made pursuant to Section 4.04, each borrowing, prepayment,
conversion and renewal of principal of Loans of a particular type shall be in an
amount not less than (i) $250,000 in the aggregate for all Lenders in the case
of Variable Rate Loans and (ii) $1,000,000 (or the Dollar Equivalent thereof) in
the aggregate for all Lenders (plus increments of $100,000 (or the Dollar
Equivalent thereof) in excess thereof) in the case of Fixed Rate Loans unless
such minimum amount is waived by the Required Lenders (borrowings, prepayments,
conversions or renewals of or into Loans of different types or, in the case of
Fixed Rate Loans, having different Interest Periods at the same time hereunder
to be deemed separate borrowings, prepayments, conversions and renewals for the
purposes of the foregoing, one for each type or Interest Period). Anything in
this Agreement to the contrary notwithstanding, the aggregate principal amount
of Fixed Rate Loans having concurrent Interest Periods shall be at least equal
to $500,000 (or, in the case of NIBO Rate Loans, the Dollar Equivalent of
$100,000).
SECTION 2.11. INTEREST. (a) Interest shall accrue on the outstanding
and unpaid principal amount of each Loan for the period from and including the
date of such Loan to but excluding the date such Loan is due at the following
rates per annum: (i) for a Variable Rate Loan, at a variable rate per annum
equal to the Variable Rate plus the Applicable Rate and (ii) for a Fixed Rate
Loan, at a fixed rate equal to the LIBO Rate or NIBO Rate plus the Applicable
Rate. If an Event of Default shall exist, interest shall accrue on the
outstanding principal amount of any Loan and any other amount payable by the
Borrower or the Subsidiary Borrower hereunder, under any Note or under any other
Facility Document to the fullest extent permitted by law from and including such
due date to but excluding the date such amount is paid in full or such Event of
Default is cured at the Default Rate.
(b) The interest rate on each Variable Rate Loan shall change when
the Variable Rate changes and interest on each such Variable Rate Loan shall be
calculated on the basis of a year of 365/366 days for the actual number of days
elapsed. Interest on each Fixed Rate Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Promptly after the
determination of any interest rate provided for herein or any change therein,
the
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Administrative Agent shall notify the Borrower, the Subsidiary Borrower and the
Lenders.
(c) Accrued interest shall be due and payable in arrears upon any
repayment of principal or conversion and (i) for each Variable Rate Loan, on the
fifteenth day of each March, June, September and December commencing the first
such date after such Variable Rate Loan; and (ii) for each Fixed Rate Loan, on
the last day of the Interest Period with respect thereto and, in the case of an
Interest Period greater than three months or 90 days, at three-month intervals
after the first day of such Interest Period; provided that interest accruing at
the Default Rate shall be due and payable from time to time on demand of the
Administrative Agent.
SECTION 2.12. FEES. The Borrower shall pay to the Administrative Agent
for the account of each Lender a facility fee on the aggregate Commitments of
such Lender for the period from and including the date hereof to the earlier of
the date all of the Commitments are terminated or the Termination Date at a rate
per annum equal to the Applicable Rate, calculated in each case on the basis of
a year of 360 days for the actual number of days elapsed. The accrued facility
fees shall be due and payable in arrears upon any reduction or termination of
the Commitments and on the fifteenth day of each March, June, September and
December, commencing on the first such date after the Closing Date.
SECTION 2.13. PAYMENTS GENERALLY. All payments under this Agreement,
the Revolving Credit Notes and the other Facility Documents shall be made in
Dollars and all payments under the Swingline Notes shall be made in Norwegian
Krone, in each case in immediately available funds not later than 11:00 a.m. New
York, New York time on the relevant dates specified above or in such Facility
Document (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Banking Day) by, unless the
Administrative Agent agrees to accept payment by other means, the debiting by
the Administrative Agent for the account of the applicable Lending Office of
each Lender, or by any Lender for whose account any such payment is to be made,
of the amount of any such payment from any ordinary deposit account of the
Borrower or the Subsidiary Borrower, as applicable, with the Administrative
Agent or such Lender, as the case may be, and the Administrative Agent so doing
shall promptly notify the Borrower or the Subsidiary Borrower, as applicable,
and any Lender so doing shall promptly notify the Administrative Agent which in
turn shall promptly notify the Borrower or the Subsidiary Borrower, as
applicable. The Borrower or the Subsidiary Borrower, as applicable, shall, at
the time of making each optional payment under this Agreement, any Note or any
other Facility Document, specify to the Administrative Agent the principal or
other amount payable by the Borrower or the Subsidiary Borrower under this
Agreement, such Note or such other Facility Document to which such payment is to
be applied (and in the event that it fails to so specify, or if a Default or
Event of Default has occurred and is continuing, the Administrative Agent may
apply such payment as it may elect in its sole discretion
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(subject to Section 11.16)). If the due date of any payment under this
Agreement, any Note or any other Facility Document would otherwise fall on a day
which is not a Banking Day, such date shall be extended to the next succeeding
Banking Day and interest shall be payable for any principal so extended for the
period of such extension. Each payment received by the Administrative Agent
hereunder, under any Note or any other Facility Document for the account of a
Lender shall be paid promptly to such Lender, in immediately available funds,
for the account of such Lender's Lending Office.
ARTICLE 3. THE LETTERS OF CREDIT .
SECTION 3.01. LETTERS OF CREDIT. (a) Subject to the terms and
conditions of this Agreement, the Issuing Lender, on behalf of the Lenders, and
in reliance on the agreement of the Lenders set forth in Section 3.04, agrees to
issue on any Banking Day prior to the Revolving Credit Termination Date, for the
account of the Borrower, irrevocable documentary and standby letters of credit
or bank guarantees in such form as may from time to time be approved by the
Issuing Lender acting reasonably (together with the applications therefor, the
"Letters of Credit"); provided that on the date of the issuance of any Letter of
Credit, and after giving effect to such issuance, the Letter of Credit
Obligations shall not exceed the Letter of Credit Availability.
(b) Each Letter of Credit shall (i) have an expiry date no later
than the earlier of (A) one year from the date of issuance provided that such
Letter of Credit may automatically renew for subsequent one year terms upon the
failure of the Issuing Lender to provide sixty days' prior written notice of
termination to the Borrower and (B) the Revolving Credit Termination Date, (ii)
be denominated in Dollars, (iii) be in a minimum face amount of $100,000 and
(iv) provide for the payment of sight drafts when presented for honor thereunder
in accordance with the terms thereof and when accompanied by the documents
described therein or when such documents are presented, as the case may be.
SECTION 3.02. PURPOSES. The Borrower shall use the Letters of Credit
for the purpose of securing obligations incurred in the ordinary course of
business.
SECTION 3.03. PROCEDURES FOR ISSUANCE OF LETTERS OF CREDIT . The
Borrower may from time to time request that the Issuing Lender issue a Letter of
Credit by delivering to the Issuing Lender at its address for notices specified
herein an application therefor in such form as may from time to time be approved
by the Issuing Lender acting reasonably, completed to the reasonable
satisfaction of the Issuing Lender, and such other certificates, documents and
other papers and information as the Issuing Lender may reasonably request. Upon
receipt of any application, the Issuing Lender will process such application and
the certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the requested
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Letter of Credit in such customized form as may reasonably be requested by the
Borrower (but in no event shall the Issuing Lender issue any Letter of Credit
later than five Banking Days after receipt of the application therefor and all
such other certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Lender and the Borrower.
The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower
promptly following the issuance thereof.
SECTION 3.04. PARTICIPATING INTERESTS . In the case of each Letter of
Credit, effective as of the date of the issuance thereof, the Issuing Lender
agrees to allot and does allot to each other Lender, and each such Lender
severally and irrevocably agrees to take and does take a Participating Interest
in such Letter of Credit in a percentage equal to such Lender's pro rata share
of the Letter of Credit Obligations (calculated based on its Revolving Credit
Commitment Percentage). On the date that any Lender becomes a party to this
Agreement in accordance with Section 12.05, Participating Interests in any
outstanding Letter of Credit held by the transferor Lender from which such
transferee Lender acquired its interest hereunder shall be proportionately
reallotted between such transferee Lender and such transferor Lender. Each
Participating Lender hereby agrees that its obligation to participate in each
Letter of Credit, and to pay or to reimburse the Issuing Lender for its
participating share of the drafts drawn thereunder, is absolute, irrevocable and
unconditional and shall not be affected by any circumstances whatsoever,
including, without limitation, the occurrence and continuance of any Default or
Event of Default, and that each such payment shall be made without any offset,
abatement, withholding or other reduction whatsoever.
SECTION 3.05. PAYMENTS . (a) In order to induce the Issuing Lender to
issue the Letters of Credit, the Borrower hereby agrees to reimburse the Issuing
Lender, unless such Reimbursement Obligation has been accelerated pursuant to
Section 10.02, by not later than 1:00 p.m., New York City time, on each date
that the Borrower has been notified by the Issuing Lender that any draft
presented under any Letter of Credit is paid by the Issuing Lender, for (i) the
amount of the draft paid by the Issuing Lender and (ii) the amount of any taxes,
fees, charges or other reasonable costs or expenses whatsoever incurred by the
Issuing Lender in connection with any payment made by the Issuing Lender under,
or with respect to, such Letter of Credit. Each such payment shall, subject to
the next sentence hereof, be made to the Issuing Lender at its office specified
in Section 12.06, in lawful money of the United States and in immediately
available funds by not later than 1:00 p.m., New York City time, on the day that
payment is made by the Issuing Lender (or, if such drawing occurs after 1:00
p.m. New York City time, on the next succeeding Banking Day). If such payment is
not made in full, all amounts remaining unpaid by the Borrower under this
Section 3.05 shall, to the extent otherwise permitted hereunder, automatically
be deemed to be a borrowing as Revolving Credit Loans bearing interest at the
Variable Rate plus the Applicable
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Rate. Except as otherwise permitted by the preceding sentence, interest on any
and all amounts remaining unpaid by the Borrower under this Section 3.05 at any
time from the date such amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full shall be payable to the Issuing
Lender on demand at a fluctuating rate per annum equal to the Default Rate.
(b) In the event that the Issuing Lender makes a payment (a
"Letter of Credit Funding") under any Letter of Credit and is not reimbursed in
full therefor on the date of such Letter of Credit Funding, in accordance with
the terms hereof, the Issuing Lender will promptly through the Administrative
Agent notify each Participating Lender that acquired its Participating Interest
in such Letter of Credit from the Issuing Lender. No later than the close of
business on the date such notice is given if such notice is given, each such
Participating Lender will transfer to the Administrative Agent, for the account
of the Issuing Lender, in immediately available funds, an amount equal to such
Participating Lender's pro rata share of the unreimbursed portion of such Letter
of Credit Funding (calculated based on its Revolving Credit Commitment
Percentage), together with interest, if any, accrued thereon from and including
the date of such transfer at a rate per annum equal to the Federal Funds Rate
plus two percent (2%).
(c) Whenever, at any time after the Issuing Lender has made a
Letter of Credit Funding and has received from any Participating Lender such
Participating Lender's pro rata share of the unreimbursed portion of such Letter
of Credit Funding, the Issuing Lender receives any reimbursement on account of
such unreimbursed portion or any payment of interest on account thereof, the
Issuing Lender will distribute to the Administrative Agent, for the account of
such Participating Lender, its pro rata share thereof; provided, however, that
in the event that the receipt by the Issuing Lender of such reimbursement or
such payment of interest (as the case may be) is required to be returned, such
Participating Lender will promptly return to the Administrative Agent, for the
account of the Issuing Lender, any portion thereof previously distributed by the
Issuing Lender to it.
SECTION 3.06. FURTHER ASSURANCES. The Borrower hereby agrees to do and
perform any and all acts and to execute any and all further instruments from
time to time reasonably requested by the Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of the Letters of Credit hereunder.
SECTION 3.07. OBLIGATIONS ABSOLUTE. The payment obligations of the
Borrower under Section 3.05 shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(a) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against any beneficiary, or any
transferee, of any Letter of Credit (or any Persons for whom any such
beneficiary or any such
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transferee may be acting), the Issuing Lender or any Participating Lender, or
any other Person, whether in connection with this Agreement, any other Facility
Document, the transactions contemplated herein, or any unrelated transaction;
(b) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect,
provided that this subparagraph (b) shall not relieve the Issuing Lender of any
liability determined to have resulted from the gross negligence or willful
misconduct of the Issuing Lender;
(c) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate which does not comply with the
terms of such Letter of Credit, provided that this subparagraph (c) shall not
relieve the Issuing Lender of any liability determined to have resulted from the
gross negligence or willful misconduct of the Issuing Lender; or
(d) any other circumstances or happening whatsoever, whether or
not similar to any of the foregoing, provided that this subparagraph (d) shall
not relieve the Issuing Lender of any liability determined to have resulted from
the gross negligence or willful misconduct of the Issuing Lender.
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SECTION 3.08. CASH COLLATERAL ACCOUNT. If the Commitments are duly
terminated and all amounts owing under this Agreement, the Notes and the
Reimbursement Obligations become due and payable pursuant to Section 10, the
Borrower shall deposit with the Administrative Agent, on the date such
obligations become due and payable, an amount in cash or Domestic Cash
Equivalents equal to the Letter of Credit Obligations as of such date and the
Letter of Credit fees in accordance with Section 3.09. Such amount shall be
deposited in a cash collateral account to be established by the Administrative
Agent, for the benefit of the Issuing Lender and the Participating Lenders, and
shall constitute collateral security for the Letter of Credit Obligations and
other amounts owing hereunder. All amounts in such cash collateral account shall
be maintained pursuant to a cash collateral account agreement which shall grant
to the Administrative Agent a security interest in all such funds and in any
investments made therewith or proceeds thereof to secure payment to the
Administrative Agent of Reimbursement Obligations with respect to outstanding
Letters of Credit. In the event that the Administrative Agent makes any Letter
of Credit Funding, the Administrative Agent may withdraw funds on deposit to
make reimbursement of such Letter of Credit Funding, in an amount equal to such
Letter of Credit Funding. Upon payment by the Borrower of all Reimbursement
Obligations with respect to Letters of Credit or the termination or other
expiration of all Letters of Credit, remaining funds on deposit in the cash
collateral account shall be returned promptly to the Borrower.
SECTION 3.09. LETTER OF CREDIT FEES. (a) The Borrower agrees to pay
the Administrative Agent, for the account of the Issuing Lender and the
Participating Lenders, a non-refundable letter of credit fee of (a) with respect
to each documentary Letter of Credit, an amount equal to one-half of one percent
of the face amount under such documentary Letter of Credit payable on payment
thereof and (b) with respect to each standby Letter of Credit, an amount
computed at the Applicable Rate equal to the "Fixed Rate Margin" on the
aggregate undrawn amount under each standby Letter of Credit, calculated on the
basis of a year of 360 days for the actual number of days elapsed, payable in
arrears on the fifteenth day of each March, June, September and December,
commencing on the first such date after the Closing Date.
(b) The Borrower agrees to pay the Issuing Lender, for its own
account, its normal and customary administration, amendment, transfer, payment
and negotiation fees charged in connection with its issuance and administration
of letters of credit.
ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC
SECTION 4.01. ADDITIONAL COSTS. (a) The Borrower or the Subsidiary
Borrower, as applicable, shall pay directly to each Lender from time to time on
demand such amounts as such Lender may determine (and reasonably
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substantiate) to be necessary to compensate it for any costs which such Lender
determines are attributable to its making or maintaining any Fixed Rate Loans
under this Agreement or its Notes or its obligation to make any such Fixed Rate
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any such Fixed Rate Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change relating to any such
Fixed Rate Loans or such obligation which: (i) changes the basis of taxation of
any amounts payable to such Lender under this Agreement or its Notes in respect
of any of such Fixed Rate Loans (other than taxes imposed on the overall net
income of such Lender or of its Lending Office for any of such Fixed Rate Loans
by the jurisdiction in which such Lender has its principal office or such
Lending Office); or (ii) imposes or modifies any reserve, special deposit,
deposit insurance or assessment, minimum capital, capital ratio or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (including any of such Fixed
Rates Loans or any deposits referred to in the definition of "LIBO Base Rate"
or "NIBO Base Rate" in Section 1.01); or (iii) imposes any other condition
affecting this Agreement or its Notes (or any of such extensions of credit or
liabilities). Each Lender will notify the Borrower or the Subsidiary Borrower,
as applicable, of any event occurring after the date of this Agreement which
will entitle such Lender to compensation pursuant to this Section 4.01(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. If any Lender requests compensation from the
Borrower or the Subsidiary Borrower, as applicable, under this Section 4.01(a),
or under Section 4.01(c), the Borrower or the Subsidiary Borrower, as
applicable, may, by notice to such Lender (with a copy to the Administrative
Agent), require that such Lender's affected Fixed Rate Loans with respect to
which such compensation is requested be converted in accordance with Section
4.04. If any taxes are imposed for which the Borrower or the Subsidiary
Borrower, as applicable, would be required to make a payment under this Section
4.01, the applicable Lender shall use its best efforts to avoid or reduce such
taxes by taking any appropriate action (including, without limitation,
assigning its rights hereunder to a related entity or a different Lending
Office).
(b) Without limiting the effect of the foregoing provisions of this
Section 4.01, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
Fixed Rate Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Fixed Rate
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Lender so elects by
notice to the Borrower or the Subsidiary Borrower, as applicable (with a copy to
the Administrative Agent), the obligation of such Lender to make or renew Fixed
Rate Loans, and to convert Variable Rate Loans to Fixed Rate Loans hereunder
shall be suspended until the
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date such Regulatory Change ceases to be in effect (and all affected Fixed Rate
Loans held by such Lender then outstanding shall be converted in accordance
with Section 4.04).
(c) Without limiting the effect of the foregoing
provisions of this Section 4.01 (but without duplication), the Borrower or the
Subsidiary Borrower, as applicable, shall pay directly to each Lender from time
to time on request such amounts as such Lender may determine to be necessary to
compensate such Lender for any costs which it determines are attributable to the
maintenance by it or any of its affiliates pursuant to any law or regulation of
any jurisdiction or any interpretation, directive or request (whether or not
having the force of law and whether in effect on the date of this Agreement or
thereafter) of any court or governmental or monetary authority of capital in
respect of its Loans hereunder, its obligation to make Loans hereunder or its
obligation to issue, or participate in, any Letter of Credit (such compensation
to include, without limitation, an amount equal to any reduction in return on
assets or equity of such Lender to a level below that which it could have
achieved but for such law, regulation, interpretation, directive or request).
Each Lender will notify the Borrower or the Subsidiary Borrower, as applicable,
if it is entitled to compensation pursuant to this Section 4.01(c) as promptly
as practicable after it determines to request such compensation.
(d) Determinations and allocations by a Lender for
purposes of this Section 4.01 of the effect of any Regulatory Change pursuant to
subsections (a) or (b), or of the effect of capital maintained pursuant to
subsection (c), on its costs of making or maintaining Loans, its obligation to
make Loans or its obligation to issue, or participate in, any Letter of Credit,
or on amounts receivable by, or the rate of return to, it in respect of Loans or
such obligation, and of the additional amounts required to compensate such
Lender under this Section 4.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
SECTION 4.02. LIMITATION ON FIXED RATE LOANS. Anything herein to the
contrary notwithstanding, if:
(a) the Administrative Agent determines (which
determination shall be conclusive) that quotations of interest rates for the
relevant deposits referred to in the definition of "LIBO Base Rate" or "NIBO
Base Rate" in Section 1.01 are not being provided in the relevant amounts or for
the relevant maturities for purposes of determining the rate of interest for any
Fixed Rate Loans as provided in this Agreement; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify the Administrative Agent that the relevant rates
of interest referred to in the definition of "Fixed Base Rate" in Section 1.01
upon the basis of which the rate of interest for any Fixed Rate Loans is to be
determined do not
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adequately cover the cost to the Lenders of making or maintaining such Fixed
Rate Loans; or
(c) in the case of Fixed Rate Loans denominated in
Norwegian Krone, any Lender shall determine (which determination shall be
conclusive) and notify the Administrative Agent that Norwegian Krone is not
available in the relevant amounts or for the relevant period, or that a change
in national or international controls has occurred which would, in the opinion
of such Lender, make it impracticable for such Lender to make, fund or maintain
its Fixed Rate Loans to be made in Norwegian Krone or for the Subsidiary
Borrower to pay the principal of or interest on such Fixed Rate Loans as
provided in this Agreement;
then the Administrative Agent shall give the Borrower or the Subsidiary
Borrower, as applicable, and each Lender prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make or renew affected Fixed Rate Loans or to convert Variable Rate Loans into
affected Fixed Rate Loans and the Borrower or the Subsidiary Borrower, as
applicable, shall, on the last day(s) of the then current Interest Period(s)
for the outstanding affected Fixed Rate Loans, either prepay such Fixed Rate
Loans or convert such Fixed Rate Loans into Variable Rate Loans in accordance
with Section 2.05.
SECTION 4.03. ILLEGALITY. Notwithstanding any other provision in
this Agreement, in the event that it becomes unlawful for any Lender or its
Lending Office to honor its obligation to make, maintain or renew Fixed Rate
Loans hereunder or convert Variable Rate Loans into Fixed Rate Loans, then such
Lender shall promptly notify the Borrower or the Subsidiary Borrower, as
applicable, thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or renew Fixed Rate Loans and to convert other Variable Rate
Loans into Fixed Rate Loans hereunder shall be suspended until such time as
such Lender may again make, renew, or convert and maintain such Fixed Rate
Loans and such Lender's outstanding Fixed Rate Loans, as the case may be, shall
be converted in accordance with Section 4.04.
SECTION 4.04. CERTAIN CONVERSIONS PURSUANT TO SECTIONS 4.01 AND
4.03. If Fixed Rate Loans are to be converted pursuant to Section 4.01 or
4.03, such Lender's Fixed Rate Loans shall be automatically converted into
Variable Rate Loans on the last day(s) of the then current Interest Period(s)
for such Lender's Fixed Rate Loans (or, in the case of a conversion required by
Section 4.01 or 4.03, on such earlier date as such Lender may specify to the
Borrower with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 4.01 or 4.03 which gave rise to such conversion no longer exist:
(a) to the extent that such Lender's Fixed Rate Loans have
been so converted, all payments and prepayments of principal which would
otherwise be
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applied to such Lender's Fixed Rate Loans shall be applied instead to its
Variable Rate Loans; and
(b) all Fixed Rate Loans which would otherwise be made or
renewed by such Lender as Fixed Rate Loans shall be made instead as Variable
Rate Loans and all Variable Rate Loans of such Lender which would otherwise be
converted into Fixed Rate Loans shall remain as Variable Rate Loans.
If such Lender gives notice to the Borrower or the Subsidiary
Borrower, as applicable (with a copy to the Administrative Agent) that the
circumstances specified in Section 4.01 or 4.03 which gave rise to the
conversion of such Lender's Fixed Rate Loans pursuant to this Section 4.04 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Fixed Rate Loans are outstanding, such
Lender's Variable Rate Loans shall be automatically converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Fixed
Rate Loans to the extent necessary so that, after giving effect thereto, all
Fixed Rate Loans held by the Lenders holding Fixed Rate Loans and by such
Lender are held pro rata (as to principal amounts, types, classes and Interest
Periods) in accordance with their respective Commitments.
SECTION 4.05. CERTAIN COMPENSATION. The Borrower and the
Subsidiary Borrower, as applicable, shall pay to the Administrative Agent for
the account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense which such Lender determines is attributable to:
(a) any payment, prepayment, conversion or renewal of a
Fixed Rate Loan made by such Lender on a date other than the last day of an
Interest Period for such Fixed Rate Loan (whether by reason of acceleration or
otherwise); or
(b) any failure by the Borrower or the Subsidiary
Borrower, as applicable, to borrow, convert into or renew a Fixed Rate Loan to
be made, converted into or renewed by such Lender on the date specified therefor
in the relevant notice under Sections 2.04, 2.05 or 2.07, as the case may be.
Without limiting the foregoing, such compensation shall include an
amount equal to the present value of the excess, if any, of: (i) the amount of
interest which otherwise would have accrued on the principal amount so paid,
prepaid, converted or renewed or not borrowed, converted or renewed for the
period from and including the date of such payment, prepayment or conversion or
failure to borrow, convert or renew to but excluding the last day of the then
current Interest Period for such Fixed Rate Loan (or, in the case of a failure
to borrow, convert or renew, to but excluding the last day of the Interest
Period for such Fixed Rate Loan which would have commenced on the date
specified therefor in the relevant notice) at the applicable rate of interest
for such Fixed Rate Loan provided for herein; over (ii) the
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amount of interest (as reasonably determined by such Lender) such Lender would
have bid in the London interbank market (if such Loan is a Fixed Rate Loan) for
Dollar or Norwegian Krone deposits for amounts comparable to such principal
amount and maturities comparable to such period. A determination of any Lender
as to the amounts payable pursuant to this Section 4.05 shall be conclusive
absent manifest error.
SECTION 4.06. TAXES. Each of the Borrower and the Subsidiary
Borrower covenants and agrees that:
(a) All payments on account of the principal of and
interest on the Loans and the Notes, and all other amounts payable by the
Borrower or the Subsidiary Borrower hereunder, under any Note or under any other
Facility Document, including without limitation amounts payable under Section
4.06(b), shall be made without any set-off or counterclaim and free and clear of
and without reduction by reason of, all present and future income, stamp,
registration and other taxes and levies, imposts, deductions, charges,
compulsory loans and withholdings whatsoever (other than taxes imposed on the
overall net income of any Lender, or of its applicable Lending Office, by the
jurisdiction in which such Lender's principal office or its applicable Lending
Office is located), and all interest, penalties or similar amounts with respect
thereto, now or hereafter imposed, assessed, levied or collected by any country
or any political subdivision or taxing authority thereof or therein or by any
federation or association of or with which any country may be a member or
associated or by any jurisdiction from which any payment hereunder or under any
Note is made or any taxing authority thereof or therein, on or in respect of
this Agreement, the Loans, any Note, any other Facility Document, the recording,
registration, notarization or other formalization of any thereof, the
enforcement thereof or the introduction thereof in any judicial proceedings, or
on or in respect of any payments of principal, interest, premiums, charges, fees
or other amounts made on, under or in respect of any thereof (hereinafter called
"Taxes"), all of which will be paid by the Borrower or the Subsidiary Borrower,
as applicable, for its own account, prior to the date on which penalties attach
thereto;
(b) The Borrower and the Subsidiary Borrower, as
applicable, shall indemnify each Lender against, and reimburse each Lender on
demand for, any Taxes and any loss, liability, claim or expense, including
interest, penalties and reasonable legal fees (net of any refunds or tax credits
for such Taxes which such Lender shall actually receive or utilize), which such
Lender may incur at any time arising out of or in connection with any failure of
the Borrower or the Subsidiary Borrower, as applicable, to make any payments of
Taxes when due;
(c) In the event that the Borrower or the Subsidiary
Borrower is required by applicable law, decree or regulation to deduct or
withhold Taxes from any amounts payable to any Lender on, under or in respect of
this Agreement, the Loans, any Note or any other Facility Document, the Borrower
and the Subsidiary Borrower, as applicable, shall pay to such Lender such
additional amount(s) as may
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be required, after the deduction or withholding of Taxes, to enable such Lender
to receive from the Borrower or the Subsidiary Borrower, as applicable, an
amount equal to the amount stated to be payable by the Borrower or the
Subsidiary Borrower, as applicable, to such Lender under this Agreement, its
Note held by such Lender or under any other Facility Document;
(d) The Borrower and the Subsidiary Borrower, as
applicable, shall furnish to each Lender the official tax receipts in respect of
each payment of Taxes required under this Section 4.06 within 30 days after the
date such payment is due pursuant to applicable law, and the Borrower and the
Subsidiary Borrower, as applicable, shall promptly furnish to each Lender at its
request any other information, documents and receipts that such Lender may, in
its reasonable discretion from time to time, require to establish to its
satisfaction that full and timely payment has been made of all Taxes required to
be paid under this Section 4.06; and
(e) In the event that the payments by the Borrower or the
Subsidiary Borrower, as applicable, hereunder become exempt from or not subject
to Taxes, the Borrower or the Subsidiary Borrower, as applicable, will, upon the
reasonable request of any Lender, furnish to such Lender either a certificate
from each appropriate taxing authority or an opinion of counsel reasonably
acceptable to such Lender, in either case stating that payments hereunder are
exempt from or not subject to Taxes.
ARTICLE 5. CONDITIONS PRECEDENT
SECTION 5.01. DOCUMENTARY CONDITIONS PRECEDENT. The obligations of
the Lenders to make the Loans constituting the initial borrowing and of the
Issuing Lender to issue the initial Letter of Credit are subject to the
condition precedent that the Administrative Agent shall have received on or
before the Closing Date each of the following, in form and substance
satisfactory to the Administrative Agent and its counsel:
(a) counterparts of this Agreement duly executed by each
of the Borrower, the Subsidiary Borrower, the Subsidiary Guarantors, the Lenders
and the Administrative Agent;
(b) the Singh Guaranty and the Cash Collateral Account
Agreement duly executed by the Individual Guarantor;
(c) evidence that all actions necessary or appropriate
(or, in any event, as may be requested by the Administrative Agent) to create,
perfect or protect the Liens created or purported to be created by the Security
Agreement, the Intellectual Property Security Agreement and the Pledge Agreement
have been taken including, without limitation, (i) the execution of financing
statements
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(UCC-1) by the New Subsidiary Guarantor, (ii) the execution of applicable
security documents by the Subsidiary Borrower, (iii) the execution of
supplements to the Intellectual Property Security Agreement by each of the
Obligors and (iv) evidence of the pledge of all of the outstanding membership
interests of the New Subsidiary Guarantor;
(d) certificates or other evidence of casualty and
business interruption insurance policies covering all of the Property subject
to the Lien of the Administrative Agent under the Security Documents with
appropriate loss payable endorsements indicating assignment of proceeds
thereunder to the Administrative Agent and certificates or other evidence of
liability insurance with appropriate endorsements indicating the coverage of
the Administrative Agent as an additional insured, in each case containing
endorsements requiring at least 30 days prior written notice to the
Administrative Agent of noncancellation, nonrenewal or other material change
and which shall provide such other terms and conditions as the Administrative
Agent may reasonably require;
(e) a certificate of the Secretary of each of the
Obligors dated the Closing Date, attesting to all corporate or limited
liability company action taken by such Obligor, including resolutions of its
Board of Directors or Members Committee authorizing the execution, delivery and
performance of each of the Facility Documents to which it is a party and each
other document to be delivered pursuant to this Agreement;
(f) a legal opinion of Hogan & Hartson LLP, outside
counsel to the LCC Consolidated Entities and the Individual Guarantor, in
substantially the form of EXHIBIT C1 and as to such other matters as the
Administrative Agent may reasonably request;
(g) a legal opinion of Wikborg, Rein & Co., Norwegian
counsel to the Subsidiary Borrower, in substantially the form of EXHIBIT C2 and
as to such other matters as the Administrative Agent may reasonably request;
(h) certified complete and correct copies of the Telcom
Documents (including all exhibits, schedules and disclosure letters referred to
therein or delivered pursuant thereto and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof);
(i) certified complete and correct copies of the
Microcell Loan Agreement and the Microcell Note (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto and all amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof);
(j) certified complete and correct copies of each of the
financial statements referred to in Section 6.05; and
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(k) a Borrowing Base Certificate as of a date not more
than 10 days prior to the Closing Date.
SECTION 5.02. ADDITIONAL CONDITIONS PRECEDENT. The obligations of
the Lenders to make any Loans pursuant to a borrowing which increases the
amount outstanding hereunder (including the initial borrowing) or to issue any
Letters of Credit shall be subject to the further conditions precedent that on
the date of such Loans or the issuance of such Letters of Credit the following
statements shall be true: (a) the representations and warranties contained in
Article 6 and in each of the other Facility Documents are true and correct on
and as of the date of such Loans or the issuance of such Letter of Credit as
though made on and as of such date (provided that any representations and
warranties which speak to a specific date shall remain true and correct as of
such specific date); and (b) no Default or Event of Default has occurred and is
continuing, or would result from such Loans or the issuance of Letters of
Credit.
SECTION 5.03. DEEMED REPRESENTATIONS. Each notice of borrowing or
request for the issuance of a Letter of Credit hereunder and acceptance by the
Borrower or the Subsidiary Borrower, as applicable, of the proceeds of such
borrowing or the benefit of such Letter of Credit shall constitute a
representation and warranty that the statements contained in Section 5.02 are
true and correct both on the date of such notice or request and, unless the
Borrower or the Subsidiary Borrower, as applicable, otherwise notifies the
Administrative Agent prior to such borrowing or such issuance, as of the date
of such borrowing or such issuance.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Each of the Obligors hereby represents and warrants that:
SECTION 6.01. ORGANIZATION. GOOD STANDING_AND DUE QUALIFICATION.
Each of the LCC Consolidated Entities is a corporation, partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has the corporate,
partnership or limited liability company power and authority to own its assets
and to transact the business in which it is now engaged or proposed to be
engaged and is duly qualified as a foreign corporation, partnership or limited
liability company and is in good standing under the laws of each other
jurisdiction in which such qualification is required and in which such failure
to so qualify or be in good standing could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.02. POWER AND AUTHORITY: NO CONFLICTS. The execution,
delivery and performance by each of the Obligors of the Facility Documents to
which it is a party have been duly authorized by all necessary limited
liability
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company, corporate and partnership action and do not and will not: (a) require
any consent or approval of its members which has not been obtained; (b)
contravene its organizational documents; (c) violate any provision of, or
require any filing (other than the filings required pursuant to the terms of
the Security Documents), registration, consent or approval under, any law,
rule, regulation (including, without limitation, Regulation U), order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to the Parent or any of its Subsidiaries; (d) except as otherwise
disclosed in Schedule A to the Pledge Agreement, result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement, or any other agreement, lease or instrument to which the
Parent or any of its Subsidiaries is a party or by which their respective
Properties may be bound or affected; (e) result in, or require, the creation or
imposition of any Lien (other than as created under the Security Documents),
upon or with respect to any of the Properties now owned or hereafter acquired
by the Parent or any of its Subsidiaries; or (f) cause the Parent or any of its
Subsidiaries to be in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
SECTION 6.03. LEGALLY ENFORCEABLE AGREEMENTS. Each Facility
Document to which any Obligor is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of such Obligor
enforceable against such Obligor in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
SECTION 6.04. LITIGATION. Except as set forth on SCHEDULE 6.04,
there are no material actions, suits or proceedings pending or, to the
knowledge of any Obligor, threatened, against or affecting any LCC Consolidated
Entity before any Governmental Authority.
SECTION 6.05. FINANCIAL STATEMENTS. (a) The consolidated
balance sheets of the Borrower and its Subsidiaries as at December 31, 1997,
1996 and 1995, and the related consolidated statements of income, cash flows and
shareholders' equity (or members' capital) of the Borrower and its Subsidiaries,
for the Fiscal Years then ended, and the accompanying footnotes, together with
the opinion on the consolidated statements of KPMG Peat Marwick, independent
certified public accountants, and the interim unaudited consolidated balance
sheet of the LCC Consolidated Entities as at September 30, 1998, and the related
statements of income and cash flow of the Borrower and its Subsidiaries, for the
nine month period then ended, copies of which have been furnished to each of the
Lenders, are complete and correct in all material respects and fairly present
the financial condition of the LCC Consolidated Entities at such dates and the
results of
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the operations of the LCC Consolidated Entities for the periods covered by such
statements, all in accordance with GAAP consistently applied.
(b) The most recent operating plan delivered to the
Lenders for the LCC Consolidated Entities for their current and subsequent
Fiscal Years, including budget, personnel, facilities, capital expenditure and
research and development projections, on an annual basis, and projected income
and cash flow statements for each such Fiscal Year, on an annual basis,
incorporating the items detailed in such operating plan for each such Fiscal
Year, and accompanied by a description of the material assumptions used in
making such operating plan, have each been prepared in good faith and are based
on reasonable estimates for the operating performance of the LCC Consolidated
Entities on and after the Closing Date.
(c) Except as set forth in the consolidated balance sheet
of the LCC Consolidated Entities as of September 30, 1998, there are no
liabilities of any LCC Consolidated Entity, fixed or contingent, which are
material but are not reflected in such financial statements or in such notes
and which would be required to be recorded in such financial statements or
notes in accordance with GAAP. No information, exhibit or report furnished by
any LCC Consolidated Entity to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or any other Facility
Document contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein
not materially misleading. Since September 30, 1998, there has been no change
which could reasonably be expected to have a Material Adverse Effect.
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SECTION 6.06. OWNERSHIP AND LIENS. Each of the LCC Consolidated
Entities has title to, or valid leasehold interests in, all of its Properties
reflected in the financial statements referred to in Section 6.05 (other than
any Properties disposed of in the ordinary course of business), and none of the
Properties owned or leased by any LCC Consolidated Entity is subject to any
Lien, except as may be permitted hereunder and except for the Liens created by
the Security Documents; provided that no Obligor is making any representation
or warranty with respect to Liens affecting the fee interest in real Property
leased to any LCC Consolidated Entity and not owned by another LCC Consolidated
Entity.
SECTION 6.07. TAXES. Except as set forth on SCHEDULE 6.07 or as
otherwise permitted under Section 7.06, each of the LCC Consolidated Entities
has filed (or obtained extensions for) all tax returns (domestic, foreign,
federal, state and local) required to be filed and has paid or provided
adequate reserves for all taxes, assessments and governmental charges and
levies shown thereon to be due, including interest and penalties. The charges,
accruals and reserves on the books of the LCC Consolidated Entities in respect
of taxes, assessments and other governmental charges are adequate.
SECTION 6.08. ERISA. Each Domestic Plan, Foreign Plan and, to the
best knowledge of each Obligor, Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in
compliance with, the applicable provisions of ERISA, the Code and any other
applicable domestic, foreign, federal, state or local law, and no event or
condition is occurring or exists concerning which any LCC Consolidated Entity
would be under an obligation to furnish a report to the Lenders in accordance
with Section 7.08(j). Each of the LCC Consolidated Entities and the ERISA
Affiliates has fulfilled its obligations under the minimum funding standards of
ERISA, the Code and any other applicable domestic, foreign, federal, state or
local law.
SECTION 6.09. SUBSIDIARIES AND AFFILIATES. As of the Closing
Date, SCHEDULE 6.09 sets forth the name of (a) each Subsidiary of each LCC
Consolidated Entity, in each case showing (i) the jurisdiction of organization
of each such Subsidiary and (ii) percentage of such LCC Consolidated Entity's
ownership in such Subsidiary and (b) each Affiliate of each LCC Consolidated
Entity, in each case showing (i) the percentage of such Affiliate's ownership
interest in such LCC Consolidated Entity, (ii) the percentage of such LCC
Consolidated Entity's ownership interest in such Affiliate, and (iii) the
percentage of the common controlling person's interest in such LCC Consolidated
Entity and such Affiliate. All of the outstanding shares of Capital Stock of
each LCC Consolidated Entity are validly issued, fully paid and nonassessable.
Except as set forth on SCHEDULE 6.09, no LCC Consolidated Entity owns or holds
the right to acquire any shares of stock or any other security or interest in
any other Person.
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SECTION 6.10. CREDIT ARRANGEMENTS. As of the Closing Date,
SCHEDULE 6.10 is a complete and correct list of all credit agreements,
indentures, purchase agreements, Guaranties, Capital Leases in excess of
$50,000 and other investments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which any LCC Consolidated Entity is in any manner directly or
contingently obligated; and the maximum principal or face amounts of the credit
in question, outstanding and which can be outstanding, are correctly stated,
and all Liens of any nature given or agreed to be given as security therefor
are correctly described or indicated in such Schedule (except that Liens
permitted under Section 8.03 are described as of September 30, 1996).
SECTION 6.11. MATERIAL CONTRACTS. SCHEDULE 6.11 contains a
complete and correct list of all Material Contracts between any LCC
Consolidated Entity and another Person or other Persons. Each of the LCC
Consolidated Entities and, to the knowledge of the Borrower, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date, have received no notice of default and are not in
default under any Material Contract now in effect to which any LCC Consolidated
Entity is a party or by which it or its Property may be bound. Except as set
forth on SCHEDULE 6.11, each of the Material Contracts is in full force and
effect with no default, anticipated or threatened default or failure of
performance or observance of any obligations or conditions contained therein,
and none of the foregoing parties nor any LCC Consolidated Entity has provided
any notice of default or of its intention to terminate any Material Contract.
SECTION 6.12. PROPRIETARY RIGHTS. As of the Closing Date, SCHEDULE 6.12
contains a complete and accurate list of (a) all patents, registered and
unregistered trademarks, registered service marks, and registered copyrights
owned or filed by any LCC Consolidated Entity (other than the Subsidiary
Borrower) and (b) all licenses and other rights granted by any third party to
any LCC Consolidated Entity (other than the Subsidiary Borrower) with respect to
any Proprietary Rights used in the conduct of its business (excluding shrink
wrap licenses held by any LCC Consolidated Entity with respect to software for
internal use), the unavailability of which could reasonably be expected to have
a Material Adverse Effect. Except for licenses granted to customers and
distributors in the ordinary course of business and except as set forth on
SCHEDULE 6.12, no LCC Consolidated Entity (other than the Subsidiary Borrower)
has granted licenses or other rights to any third party with respect to any
Proprietary Rights. Each of the LCC Consolidated Entities owns or has sufficient
right to use pursuant to a valid and enforceable license all Proprietary Rights
necessary for the conduct of its business without infringing the rights of
others except for such infringements as could not reasonably be expected to have
a Material Adverse Effect. No loss or expiration of any Proprietary Right, the
loss or expiration of which could reasonably
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be expected to have a Material Adverse Effect, is pending or, to the knowledge
of each Obligor, threatened. Each of the LCC Consolidated Entities has taken
reasonable and appropriate steps to protect and preserve the confidentiality of
its trade secrets and confidential information as outlined on SCHEDULE 6.12.
Except as set forth on SCHEDULE 6.12, (i) no LCC Consolidated Entity has
received notice from any Person asserting the invalidity, misuse or
unenforceability of any Proprietary Rights owned or used by any LCC Consolidated
Entity and to the best knowledge of each Obligor, no such claims are threatened
and there are no grounds for the same, (ii) within the last five years, no LCC
Consolidated Entity has received a notice of nor is aware of any facts which in
any LCC Consolidated Entity's reasonable judgment indicate a reasonable
likelihood of any conflict with the asserted Proprietary Rights of others, (iii)
to the best knowledge of each Obligor, the conduct of each LCC Consolidated
Entity's business has not infringed or misappropriated and does not infringe or
misappropriate any Proprietary Rights of other Persons, nor would any future
conduct as presently proposed infringe any Proprietary Rights of other Persons,
and the Proprietary Rights owned by any LCC Consolidated Entity are not
currently being infringed or misappropriated by other Persons, except in each
case for such infringements as could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.13. HAZARDOUS MATERIALS. Each of the LCC Consolidated
Entities is in compliance with all Environmental Laws in effect in each
jurisdiction where it is presently doing business. No LCC Consolidated Entity
is subject to any liability under any Environmental Law.
In addition, no LCC Consolidated Entity has received any (i) notice
from any Governmental Authority by which any of its present or previously-owned
or leased real Properties has been designated, listed, or identified in any
manner by any Governmental Authority charged with administering or enforcing
any Environmental Law as a Hazardous Material disposal or removal site, "Super
Fund" clean-up site, or candidate for removal or closure pursuant to any
Environmental Law, (ii) notice of any Lien arising under or in connection with
any Environmental Law that has attached to any revenues of, or to, any of its
owned or leased real Properties, or (iii) summons, citation, notice, directive,
letter, or other written or oral communication from any Governmental Authority
concerning any intentional or unintentional action or omission by such LCC
Consolidated Entity in connection with its ownership or leasing of any real
Property resulting in the releasing, spilling, leaking, pumping, pouring,
emitting, emptying, dumping, or otherwise disposing of any Hazardous Material
into the environment resulting in any violation of any Environmental Law.
SECTION 6.14. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. As
of the Closing Date, each of the LCC Consolidated Entities has satisfied all
judgments and no LCC Consolidated Entity is in default with respect to any
final
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judgment, writ, injunction, decree, rule or regulation of any Governmental
Authority.
SECTION 6.15. NO DEFAULTS ON OTHER AGREEMENTS. Except for the MCI
Note Purchase Documents and the Telcom Documents, no LCC Consolidated Entity is
a party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any corporate, partnership or limited
liability company restriction which could have a Material Adverse Effect. No
LCC Consolidated Entity is in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument material to its business to which it
is a party.
SECTION 6.16. LABOR DISPUTES AND ACTS OF GOD. Neither the
Business nor the Properties of any LCC Consolidated Entity are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could have a Material
Adverse Effect.
SECTION 6.17. GOVERNMENTAL REGULATION. Neither any LCC
Consolidated Entity nor any Affiliate is subject to regulation under the Public
Utility Holding Company Act of 1935, the Investment Company Act of 1940, the
Interstate Commerce Act, the Federal Power Act or any statute or regulation
limiting its ability to incur indebtedness for money borrowed as contemplated
hereby.
SECTION 6.18. NO FORFEITURE. Neither any LCC Consolidated Entity
nor any Affiliate is engaged in or proposes to be engaged in the conduct of any
business or activity which could result in a Forfeiture Proceeding and no
Forfeiture Proceeding against any of them is pending or threatened.
SECTION 6.19. SOLVENCY. The present fair saleable value of the
assets of each of the Borrower and the Subsidiary Borrower after giving effect
to all the transactions contemplated by the Facility Documents and the funding
of the Commitments and the issuance of the Letters of Credit hereunder exceeds
the amount that will be required to be paid on or in respect of the existing
Debts and other liabilities (including contingent liabilities but excluding the
MCI Subordinated Notes) of each of the Borrower and the Subsidiary Borrower as
they mature. The Property of each of the Borrower and the Subsidiary Borrower
does not constitute unreasonably small capital for each of the Borrower and the
Subsidiary Borrower to carry out its business as now conducted and as proposed
to be conducted including the capital needs of each of the Borrower and the
Subsidiary Borrower. Neither the Borrower nor the Subsidiary Borrower intends
to, nor does either the Borrower or the Subsidiary Borrower believe that it
will, incur Debts beyond its ability to pay such Debts as they mature (taking
into account the timing
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and amounts of cash to be received by each of the Borrower and the Subsidiary
Borrower, and of amounts to be payable on or in respect of Debt of each of the
Borrower and the Subsidiary Borrower). The cash available to each of the
Borrower and the Subsidiary Borrower after taking into account all other
anticipated uses of the cash of each of the Borrower and the Subsidiary
Borrower, is anticipated to be sufficient to pay all such amounts on or in
respect of Debt of the Borrower when such amounts are required to be paid.
Neither the Borrower nor the Subsidiary Borrower believes that final judgments
against it in actions for money damages will be rendered at a time when, or in
an amount such that, either the Borrower or the Subsidiary Borrower will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any
such actions and the earliest reasonable time at which such judgments might be
rendered). The cash available to the each of the Borrower and the Subsidiary
Borrower after taking into account all other anticipated uses of the cash of
each of the Borrower and the Subsidiary Borrower, is anticipated to be
sufficient to pay all such judgments promptly in accordance with their terms.
SECTION 6.20. SUBORDINATED NOTE DOCUMENTS. (a) Each of the
Lenders and the Administrative Agent has received a complete and correct copy
of the MCI Note Purchase Documents (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. Each of the MCI Note Purchase
Documents to which it is a party has been duly executed and delivered by Old
LCC and the Parent and, to the best knowledge of the Borrower, MCI and is in
full force and effect. Each of the representations and warranties of Old LCC
and the Parent set forth in each of the MCI Note Purchase Documents is true and
correct in all material respects as of the Closing Date. Each of the MCI Note
Purchase Documents to which it is a party is a legal, valid and binding
obligation of the Borrower and the Parent and, to the best knowledge of the
Borrower, MCI enforceable against the Borrower and the Parent, and, to the best
knowledge of the Borrower, MCI in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally. Each
of the MCI Note Purchase Agreement and the MCI Subordinated Guaranty has been
terminated and no party thereto has any further rights or obligations
thereunder.
(b) Each of the Lenders and the Administrative Agent has
received a complete and correct copy of the Telcom Documents (including all
exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto) and all amendments thereto, waivers relating thereto and
other side letters or agreements affecting the terms thereof. Each of the
Telcom Documents to which it is a party has been duly executed and delivered by
the Borrower and the Parent and is in full force and effect. Each of the
Telcom Documents to which it is a party is a legal, valid and binding
obligation of the Borrower and the Parent enforceable
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against the Borrower and the Parent in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.
SECTION 6.21. SECURITY DOCUMENTS. The Security Documents are
effective to create in favor of the Administrative Agent for the benefit of the
Lenders a legal, valid and enforceable Lien on and security interest in all
right, title and interest of each Obligor in the Collateral securing the
Obligations. Except for Liens permitted under Section 8.03 entitled to
priority by law, the Administrative Agent has a fully perfected and continuing
first priority Lien on and security interest in the Collateral, free from all
Liens other than Liens permitted under Section 8.03.
SECTION 6.22. SENIOR DEBT. The obligations of the Borrower
hereunder and under the other Facility Documents constitute "Senior Debt" under
and as defined in the Subordination Agreement and in the MCI Subordinated Notes
with respect to the MCI Subordinated Notes. The obligations of the Borrower
hereunder and under the other Facility Documents constitute "Senior
Obligations" under and as defined in the Telcom Subordination Agreement and in
the Telcom Subordinated Note with respect to the Telcom Subordinated Note.
ARTICLE 7. AFFIRMATIVE COVENANTS
So long any Obligation shall remain unpaid, any Letter of Credit shall
remain outstanding or any Lender shall have any Commitment, the Borrower shall,
and shall cause each of its Subsidiaries to:
SECTION 7.01. MAINTENANCE OF EXISTENCE. Preserve and maintain its
corporate, partnership or limited liability company existence and good standing
in the jurisdiction of its organization and qualify and remain qualified as a
foreign corporation, partnership or limited liability company in each
jurisdiction in which such qualification is required, except with respect to
(a) sales or other dispositions permitted under Section 8.08 and (b) mergers
and consolidations permitted under Section 8.10.
SECTION 7.02. CONDUCT OF BUSINESS. Continue to primarily engage
in the Business.
SECTION 7.03. MAINTENANCE OF PROPERTIES. Maintain, keep and
preserve all of its Properties (including, without limitation, its Proprietary
Rights) necessary or useful in the proper conduct of the Business in good
working order and condition, ordinary wear and tear excepted.
SECTION 7.04. MAINTENANCE OF RECORDS. Keep adequate records and
books of account, in which complete entries will be made in accordance with
GAAP,
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reflecting all financial transactions of such LCC Consolidated Entity; provided
that, with respect to each of the Foreign Subsidiaries, such entries may be
made in accordance with generally accepted accounting principles in effect in
its jurisdiction of organization until such time that such entries are
consolidated with the entries of the Borrower and its Domestic Subsidiaries.
SECTION 7.05. MAINTENANCE OF INSURANCE. Maintain insurance with
financially sound and reputable insurance companies or associations rated "A"
or better by A.M. Best Company, Inc. in such amounts and including such
coverages (including, without limitation, casualty, workers compensation,
liability and business interruption insurance) as are acceptable to an
insurance broker of national reputation selected by the Borrower and reasonably
acceptable to the Required Lenders and, in any event, as are usually carried by
companies engaged in the same or a similar business and similarly situated,
which insurance shall name the Administrative Agent as loss payee or additional
insured, as its interest may appear, and shall contain a clause requiring the
insurer to give not less than 30 days' notice to the Administrative Agent in
the event of cancellation of the policy for any reason whatsoever.
SECTION 7.06. COMPLIANCE WITH LAWS. Comply in all material
respects with all applicable laws, rules, regulations and orders (including,
without limitation, any Environmental Law), such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its Property; provided, however,
that no delinquency with respect to the payment of any tax, assessment or
governmental charge shall represent a violation of this Section 7.06 so long as
(a) the obligation of any LCC Consolidated Entity to pay such tax, assessment
or other governmental charge is being contested in good faith by appropriate
proceedings and (b) adequate reserves in the good faith and reasonable judgment
of the Borrower have been established with respect thereto.
SECTION 7.07. RIGHT OF INSPECTION. At any reasonable time and
from time to time, permit the Administrative Agent or any Lender or any agent
or representative thereof, to examine and make copies and abstracts from the
records and books of account of, and visit the Properties of, such LCC
Consolidated Entity, and to discuss the affairs, finances and accounts of such
LCC Consolidated Entity with its officers and directors and independent
accountants.
SECTION 7.08. REPORTING REQUIREMENTS. Furnish directly to each of
the Lenders:
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, consolidated (and unaudited for Microcell
and the Subsidiary Borrower) balance sheets of the LCC Consolidated Entities as
of the end of such Fiscal Year and consolidated (and unaudited by product line
and for each
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LCC Consolidated Entity) statements of income, consolidated statements of cash
flows and consolidated statements of shareholders' equity of the LCC
Consolidated Entities for such Fiscal Year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding date
and period in the prior Fiscal Year and all prepared in accordance with GAAP
and accompanied by an opinion on the consolidated statements acceptable to the
Lenders by KPMG Peat Marwick or other independent accountants of national
standing selected by the LCC Consolidated Entities;
(b) as soon as available and in any event within 45 days
after the end of the first three Fiscal Quarters and, in the case of the
unaudited consolidated statements of income, within 30 days after the end of
each calendar month, unaudited consolidated (and for Microcell and the
Subsidiary Borrower) balance sheets of the LCC Consolidated Entities as of the
end of such Fiscal Quarter and unaudited consolidated statements of income (and
by product line and for each LCC Consolidated Entity), unaudited consolidated
statements of cash flows and unaudited consolidated statements of shareholders'
equity of the LCC Consolidated Entities for the period commencing at the end of
the previous Fiscal Year and ending with the end of such Fiscal Quarter or, in
the case of the unaudited consolidated statements of income for each calendar
month, for such calendar month, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period
in the previous Fiscal Year and all prepared in accordance with GAAP and
certified by the president or the chief financial officer of the LCC
Consolidated Entities (subject to year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to above, a Compliance Certificate of the president or
chief financial officer of the Borrower (i) certifying that to the best of his
knowledge no Default or Event of Default has occurred and is continuing or, if
a Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action which is proposed to be taken with respect
thereto and (ii) with computations demonstrating compliance with the covenants
contained in Article 9;
(d) simultaneously with the delivery of the annual
financial statements referred to in Section 7.08(a), a certificate of the
independent public accountants who audited such statements (i) certifying to
the effect that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such accountants shall have
obtained knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have knowledge and the
nature and status thereof and (ii) with computations demonstrating compliance
with the covenants contained in Article 9;
(e) as soon as available and in any event within 30 days
after the end of each calendar month, (i) a Borrowing Base Certificate, (ii) a
listing of Receivable balances not paid within 90 days of the due date,
specifying each
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Customer thereunder by name and the aged balance of all Receivables due from
such Customer and (iii) a listing of all Customers from which 50% or more of
the aggregate amount of Receivables have not paid within 90 days of the due
date, specifying the names of such Customers and the total amount of
Receivables of such Customers;
(f) simultaneously with the delivery of the financial
statements referred to in Section 7.08(a) and Section 7.08(b), a narrative
explanation signed by the president or the chief financial officer of the
Borrower of any material variance from the LCC Consolidated Entities' budget
for the Fiscal Year that is reflected in such financial statements;
(g) not later than the 30th day following the
commencement of each Fiscal Year, (i) a projected consolidated balance sheet of
the LCC Consolidated Entities for such Fiscal Year and the next four Fiscal
Years on an annual basis and (ii) an operating plan for the LCC Consolidated
Entities for such Fiscal Year and the next four Fiscal Years, including budget,
personnel, facilities, capital expenditure and research and development
projections on an annual basis and a projected consolidated income and cash
flows statement for such Fiscal Years on an annual basis, incorporating the
items detailed in such operating plan for such Fiscal Years, and accompanied by
a description of the material assumptions used in making such operating plan;
(h) promptly after the commencement thereof, notice of
all material actions, suits, and proceedings before any Governmental Authority
against or affecting any LCC Consolidated Entity or any of their respective
Properties;
(i) as soon as possible and in any event within 10 days
after any LCC Consolidated Entity knows or has reason to know of the occurrence
of each Default or Event of Default a written notice setting forth the details
of such Default or Event of Default and the action which is proposed to be
taken by the LCC Consolidated Entities with respect thereto;
(j) as soon as possible, and in any event within 10 days
after any LCC Consolidated Entity knows or has reason to know that any of the
events or conditions specified below with respect to any Domestic Plan, Foreign
Plan or Multiemployer Plan has occurred or exists, a statement signed by a
senior financial officer of such LCC Consolidated Entity setting forth details
respecting such event or condition and the action, if any, which such LCC
Consolidated Entity or an ERISA Affiliate proposes to take with respect thereto
(and a copy of any report or notice required to be filed with or given to the
PBGC or any other Governmental Authority by such LCC Consolidated Entity or an
ERISA Affiliate with respect to such event or condition): (i) any reportable
event, as defined in Section 4043(b) of ERISA, with respect to a Domestic Plan,
as to which the PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of such
event (provided that a failure to meet the
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minimum funding standard of Section 412 of the Code or Section 302 of ERISA
including, without limitation, the failure to make on or before its due date a
required installment under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code) and any request for a waiver under
Section 412(d) of the Code for any Domestic Plan; (ii) the distribution under
Section 4041 of ERISA or under any similar foreign law of a notice of intent to
terminate any Domestic Plan or Foreign Plan or any action taken by such LCC
Consolidated Entity or an ERISA Affiliate to terminate any Domestic Plan or
Foreign Plan; (iii) the institution by the PBGC or any other Governmental
Authority of proceedings under Section 4042 of ERISA or under any similar
foreign law for the termination of, or the appointment of a trustee to
administer, any Domestic Plan or any Foreign Plan, or the receipt by such LCC
Consolidated Entity or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; (iv) the complete or partial withdrawal from a
Multiemployer Plan by such LCC Consolidated Entity or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser default)
or the receipt by such LCC Consolidated Entity or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA; (v) the institution of a proceeding by
a fiduciary or any Multiemployer Plan against such LCC Consolidated Entity or
any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days; (vi) the adoption of an amendment to any Domestic
Plan that pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA
would result in the loss of tax-exempt status of the trust of which such
Domestic Plan is a part if such LCC Consolidated Entity or an ERISA Affiliate
fails to timely provide security to the Domestic Plan in accordance with the
provisions of said Sections; (vii) any event or circumstance exists which may
reasonably be expected to constitute grounds for such LCC Consolidated Entity
or any ERISA Affiliate to incur liability under Title IV of ERISA or under
Section 412(c)(11) or 412(n) of the Code with respect to any Domestic Plan; and
(viii) the Unfunded Benefit Liabilities of one or more Domestic Plans and
Foreign Plans increase after the date of this Agreement in an amount which is
material in relation to the financial condition of the Consolidated Entities;
provided, however, that such increase shall not be deemed to be material so
long as it does not exceed during any consecutive 3 year period $500,000;
(k) promptly after the request of any Lender, copies of
each annual report filed pursuant to Section 104 of ERISA with respect to each
Domestic Plan (including, to the extent required by Section 104 of ERISA, the
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information referred to in Section
103) and each annual report filed with respect to each Domestic Plan under
Section 4065 of ERISA; provided, however, that in the case of a Multiemployer
Plan, such annual reports shall be
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furnished only if they are available to such LCC Consolidated Entity or an
ERISA Affiliate;
(l) promptly after the sending or filing thereof, copies
of all proxy statements, financial statements and reports which any LCC
Consolidated Entity sends to its holders of Capital Stock, and copies of all
regular, periodic and special reports, and all registration statements which
such LCC Consolidated Entity files with the Securities and Exchange Commission
or any Governmental Authority which may be substituted therefor, or with any
national securities exchange;
(m) promptly after becoming aware of the existence of any
violation or alleged violation of any Environmental Law by any LCC Consolidated
Entity and with respect to any real Property owned or leased by any LCC
Consolidated Entity, prompt written notice of and a description of the nature
of such violation or alleged violation, what action such LCC Consolidated
Entity is taking or proposes to take with respect thereto and, when known, any
action taken, or proposed to be taken, by any Governmental Authority with
respect thereto;
(n) simultaneously with the delivery of the financial
statements referred to in Section 7.08(a) and Section 7.08(b), a report
describing any unscheduled termination, material amendment or material default
under any Material Revenue-Producing Contract (whether or not constituting a
Material Contract Termination), and the entering into of any new Material
Revenue-Producing Contract;
(o) at least once a Fiscal Year, a report of a reputable
insurance broker with respect to all insurance maintained by the LCC
Consolidated Entities together with a certificate of insurance evidencing the
effectiveness of the policies of insurance required to be maintained pursuant
the provisions of Section 7.05;
(p) simultaneously with the delivery of the financial
statements referred to in Section 7.08(a) and Section 7.08(b), a report, with
respect to each LCC Consolidated Entity, as to any new location or relocation
of inventory or equipment, any new interests in real Property acquired, any new
interests in Proprietary Rights obtained and any new equity interests acquired,
together with such financing statements, mortgages, assignments and stock
certificates as may be necessary to perfect the Lien of the Administrative
Agent under the Security Documents;
(q) promptly after the commencement thereof or promptly
after any LCC Consolidated Entity knows of the commencement or threat thereof,
notice of any Forfeiture Proceeding;
(r) damage to all or any part of the Property of any LCC
Consolidated Entity by casualty or damage or taking of all or any part of any
LCC Consolidated Entity by condemnation that would cause business interruption
or
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would cause monetary loss in excess of $500,000 not otherwise covered by
insurance; and
(s) such other information respecting the condition or
operations, financial or otherwise, of any LCC Consolidated Entity as the
Administrative Agent or any Lender may from time to time reasonably request.
SECTION 7.09. ADDITIONAL GUARANTORS. Promptly upon any Person(s)
becoming a Significant Subsidiary, cause such Significant Subsidiary to become
a "Subsidiary Guarantor" and thereby an "Obligor" hereunder pursuant to the
Assumption Agreement and deliver such proof of corporate, partnership or
limited liability company action, incumbency of officers, opinions of counsel
and other documents as is consistent with those delivered by the Obligors
pursuant to Article 5 or as the Administrative Agent shall have reasonably
requested.
SECTION 7.10. AFTER ACQUIRED REAL PROPERTY. Promptly upon
acquiring any material interest in any real Property or, in the case of
telecommunications towers acquired or constructed by the New Subsidiary
Guarantor, at the request of the Administrative Agent, cause each Obligor to
(a) immediately provide written notice thereof to the Administrative Agent,
setting forth with specificity a description of the interest acquired, the
location of such real Property, any structures or improvements thereon and the
fair market value of such real Property; (b) as soon as practicable thereafter,
execute and deliver to the Administrative Agent a mortgage or trust deed in a
form reasonably acceptable to the Administrative Agent, together with such of
the other documents and instruments as the Administrative Agent shall have
reasonably requested; (c) deliver a mortgagee policy of title insurance for
such real Property in an amount no less the fair market value of such real
Property; and (d) deliver such proof of corporate, partnership or limited
liability company action, incumbency of officers, opinions of counsel and other
documents as the Administrative Agent shall have reasonably requested.
ARTICLE 8. NEGATIVE COVENANTS
So long as any Obligation shall remain unpaid, any Letter of Credit
shall remain outstanding or any Lender shall have any Commitment, the Borrower
shall not, and shall cause each of its Subsidiaries not to:
SECTION 8.01. DEBT. Create, incur, assume or suffer to exist any
Debt, except:
(a) Debt of the LCC Consolidated Entities under this
Agreement, the Notes, the Letters of Credit, the Interest Rate Protection
Agreements, the Currency Protection Agreements and the other Facility
Documents;
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(b) Debt described on SCHEDULE 6.10 but no renewals,
extensions or refinancings thereof;
(c) Debt consisting of Guaranties permitted pursuant to
Section 8.02;
(d) Consolidated Subordinated Debt;
(e) Debt under documentary and standby letters of credit
exclusive of the Letters of Credit so long as the aggregate reimbursement
obligations under such letters of credit together with the aggregate
reimbursement obligations of all outstanding letters of credit described on
SCHEDULE 6.10 does not exceed at any time $750,000;
(f) Debt of (i) any Obligor (other than the Subsidiary
Borrower) to any other Obligor (other than the Subsidiary Borrower), (ii) the
Borrower to any of its Subsidiaries so long as such Debt is subordinated to the
Obligations on terms and conditions acceptable to the Required Lenders and
(iii) in addition to the Debt permitted under clauses (i) and (ii) of this
paragraph (f), any Subsidiary of the Borrower to the Borrower so long as (A)
such Debt is evidenced by a promissory note on terms reasonably acceptable to
the Required Lenders which promissory note shall be pledged to the
Administrative Agent as collateral for the Obligations and (B) the aggregate
principal amount of all such Debt does not exceed at any time $1,000,000;
(g) accounts payable to trade creditors for goods or
services which are not aged more than 120 days from billing date and current
operating liabilities (other than for borrowed money) which are not more than
120 days past due, in each case incurred in the ordinary course of business and
paid within the specified time, unless contested in good faith and by
appropriate proceedings; and
(h) Debt of any LCC Consolidated Entity secured by
Purchase Money Liens permitted by Section 8.03(j) and any renewals, extensions
or refinancings thereof so long as the aggregate principal amount of all such
Debt together with all Debt then outstanding secured by Purchase Money Liens
described on SCHEDULE 6.10 does not exceed at any time $1,000,000.
SECTION 8.02. GUARANTIES. Assume, guarantee, endorse or otherwise
become directly or contingently responsible or liable for any Guaranty, except:
(a) Guaranties by the Subsidiaries of the Borrower of the
Obligations;
(b) Guaranties by the Borrower of the Debt of other
Persons so long as the aggregate amount of such Debt does not exceed at any
time $1,000,000; and
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(c) Guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
SECTION 8.03. LIENS. Create, incur, assume or suffer to exist any
Lien, upon or with respect to any of its Properties, now owned or hereafter
acquired, except:
(a) Liens in favor of the Administrative Agent on behalf
of the Lenders securing the Obligations under this Agreement, the Notes, the
Letters of Credit, the Interest Rate Protection Agreements, the Currency
Protection Agreements and the other Facility Documents;
(b) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(c) Liens imposed by law, such as mechanic's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other
similar Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than 60 days, or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves have
been established;
(d) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance
of bids, tenders, contracts (other than contracts for the payment of money),
leases (permitted under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in
connection with court proceedings that do not exceed $500,000 in the aggregate;
provided that the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(g) easements, rights-of-way, restrictions and other
similar encumbrances which, in the aggregate, do not materially interfere with
the occupation, use and enjoyment by any LCC Consolidated Entity of the
Property encumbered thereby in the normal course of its business or materially
impair the value of the Property subject thereto;
(h) Liens described on SCHEDULE 6.10 provided that such
Liens shall secure only those obligations which they secure on the date hereof;
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(i) Liens on Domestic Cash Equivalents securing the
reimbursement obligations of any LCC Consolidated Entity under letters of
credit permitted under Section 8.01(e); and
(j) Purchase Money Liens; provided that (i) the Person
owning any Property subject to such Lien is acquired or any Property subject to
such Lien is acquired or constructed by any LCC Consolidated Entity and the
Lien on any such Property is created within 120 days of such acquisition or
construction; (ii) the obligation secured by any Lien so created, assumed or
existing shall not exceed 100% of the lesser of cost or fair market value as of
the time of acquisition or construction of the Property covered thereby to such
LCC Consolidated Entity acquiring or constructing the same; (iii) each such
Lien shall attach, in the case of an acquisition, only to the Property so
acquired, Property associated with such Property, fixed improvements thereon
and the proceeds thereof and, in the case of construction, only to the Property
so constructed, Property associated with such Property, the land thereunder,
the fixed improvements attached thereto and the proceeds thereof; and (iv) the
obligations secured by such Lien are permitted by the provisions of Section
8.01(h) and the related expenditure is permitted under Section 8.13.
SECTION 8.04. LEASES. Create, incur, assume or suffer to exist
any obligation as lessee for the rental or hire of any Property, except:
(a) leases existing on the date of this Agreement and any
extensions or renewals thereof;
(b) ground leases entered into in connection with the
acquisition, construction or other operation of cell sites, base stations or
telecommunications towers utilized in the operation of wireless networks;
(c) Capital Leases permitted by Section 8.01, Section
8.03 and Section 8.13; and
(d) other leases, provided that Consolidated Rentals
during any Fiscal Year shall not exceed $7,500,000.
SECTION 8.05. SALE AND LEASEBACK. Sell, transfer or otherwise
dispose of any real or personal Property to any Person and thereafter directly
or indirectly lease back the same or similar Property.
SECTION 8.06. INVESTMENT. Make any Investment, except:
(a) in Domestic Cash Equivalents and Foreign Cash
Equivalents;
(b) in Property to be used or useful in the ordinary
course of business of such LCC Consolidated Entity;
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(c) in stock, obligations or securities received in
settlement of trade debts (created in the ordinary course of business and not,
in any event, in excess of $500,000) owing to such LCC Consolidated Entity;
(d) to or in any Obligor (other than the Subsidiary
Borrower) or in any corporation, limited partnership or limited liability
business entity that concurrently with such Investment is or becomes an Obligor
(other than the Subsidiary Borrower); provided that at least $15,000,000 of all
amounts invested in Microcell shall be under the Microcell Note;
(e) in loans or advances by the Borrower to the Parent
made prior to the date hereof to assist the Parent in paying certain taxes due
in connection with the assumption of the MCI Subordinated Telcom Note by the
Borrower so long as (i) the aggregate amount of such loans or advances does not
exceed $3,500,000 at any time and (ii) such loans and advances are evidenced by
a promissory note on terms reasonably acceptable to the Required Lenders and
which promissory note shall be pledged to the Administrative Agent as
collateral for the Obligations; and
(f) in loans incurred in the ordinary course of business
or advances to employees which in the aggregate do not exceed $750,000 at any
time.
SECTION 8.07. RESTRICTED PAYMENTS. Make any Restricted Payment,
except:
(a) the declaration and payment of cash dividends by a
Subsidiary of the Borrower on its Capital Stock to the Borrower or to a
Wholly-Owned Subsidiary of the Borrower;
(b) so long as no Default or Event of Default shall have
occurred and be continuing, or would result from any of the following payments,
payments by the Borrower of accrued interest on the MCI Subordinated Notes on
and not prior to the respective due dates thereof; and
(c) so long as no Default or Event of Default shall have
occurred and be continuing, or would result from any of the following payments,
repurchases of Capital Stock of Microcell from the holders thereof so long as
the aggregate amount of payments made in connection with all such repurchases
does not exceed $2,000,000.
SECTION 8.08. SALE OF ASSETS. Sell, lease, assign, transfer or
otherwise dispose of any of its now owned or hereafter acquired Property
(including, without limitation, shares of stock and indebtedness, receivables
and leasehold interests); except:
(a) for inventory disposed of in the ordinary course of
business;
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(b) leases of cell sites to wireless network operators in
the ordinary course of business;
(c) for Proprietary Rights licensed in the ordinary
course of business;
(d) the sale or other disposition of Property no longer
used or useful in the conduct of its business;
(e) the sale or other disposition of Property during each
Fiscal Year so long as the aggregate consideration for such disposition and all
other dispositions made during such Fiscal Year does not exceed $500,000; and
(e) any LCC Consolidated Entity may effect a merger,
consolidation or transfer of substantially all of its Property permitted by
Section 8.10.
SECTION 8.09. TRANSACTIONS WITH AFFILIATES. (a) Make any
Investment in an Affiliate except as otherwise permitted under Section 8.06;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to any
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from any Affiliate except as otherwise permitted under Section 8.10; or (d)
enter into any other transaction directly or indirectly with or for the benefit
of any Affiliate (including, without limitation, Guaranties and assumption of
obligations of any Affiliate); provided that (x) any Affiliate who is an
individual may serve as a director, member of a membership committee, officer
or employee of any LCC Consolidated Entity and receive reasonable compensation
for his or her services in such capacity and (y) any LCC Consolidated Entity
may enter into transactions (other than Investments by such LCC Consolidated
Entity in any Affiliate not permitted under Section 8.06) in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to such LCC Consolidated Entity as the
monetary or business consideration which would obtain in a comparable arm's
length transaction with a Person not an Affiliate.
SECTION 8.10. MERGERS. Merge or consolidate with, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its Property (whether now
owned or hereafter acquired) to, any Person, or acquire all or substantially
all of the Property or the business of any Person (or enter into any agreement
to do any of the foregoing), except that:
(a) any Wholly-Owned Subsidiary of the Borrower may merge
into or consolidate with or transfer substantially all of its Property to the
Borrower or any other Wholly-Owned Subsidiary of the Borrower; and
(b) any LCC Consolidated Entity may effect any
Acquisition permitted by Section 8.11.
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SECTION 8.11. ACQUISITIONS. Engage in or propose to be engaged in
the conduct of any business or activity which could result in a Forfeiture
Proceeding.
SECTION 8.12. NO ACTIVITIES LEADING TO FORFEITURE. Make any
Acquisition.
SECTION 8.13. CAPITAL EXPENDITURES. Make or commit to make any
Capital Expenditure if the aggregate amount of Consolidated Capital
Expenditures incurred during any Fiscal Year would exceed $4,000,000.
SECTION 8.14. AMENDMENTS OR WAIVERS OF CERTAIN DOCUMENTS. Amend,
supplement, otherwise change, waive or otherwise relinquish (or agree to any
amendment, supplement, other change, waiver or other relinquishment of) any
term of (a) any terms of Consolidated Subordinated Debt (including, without
limitation, any MCI Note Purchase Document and any Telcom Document) or (b) if
such amendment, supplement, change, waiver or relinquishment could have an
adverse effect on the rights or interests of the Lenders hereunder or under any
of the other Facility Documents, any terms of any NextWave Investment Document,
any DCR Investment Document, the Merger Agreement or the organizational
documents of any Subsidiary Guarantor without, in each case, obtaining the
prior written consent of the Required Lenders to such amendment, supplement,
change, waiver or relinquishment.
SECTION 8.15. RESTRICTIONS. Enter into or suffer to exist, any
agreement with any Person other than the Lenders that (a) prohibits, requires
the consent of such Person for or limits the ability of (i) any LCC
Consolidated Entity to pay dividends or make distributions to any other LCC
Consolidated Entity, pay liabilities owed to any other LCC Consolidated Entity,
make loans or advances to any other LCC Consolidated Entity or transfer any of
its Property to any other LCC Consolidated Entity, (ii) any LCC Consolidated
Entity to create, incur, assume or suffer to exist any Lien upon any of its
Property or (iii) any Obligor to enter into any modification or supplement of
any Facility Document; or (b) contains financial covenants which, taken as a
whole, are more restrictive on the LCC Consolidated Entities than the financial
covenants contained in Article 9.
ARTICLE 9. FINANCIAL COVENANTS.
So long as any Obligation shall remain unpaid, any Letter of Credit
shall remain outstanding or any Lender shall have any Commitment and as
determined as of the end of each Fiscal Quarter:
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SECTION 9.01. INTEREST COVERAGE RATIO. Commencing with, and
including, the calendar month ending April 30, 1999, the LCC Consolidated
Entities shall maintain at all times an Interest Coverage Ratio of not less
than 1.50 to 1.00.
SECTION 9.02. MINIMUM NET WORTH. The LCC Consolidated Entities
shall maintain at all times Consolidated Net Worth of not less than the sum of
(a) $50,000,000 plus (b) the aggregate sum of the Fiscal Quarter Net Worth
Increase Amounts calculated for each Fiscal Quarter ending after the date
hereof.
SECTION 9.03. CURRENT RATIO. The LCC Consolidated Entities shall
maintain at all times a Current Ratio of not less than 1.25 to 1.00.
SECTION 9.04. BALANCE SHEET LEVERAGE RATIO. The LCC Consolidated
Entities shall maintain at all times a Balance Sheet Leverage Ratio of not
greater than 1.00 to 1.00.
SECTION 9.05. CONSOLIDATED EBIT. Commencing with, and including,
the Fiscal Quarter ending on March 31, 1999, the LCC Consolidated Entities
shall maintain Consolidated EBIT of greater than (a) in the case of the Fiscal
Quarter ending on March 31, 1999, <$2,500,000> and (b) $0 for each Fiscal
Quarter ending thereafter.
ARTICLE 10. EVENTS OF DEFAULT.
SECTION 10.01. EVENTS OF DEFAULT. Any of the following events
shall be an "Event of Default":
(a) the Borrower or the Subsidiary Borrower shall: (i)
fail to pay the principal of any Note or any Reimbursement Obligation on or
before the date when due and payable; or (ii) fail to pay interest on any Note
or any fee or other amount due hereunder on or before the date when due and
payable; or the amount of cash deposited with the Administrative Agent under
the Cash Collateral Account Agreement shall be less than the aggregate amount
of the then outstanding Guarantied Obligations;
(b) any representation or warranty made or deemed made by
any LCC Consolidated Entity or the Individual Guarantor in this Agreement or in
any other Facility Document or which is contained in any certificate, document,
opinion, financial or other statement furnished at any time under or in
connection with any Facility Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made;
(c) any LCC Consolidated Entity or the Individual
Guarantor shall: (i) fail to perform or observe any term, covenant or agreement
contained in
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SECTION 2.03 or 3.02 or Article 8 or 9; or (ii) fail to perform or observe any
term, covenant or agreement on its part to be performed or observed (other than
the obligations specifically referred to elsewhere in this Section 10.01) in
any Facility Document and such failure shall continue for 30 consecutive days
after any Obligor shall have obtained actual knowledge or notice from the
Administrative Agent or any Lender thereof;
(d) any LCC Consolidated Entity shall: (i) fail to pay
any indebtedness in excess of $500,000, including but not limited to
indebtedness for borrowed money (other than the payment obligations described
in (a) above), of such LCC Consolidated Entity, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise); (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such indebtedness, when required to be
performed or observed (taking into account applicable grace periods), if the
effect of such failure to perform or observe is to accelerate, or to permit the
acceleration of, after the giving of notice or passage of time, or both, the
maturity of such indebtedness; or any such indebtedness shall be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; or (iii) a
"Default" or "Event of Default" shall have occurred under any MCI Note Purchase
Document or any Telcom Document, whether or not waived;
(e) any LCC Consolidated Entity or the Individual
Guarantor: (i) shall generally not, or be unable to, or shall admit in writing
its inability to, pay its debts as such debts become due; or (ii) shall make an
assignment for the benefit of creditors, petition or apply to any tribunal for
the appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced, against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 60 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture (other than a proceeding in respect of a
Lien permitted under Section 8.03(b)); or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for all or any substantial part of its Property;
or (vi) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of 60 days or more;
(f) one or more judgments, decrees or orders for the
payment of money in excess of $500,000 in the aggregate shall be rendered
against any LCC Consolidated Entity and such judgments, decrees or orders shall
continue
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unsatisfied and in effect for a period of 30 consecutive days without being
vacated, discharged, satisfied or stayed or bonded pending appeal;
(g) any event or condition shall occur or exist with
respect to any Domestic Plan, Foreign Plan or Multiemployer Plan concerning
which any LCC Consolidated Entity is under an obligation to furnish a report to
the Lenders in accordance with Section 7.08(i) hereof and as a result of such
event or condition, together with all other such events or conditions, such LCC
Consolidated Entity or any ERISA Affiliate has incurred or in the opinion of
the Lenders is reasonably likely to incur a liability to a Domestic Plan, a
Foreign Plan, a Multiemployer Plan, the PBGC, a Section 4042 Trustee or any
other Governmental Authority (or any combination of the foregoing) which is
material in relation to the financial position of the LCC Consolidated
Entities; provided, however, that any such amount shall not be deemed to be
material so long as all such amounts do not exceed $500,000 in the aggregate
during the term of this Agreement;
(h) the Unfunded Benefit Liabilities of one or more
Domestic Plans or Foreign Plans have increased after the date of this Agreement
in an amount which is material (as specified in Section 7.08(i)(viii) hereof);
(i) (i) any Person or two or more Persons acting in
concert (other than Dr. Rajendra Singh, Neera Singh, any trusts for their
benefit or the benefit of their family members and any of their respective
affiliates controlled by them) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of more than 25% of the Voting Stock of the
Borrower; or (ii) during any period of 12 consecutive months, commencing before
or after the date of this Agreement, individuals who at the beginning of such
12-month period were directors or members of the Members Committee (or persons
nominated by such individuals) of the Borrower cease for any reason to
constitute a majority of the Board of Directors or the Members Committee of the
Borrower;
(j) any Forfeiture Proceeding shall have been commenced
or the Borrower shall have given the Administrative Agent or any Lender written
notice of the commencement of any Forfeiture Proceeding as provided in Section
6.08(o);
(k) (i) any Security Document shall for any reason cease
to create in favor of the Administrative Agent a legal, valid and enforceable
perfected first-priority Lien in the Collateral as security for the Obligations
except for Liens permitted under Section 8.03 entitled to priority by law; or
(ii) any Facility Document shall cease to be in full force and effect or shall
be declared null and void, or the validity or enforceability thereof shall be
contested by any LCC Consolidated Entity or the Individual Guarantor or any
such Person shall deny it has any further liability or obligation under the
Security Documents or any such Person shall fail to perform any of its
obligations thereunder;
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(l) damage to all or any part of the Property of any LCC
Consolidated Entity by casualty or damage or taking of all or any part of the
Property of such LCC Consolidated Entity that would cause business interruption
or would cause monetary loss in excess of $500,000 not otherwise covered by
insurance; or
(m) the occurrence of a Material Contract Termination.
SECTION 10.02. REMEDIES. If any Event of Default shall occur and be
continuing, the Administrative Agent shall, upon request of the Required
Lenders, by notice to the Borrower and the Subsidiary Borrower, (a) declare the
Commitments to be terminated, whereupon the same shall forthwith terminate and
so shall the obligations of the Issuing Lender to issue any Letter of Credit,
(b) declare the outstanding principal of the Notes, all interest thereon and
all other amounts payable under this Agreement, the Notes and the other
Facility 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 and the Subsidiary
Borrower and/or (c) direct the Borrower to pay to the Administrative Agent an
amount to be held as cash security in the cash collateral account held by the
Administrative Agent under Section 3.08 equal to the Letter of Credit
Obligations then outstanding; provided that, in the case of an Event of Default
referred to in Section 10.01(e) or Section 10.01(i) above, the Commitments
shall be immediately terminated, and the Notes, all interest thereon and all
other amounts payable under this Agreement shall be immediately due and payable
without notice, presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower and the Subsidiary
Borrower. If an Event of Default shall occur and be continuing, the
Administrative Agent and each Lender may exercise all of the rights and
remedies conferred in this Agreement and in each of the other Facility
Documents; it being expressly understood that no such remedy is intended to be
exclusive of any other remedy or remedies; but each and every remedy shall be
cumulative and shall be in addition to every other remedy given in this
Agreement or the other Facility Documents or now or hereafter existing at law
or in equity or by statute, and may be exercised from time to time as often as
may be deemed expedient by the Administrative Agent and such Lender.
ARTICLE 11. UNCONDITIONAL GUARANTY.
SECTION 11.01. GUARANTIED OBLIGATIONS. Each of the Borrower (as to
the Swingline Notes) and the Subsidiary Guarantors (each of the foregoing
entities individually a "Guarantor" and collectively the "Guarantors"), jointly
and severally, in consideration of the execution and delivery of this Agreement
by the Lenders and the Administrative Agent, hereby irrevocably and
unconditionally guarantees to the
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Administrative Agent, for the benefit of the Lenders, as and for such
Guarantor's own debt, until final payment has been made:
(a) the due and punctual payment in full in cash in the
applicable currency of the Obligations, in each case when and as the same shall
become due and payable, whether at maturity, pursuant to mandatory or optional
prepayment, by acceleration or otherwise, all in accordance with the terms and
provisions of this Agreement and the other Facility Documents, it being the
intent of the Guarantors that the guaranty set forth in this Section 11.01 (the
"Unconditional Guaranty") shall be a guaranty of payment and not a guaranty of
collection; and
(b) the punctual and faithful performance, keeping,
observance, and fulfillment by each Obligor of all duties, agreements,
covenants and obligations such Obligor contained in each of the Facility
Documents to which it is a party.
Notwithstanding anything to the contrary contained herein, the
obligations of Microcell under this Agreement and the other Facility Documents
are limited to the principal, interest and other amounts outstanding under the
Microcell Note and the Microcell Loan Agreement. In furtherance of the
foregoing, all rights granted to the Administrative Agent under Section 3.05 of
the Pledge Agreement upon an Event of Default with respect to the Microcell
Note and the Microcell Loan Agreement shall be granted to the Administrative
Agent effective as of the Closing Date.
SECTION 11.02. PERFORMANCE UNDER THIS AGREEMENT. In the event any
Obligor fails to make, on or before the due date thereof, any payment of the
principal of, or interest on, the Notes, the Letter of Credit Obligations or
the other Obligations, or if any Obligor shall fail to perform, keep, observe,
or fulfill any other obligation referred to in clause (a) or clause (b) of
Section 11.01 hereof in the manner provided in the Notes, the Letters of Credit
or in any of the other Facility Documents, and any such failure shall remain
uncured at the expiration of any applicable cure period provided herein or in
the other Facility Documents, the Guarantors shall cause forthwith to be paid
the moneys, or to be performed, kept, observed, or fulfilled each of such
obligations, in respect of which such failure has occurred.
SECTION 11.03. WAIVERS. To the fullest extent permitted by law,
each Guarantor does hereby waive:
(a) notice of acceptance of the Unconditional Guaranty;
(b) notice of any borrowings under this Agreement, or the
creation, existence or acquisition of any of the Obligations, subject to such
Guarantor's right to make inquiry of the Administrative Agent to ascertain the
amount of the Obligations at any reasonable time;
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(c) notice of the amount of the Obligations, subject to
each Guarantor's right to make inquiry of the Administrative Agent to ascertain
the amount of the Obligations at any reasonable time;
(d) notice of adverse change in the financial condition
of the Borrower, the Subsidiary Borrower, any other guarantor or any other fact
that might increase each Guarantor's risk hereunder;
(e) notice of presentment for payment, demand, protest,
and notice thereof as to the Notes or any other Facility Document;
(f) notice of any Default or Event of Default;
(g) all other notices and demands to which each Guarantor
might otherwise be entitled (except if such notice or demand is specifically
otherwise required to be given to each Guarantor hereunder or under the other
Facility Documents);
(h) the right by statute or otherwise to require any or
each Lender or the Administrative Agent to institute suit against the Borrower,
the Subsidiary Borrower or any other guarantor or to exhaust the rights and
remedies of any or each Lender or the Administrative Agent against the
Borrower, the Subsidiary Borrower or any other guarantor, each Guarantor being
bound to the payment of each and all Obligations, whether now existing or
hereafter accruing, as fully as if such Obligations were directly owing to each
Lender by each Guarantor;
(i) any defense arising by reason of any disability or
other defense (other than the defense that the Obligations shall have been
fully and finally performed and indefeasibly paid) of the Borrower or the
Subsidiary Borrower or by reason of the cessation from any cause whatsoever of
the liability of the Borrower or the Subsidiary Borrower in respect thereof;
and
(j) any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any time
hereafter in force which, but for this waiver, might be applicable to any sale
of Property of each Guarantor made under any judgment, order or decree based on
this Agreement, and each Guarantor covenants that it will not at any time
insist upon or plead, or in any manner claim or take the benefit or advantage
of such law.
Until all of the Obligations shall have been paid in full, each of the
Guarantors hereby agrees to completely subordinate any right of subrogation,
reimbursement, or indemnity whatsoever in respect thereof and any right of
recourse to or with respect to any Property of the Borrower or the Subsidiary
Borrower. Nothing shall discharge or satisfy the obligations of any Guarantor
hereunder except the full and final performance and indefeasible payment in
cash in the applicable currency of the Obligations by such Guarantor, upon
which each Lender agrees to transfer and assign its interest in the Notes and
the other Facility Documents to such Guarantor
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without recourse, representation or warranty of any kind (other than that such
Lender owns its Notes and that such Notes are free of Liens created by such
Lender). All of the Obligations shall in the manner and subject to the
limitations provided herein for the acceleration thereof forthwith become due
and payable without notice.
SECTION 11.04. RELEASES. Each of the Guarantors consents and
agrees that, without notice to or by such Guarantor and without affecting or
impairing the obligations of such Guarantor hereunder, each Lender or the
Administrative Agent, in the manner provided herein, by action or inaction,
may:
(a) compromise or settle, extend the period of duration
or the time for the payment, or discharge the performance of, or may refuse to,
or otherwise not, enforce, or may, by action or inaction, release all or any
one or more parties to, any one or more of the Notes or the other Facility
Documents;
(b) grant other indulgences to the Borrower or the
Subsidiary Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or
from time to time) any one or more of the Notes, the Letters of Credit and the
other Facility Documents in accordance with Section 13.01 or otherwise;
(d) release or substitute any one or more of the
endorsers or guarantors of the Obligations whether parties hereto or not; and
(e) exchange, enforce, waive, or release, by action or
inaction, any security for the Obligations (including, without limitation, any
of the collateral therefor) or any other guaranty of any of the Obligations.
SECTION 11.05. MARSHALING. Each of the Guarantors consents and
agrees that:
(a) neither the Administrative Agent nor any Lender shall
be under no obligation to marshal any assets in favor of each Guarantor or
against or in payment of any or all of the Obligations; and
(b) to the extent the Borrower, the Subsidiary Borrower
or any other guarantor makes a payment or payments to any Lender, which payment
or payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required, for any of the foregoing
reasons or for any other reason, to be repaid or paid over to a custodian,
trustee, receiver, or any other party under any bankruptcy law, common law, or
equitable cause, then to the extent of such payment or repayment, the
Obligations or part thereof intended to be satisfied thereby shall be revived
and continued in full force and effect as if
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said payment or payments had not been made and such Guarantor shall remain
liable for such Obligation.
SECTION 11.06. LIABILITY. Each of the Guarantors agrees that the
liability of such Guarantor in respect of this Article 11 shall not be
contingent upon the exercise or enforcement by any Lender or the Administrative
Agent of whatever remedies such Lender or the Administrative Agent may have
against the Borrower, the Subsidiary Borrower or any other guarantor or the
enforcement of any Lien or realization upon any security such Lender or the
Administrative Agent may at any time possess.
SECTION 11.07. UNCONDITIONAL OBLIGATION. The Unconditional
Guaranty set forth in this Article 11 is an absolute, unconditional, continuing
and irrevocable guaranty of payment and performance and shall remain in full
force and effect until the full and final payment of the Obligations without
respect to future changes in conditions, including change of law or any
invalidity or irregularity with respect to the issuance or assumption of any
obligations (including, without limitation, the Notes and the Letter of Credit
Obligations) of or by the Borrower, the Subsidiary Borrower or any other
guarantor, or with respect to the execution and delivery of any agreement
(including, without limitation, the Notes and the other Facility Documents) of
the Borrower, the Subsidiary Borrower or any other guarantor.
SECTION 11.08. ELECTION TO PERFORM OBLIGATIONS. Any election by
any of the Guarantors to pay or otherwise perform any of the obligations of any
Obligor under the Notes or under any of the other Facility Documents, whether
pursuant to this Article 11 or otherwise, shall not release such Obligor from
any of its other obligations under the Notes, the Letters of Credit or any of
the other Facility Documents.
SECTION 11.09. NO ELECTION. The Administrative Agent shall have the
right to seek recourse against any one or more of the Guarantors to the
fullest extent provided for herein for such Guarantor's obligations under
this Agreement (including, without limitation, this Article 11) in respect of
the Notes, the Letters of Credit and the other Facility Documents. No
election to proceed in one form of action or proceeding, or against any
party, or on any obligation, shall constitute a waiver of the Administrative
Agent's right to proceed in any other form of action or proceeding or against
other parties unless the Administrative Agent has expressly waived such right
in writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by any Lender or the Administrative Agent
against any Obligor under any document or instrument evidencing obligations
of such Obligor to such Lender or the Administrative Agent shall serve to
diminish the liability of any of the Guarantors under this Agreement
(including, without limitation, this Article 11) except to the extent that
the Administrative Agent or such Lender finally and unconditionally shall
have realized payment by such action
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or proceeding, notwithstanding the effect of any such action or proceeding upon
such Guarantor's right of subrogation against any Obligor.
SECTION 11.10. SEVERABILITY. Subject to applicable law, each of the
rights and remedies granted under this Article 11 to the Administrative Agent
may be exercised by the Administrative Agent without notice by the
Administrative Agent to, or the consent of or any other action by, any Lender,
provided that the Administrative Agent will promptly thereafter give each
Lender notice of any exercise of rights and remedies by the Administrative
Agent under this Article 11.
SECTION 11.11. OTHER ENFORCEMENT RIGHTS. The Administrative Agent
may proceed, as provided in Article 11 hereof, to protect and enforce the
Unconditional Guaranty by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement contained herein (including, without limitation, in this Article 11)
or in execution or aid of any power herein granted; or for the recovery of
judgment for the obligations hereby guarantied or for the enforcement of any
other proper, legal or equitable remedy available under applicable law. Each
of the Lenders shall have, to the fullest extent permitted by law and this
Agreement, a right of set-off against, any and all credits and any and all
other Property of any Guarantor, now or at any time whatsoever with, or in the
possession of, such Lender, or anyone acting for such Lender, as security for
any and all obligations of such Guarantor hereunder and such Lien shall be
deemed permitted for all purposes under Article 8 hereof.
SECTION 11.12. DELAY OR OMISSION: NO WAIVER. No course of dealing
on the part of any Lender or the Administrative Agent and no delay or failure
on the part of any such Person to exercise any right hereunder (including,
without limitation, this Article 11) shall impair such right or operate as a
waiver of such right or otherwise prejudice such Person's rights, powers and
remedies hereunder. Every right and remedy given by the Unconditional Guaranty
or by law to any Lender or the Administrative Agent may be exercised from time
to time as often as may be deemed expedient by such Person.
SECTION 11.13. RESTORATION OF RIGHTS AND REMEDIES. If any Lender
or the Administrative Agent shall have instituted any proceeding to enforce any
right or remedy under the Unconditional Guaranty, under any Note held by such
Lender, or under any Security Document, and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to such Lender or the Administrative Agent, then and in every such
case each such Lender, the Administrative Agent, the Borrower, the Subsidiary
Borrower and the Guarantors shall, except as may be limited or affected by any
determination in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject
as aforesaid, the rights and remedies of such Lender or the Administrative
Agent shall continue as though no such proceeding had been instituted.
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SECTION 11.14. CUMULATIVE REMEDIES. No remedy under this Agreement
(including, without limitation, this Article 11), the Notes, the Letters of
Credit or any of the other Facility Documents is intended to be exclusive of
any other remedy, but each and every remedy shall be cumulative and in addition
to any and every other remedy given under this Agreement (including, without
limitation, this Article 11), the Notes, the Letters of Credit or any of the
other Facility Documents.
SECTION 11.15. SURVIVAL. The obligations of the Guarantors under
this Article 11 shall survive the transfer and payment of any Obligation
until the indefeasible payment in full of all the Obligations and the
expiration and termination of the Letters of Credit and the Commitments.
SECTION 11.16. NO SETOFF. COUNTERCLAIM OR WITHHOLDING: GROSS-UP.
Each payment by a Guarantor shall be made without setoff or counterclaim and
without withholding for or on account of any present or future taxes imposed by
any Governmental Authority. If any such withholding is so required, such
Guarantor shall make the withholding and pay the amount withheld to the
appropriate Governmental Authority before penalties attach thereto or interest
accrues thereon.
SECTION 11.17. PAYMENT IN APPLICABLE CURRENCY. Any payment of an
Obligation required to be made pursuant to this Agreement shall be made in the
currency in which such Obligation is required to be made pursuant to this
Agreement, any Note or any other Facility Document.
ARTICLE 12. THE ADMINISTRATIVE AGENT
SECTION 12.01. APPOINTMENT. POWERS AND IMMUNITIES OF ADMINISTRATIVE
AGENT. Each Lender hereby irrevocably (but subject to removal by the Required
Lenders pursuant to Section 12.09) appoints and authorizes the Administrative
Agent to act as its agent hereunder and under any other Facility Document with
such powers as are specifically delegated to the Administrative Agent by the
terms of this Agreement and any other Facility Document, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
shall have no duties or responsibilities except those expressly set forth in
this Agreement and any other Facility Document, and shall not by reason of this
Agreement be a trustee for any Lender. The Administrative Agent shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties made by any LCC Consolidated Entity or any of their respective
officers and officials or by any other Person contained in this Agreement or
any other Facility Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Facility Document, or for the value, legality,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Facility Document or
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any other document or instrument referred to or provided for herein or therein,
for the perfection or priority of any collateral security for the Obligations
or for any failure by any Obligor to perform any of their respective
obligations hereunder or thereunder. The Administrative Agent may employ
agents and attorneys-in-fact and shall not be responsible, except as to money
or securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither the Administrative Agent nor any of its directors,
officers, employees or agents shall be liable or responsible to any Lender for
any action taken or omitted to be taken by it or them hereunder or under any
other Facility Document or in connection herewith or therewith, except for its
or their own gross negligence or willful misconduct.
SECTION 12.02. RELIANCE BY ADMINISTRATIVE AGENT. The
Administrative Agent shall be entitled to rely upon any certification, notice
or other communication (including any thereof by telephone, telex, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat each Lender
as the holder of the Obligations attributable to it for all purposes hereof
unless and until a notice of the assignment or transfer thereof satisfactory to
the Administrative Agent signed by such Lender shall have been furnished to the
Administrative Agent but the Administrative Agent shall not be required to deal
with any Person who has acquired a participation in any Obligation from a
Lender. As to any matters not expressly provided for by this Agreement or any
other Facility Document, the Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Lenders, and such instructions of the
Required Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and any other holder of all or any portion of
any Obligation.
SECTION 12.03. DEFAULTS. The Administrative Agent shall not be
deemed to have knowledge of the occurrence of a Default or Event of Default
(other than the non-payment of principal of or interest on the Loans and the
Letter of Credit Obligations to the extent the same is required to be paid to
the Administrative Agent for the account of the Lenders) unless the
Administrative Agent has received notice from a Lender or the Borrower
specifying such Default or Event of Default and stating that such notice is a
"Notice of Default." In the event that the Administrative Agent receives such
a notice of the occurrence of a Default or Event of Default, the Administrative
Agent shall give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such non-payment). The Administrative Agent shall
(subject to Section 12.08) take such action with respect to such Default or
Event of Default which is continuing as shall be directed by the Required
Lenders; provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may take such action, or
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refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders; and
provided further that the Administrative Agent shall not be required to take
any such action which it determines to be contrary to law.
SECTION 12.04. RIGHTS OF ADMINISTRATIVE AGENT AS A LENDER. With
respect to its Commitments and the Obligations held by it, The Chase
Manhattan Bank in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include The Chase
Manhattan Bank in its capacity as a Lender. The Chase Manhattan Bank and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to (on a secured or unsecured basis), and generally
engage in any kind of banking, trust or other business with, any LCC
Consolidated Entity (and any of its their respective affiliates) as if it
were not acting as the Administrative Agent, and The Chase Manhattan Bank may
accept fees and other consideration from any LCC Consolidated Entity and any
of their respective affiliates for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders. Although
The Chase Manhattan Bank and its affiliates may in the course of such
relationships and relationships with other Persons acquire information about
any LCC Consolidated Entity, their respective affiliates and such other
Persons, the Administrative Agent shall have no duty to disclose such
information to the Lenders.
SECTION 12.05. INDEMNIFICATION OF ADMINISTRATIVE AGENT. The Lenders
agree to indemnify the Administrative Agent (to the extent not reimbursed under
Section 13.03 or under the applicable provisions of any other Facility
Document, but without limiting the obligations of any Obligor under Section
13.03 or such provisions), ratably in accordance with the aggregate unpaid
principal amount of the Obligations attributable to the Lenders (without giving
effect to any participations, in all or any portion of the Obligations, sold by
them to any other Person) (or, if no Obligations are at the time outstanding,
ratably in accordance with their respective Commitments), for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against the Administrative Agent in
any way relating to or arising out of this Agreement, any other Facility
Document or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Obligors are obligated to pay under Section 13.03
or under the applicable provisions of any other Facility Document but
excluding, unless a Default or Event of Default has occurred, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents or instruments; provided that no Lender shall be
liable for any of
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the foregoing to the extent they arise from the gross negligence or wilful
misconduct of the party to be indemnified.
SECTION 12.06. DOCUMENTS. The Administrative Agent will forward to
each Lender, promptly after the Administrative Agent's receipt thereof, a
copy of each report, notice or other document required by this Agreement or
any other Facility Document to be delivered to the Administrative Agent for
such Lender.
SECTION 12.07. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER
LENDERS. Each Lender agrees that it has, independently and without reliance
on the Administrative Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own credit analysis of
the LCC Consolidated Entities and decision to enter into this Agreement and
that it will, independently and without reliance upon 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 analysis and decisions
in taking or not taking action under this Agreement or any other Facility
Document. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by the Obligors of this Agreement
or any other Facility Document or any other document referred to or provided
for herein or therein or to inspect the Properties or books of any LCC
Consolidated Entity. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of any LCC
Consolidated Entity (or any of their respective affiliates) which may come into
the possession of the Administrative Agent or any of its affiliates. The
Administrative Agent shall not be required to file this Agreement, any other
Facility Document or any document or instrument referred to herein or therein,
for record or give notice of this Agreement, any other Facility Document or any
document or instrument referred to herein or therein, to anyone.
SECTION 12.08. FAILURE OF ADMINISTRATIVE AGENT TO ACT. Except for
action expressly required of the Administrative Agent hereunder, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall have received further assurances
(which may include cash collateral) of the indemnification obligations of the
Lenders under Section 12.05 in respect of any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
such action.
SECTION 12.09. RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, and the
Administrative Agent may be removed at any time with or without cause by the
Required Lenders; provided
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that the Borrower and the other Lenders shall be promptly notified thereof.
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 bank which has an office in New York, New York. The Required Lenders or the
retiring Administrative Agent, as the case may be, shall upon the appointment
of a successor Administrative Agent promptly so notify the Borrower and the
other Lenders. 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 or removal
hereunder as Administrative Agent, the provisions of this Article 12 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 the Administrative Agent.
SECTION 12.10. AMENDMENTS CONCERNING AGENCY FUNCTION. The
Administrative Agent shall not be bound by any waiver, amendment, supplement or
modification of this Agreement or any other Facility Document which affects its
duties hereunder or thereunder unless it shall have given its prior consent
thereto.
SECTION 12.11. LIABILITY OF ADMINISTRATIVE AGENT. The
Administrative Agent shall not have any liabilities or responsibilities to any
Obligor on account of the failure of any Lender to perform its obligations
hereunder or to any Lender on account of the failure of any Obligor or any
other Lender to perform its obligations hereunder or under any other Facility
Document.
SECTION 12.12. TRANSFER OF AGENCY FUNCTION. Without the consent of
the Obligors or any Lender, the Administrative Agent may at any time or from
time to time transfer its functions as Administrative Agent hereunder to any of
its offices wherever located, provided that the Administrative Agent shall
promptly notify the Borrower and the Lenders thereof.
SECTION 12.13. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT.
Unless the Administrative Agent shall have been notified by a Lender or the
Borrower (either one as appropriate being the "Payor") prior to the date on
which such Lender is to make payment hereunder to the Administrative Agent of
the proceeds of a Loan or the Borrower or the Subsidiary Borrower is to make
payment to the Administrative Agent, as the case may be (either such payment
being a "Required Payment"), which notice shall be effective upon receipt, that
the Payor
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does not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Administrative Agent,
the recipient of such payment (and, if such recipient is the Borrower or the
Subsidiary Borrower and the Payor Lender fails to pay the amount thereof to the
Administrative Agent forthwith upon demand, the Borrower or the Subsidiary
Borrower) shall, on demand, repay to the Administrative Agent the amount made
available to it together with interest thereon for the period from the date
such amount was so made available by the Administrative Agent until the date
the Administrative Agent recovers such amount at a rate per annum equal to the
average daily Federal Funds Rate for such period.
SECTION 12.14. WITHHOLDING TAXES. Each Lender represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Administrative Agent such forms,
certifications, statements and other documents as the Administrative Agent may
request from time to time to evidence such Lender's exemption from the
withholding of any tax imposed by any jurisdiction or to enable the
Administrative Agent to comply with any applicable laws or regulations relating
thereto. Without limiting the effect of the foregoing, if any Lender is not
created or organized under the laws of the United States of America or any
state thereof, in the event that the payment of interest by the Borrower or the
Subsidiary Borrower is treated for U.S. income tax purposes as derived in whole
or in part from sources from within the U.S., such Lender will furnish to the
Administrative Agent Form 4224 or Form 1001 of the Internal Revenue Service, or
such other forms, certifications, statements or documents, duly executed and
completed by such Lender as evidence of such Lender's exemption from the
withholding of U.S. tax with respect thereto. The Administrative Agent shall
not be obligated to make any payments hereunder to such Lender in respect of
any Obligation until such Lender shall have furnished to the Administrative
Agent the requested form, certification, statement or document.
SECTION 12.15. SEVERAL OBLIGATIONS AND RIGHTS OF LENDERS. The
failure of any Lender to make any Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its Loans
on such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender. The amounts payable at
any time hereunder to each Lender shall be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement, and it shall not be necessary for any other Lender to be joined
as an additional party in any proceeding for such purpose.
SECTION 12.16. PRO RATA TREATMENT OF LOANS ETC. Except to the
extent otherwise provided: (a) each borrowing under Section 2.01 shall be made
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from the Lenders, each reduction or termination of the amount of the
Commitments under Section 2.08 shall be applied to the Commitments of the
Lenders, and each payment of commitment fee accruing under Section 2.12(a)
shall be made for the account of the Lenders, pro rata according to the amounts
of their respective unused Commitments; (b) each conversion under Section 2.05
of Loans of a particular type (but not conversions provided for by Section
4.04), shall be made pro rata among the Lenders holding Loans of such type
according to the respective principal amounts of such Loans by such Lenders;
(c) each prepayment and payment of principal of or interest on Loans of a
particular type, a particular class and a particular Interest Period shall be
made to the Administrative Agent for the account of the Lenders holding Loans
of such type, class and Interest Period pro rata in accordance with the
respective unpaid principal amounts of such Loans of such type, class and
Interest Period held by such Lenders; and (d) each prepayment and payment of
fees under Section 3.09(a) and Letter of Credit Obligations shall be made pro
rata in accordance with the pro rata share of the Lenders in the Letter of
Credit Obligations held by each of them.
SECTION 12.17. SHARING OF PAYMENTS AMONG LENDERS. If a Lender shall
obtain payment of any principal of or interest on any Obligation held by it
through the exercise of any right of setoff, banker's lien, counterclaim, or by
any other means, it shall promptly purchase from the other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Obligations of the other Lenders in such amounts, and make
such other adjustments from time to time as shall be equitable to the end that
all the Lenders shall share the benefit of such payment (net of any expenses
which may be incurred by such Lender in obtaining or preserving such benefit)
pro rata in accordance with the unpaid principal and interest on the
Obligations held by each of them. To such end the Lenders shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. Each
of the Obligors agrees that any Lender so purchasing a participation (or direct
interest) in the Obligations held by the other Lenders may exercise all rights
of setoff, banker's lien, counterclaim or similar rights with respect to such
participation (or direct interest). Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness of any Obligor or its affiliates.
SECTION 12.18. SECURITY DOCUMENTS. Subject to the foregoing
provisions of this Section 12, the Administrative Agent shall, on behalf of the
Lenders: (a) execute any and all of the Security Documents on behalf of the
Lenders; (b) hold and apply any and all Collateral, and the proceeds thereof,
at any time received by it, in accordance with the provisions of the Security
Documents and this Agreement; (c) exercise any and all rights, powers and
remedies of the Lenders under this Agreement or any of the Security Documents,
including the giving of any consent or waiver or the entering into of any
amendment, subject to
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the provisions of Section 12.03; (d) execute, deliver and file financing
statements, mortgages, deeds of trust, lease assignments and other such
agreements, and possess instruments on behalf of any or all of the Lenders; and
(e) in the event of acceleration of the Borrower's or the Subsidiary Borrower's
obligations hereunder, use its best efforts to sell or otherwise liquidate or
dispose of the Collateral and otherwise exercise the rights of the Lenders
thereunder upon the direction of the Required Lenders.
SECTION 12.19. COLLATERAL. Notwithstanding Section 12.18, the
Administrative Agent and the other Lenders agree, as among themselves, that the
Administrative Agent shall not, without the consent of the Required Lenders,
make any sale or disposition of the Collateral pursuant to any of the Security
Documents. The Administrative Agent acknowledges to the other Lenders that it
is acting in an agency capacity hereunder and that the security interest in the
Collateral granted under the Security Documents secures the Obligations held by
all of the Lenders. In the event of any Default or Event of Default, the
Administrative Agent will apply and/or pay over to the Lenders any net proceeds
derived from the Collateral pro rata on the basis of the aggregate unpaid
principal and interest of the Obligations held by the Lenders. The
Administrative Agent will be reimbursed or properly indemnified by the Lenders
in the event the Administrative Agent is requested by the Lenders to take or
omit to take any action with respect to the Collateral (any such reimbursement
or indemnification to be pro rata as provided in Section 12.05). The
Administrative Agent shall have the right to retain counsel to advise it as to
any action or decision with respect to the Collateral and shall be reimbursed
by the other Lenders for the cost of the same (to the extent the Administrative
Agent is not reimbursed by any Obligor) prior to distributing any of the
Collateral or any proceeds thereof (any such reimbursement to be pro rata as
aforesaid).
SECTION 12.20. AMENDMENT OF ARTICLE 12.. Each of the Obligors hereby
agrees that the foregoing provisions of this Article 12 constitute an agreement
amount the Administrative Agent and the Lenders and that any and all of the
provisions of this Article 12 may be amended at any time by the Administrative
Agent and the Required Lenders without the consent or approval of, or notice
to, such Obligor.
ARTICLE 13. MISCELLANEOUS
SECTION 13.01. AMENDMENTS AND WAIVERS. Except as otherwise
expressly provided in this Agreement, any provision of this Agreement may be
amended or modified only by an instrument in writing signed by the Borrower,
the Subsidiary Borrower (if affected), the Administrative Agent and the
Required Lenders, or by the Borrower and the Administrative Agent acting with
the consent of the Required Lenders and any provision of this Agreement may be
waived by the Required Lenders or by the Administrative Agent acting with the
consent of the
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Required Lenders; provided that no amendment, modification or waiver shall,
unless by an instrument signed by all of the Lenders or by the Administrative
Agent acting with the consent of all of the Lenders: (a) increase or extend the
term, or extend the time or waive any requirement for the reduction or
termination, of the Commitments; (b) extend the date fixed for the payment of
principal of or interest on any Loan, any Letter of Credit Obligation or any
fee payable hereunder; (c) reduce the amount of any payment of principal
thereof or the rate at which interest is payable thereon or any fee payable
hereunder, (d) alter the terms of this Section 12.01; (e) amend the definition
of the term "Required Lenders"; (f) waive any of the conditions precedent set
forth in Article 5 hereof; (g) discharge any Guarantor from the Unconditional
Guaranty under Article 11 hereof; or (h) release all or any part of the
Collateral in excess of $500,000 and provided, further, that any amendment of
Article 12 or any amendment which increases the obligations of the
Administrative Agent hereunder shall require the consent of the Administrative
Agent. No failure on the part of the Administrative Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or 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 13.02. USURY. Anything herein to the contrary
notwithstanding, the obligations of the Obligors under this Agreement, the
Notes and the other Facility Documents shall be subject to the limitation that
payments of interest shall not be required to the extent that receipt thereof
would be contrary to provisions of law applicable to a Lender limiting rates of
interest which may be charged or collected by such Lender.
SECTION 13.03. EXPENSES. Each of the Obligors (including, insofar
as it is responsible for such expenses, the Subsidiary Borrower) shall
reimburse the Administrative Agent on demand for all reasonable costs, expenses
and charges (including, without limitation, reasonable fees and charges of
external legal counsel for the Administrative Agent) in connection with the
preparation of, and any amendment, supplement, waiver or modification to (in
each case, whether or not consummated), this Agreement, any other Facility
Document and any other documents prepared in connection herewith or therewith.
Each of the Obligors shall reimburse the Administrative Agent and each Lender
for all reasonable costs expenses and charges (including, without limitation,
reasonable fees and charges of external legal counsel for the Administrative
Agent and each Lender) in connection with the enforcement or preservation of
any rights or remedies during the existence of a Default or Event of Default
(including, without limitation, in connection with any restructuring or
insolvency or bankruptcy proceeding). Each of the Obligors agrees to indemnify
the Administrative Agent and each Lender and their respective directors,
officers, employees and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them arising out of or by reason of any investigation or litigation or other
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proceedings (including any threatened investigation or litigation or other
proceedings) arising out of or relating to this Agreement or any other Facility
Document or to any actual or proposed use by the Borrower of the proceeds of
the Loans or the Letters of Credit or to the performance or enforcement of this
Agreement or the other Facility Documents, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or wilful misconduct of the Person to be indemnified).
SECTION 13.04. SURVIVAL. The obligations of the Obligors under
Sections 4.01, 4.05, 13.03 and 13.18 shall survive the repayment of the
Obligations and the termination of the Commitments and the Letters of Credit.
SECTION 13.05. ASSIGNMENT: PARTICIPATIONS. (a) This Agreement
shall be binding upon, and shall inure to the benefit of, the Borrower, the
Subsidiary Borrower, the Guarantors, the Administrative Agent, the Lenders and
their respective successors and assigns, except that the Borrower, the
Subsidiary Borrower and the Subsidiary Guarantors may not assign or transfer
its rights or obligations hereunder except as otherwise permitted under Section
8.10(c). Each Lender may assign or sell participations in all of its rights
and obligations hereunder or any part of its rights and obligations hereunder
to another financial institution or other entity; provided that any assignment
or participation by any Lender of its rights and obligations in respect of the
Letters of Credit shall require the prior consent of the Issuing Lender, such
consent not to be unreasonably withheld, in which event (i) in the case of an
assignment, upon notice thereof by the Lender to the Borrower or Subsidiary
Borrower with a copy to the Administrative Agent, the assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would have if it were a Lender
hereunder; and (ii) in the case of a participation, the participant shall have
no rights under the Facility Documents and all amounts payable by the Borrower
and the Subsidiary Borrower under Article 4 shall be determined as if such
Lender had not sold such participation. The agreement executed by such Lender
in favor of the participant shall not give the participant the right to require
such Lender to take or omit to take any action hereunder except action directly
relating to (i) the extension of a payment date with respect to any portion of
the principal of or interest on any amount outstanding hereunder allocated to
such participant, (ii) the reduction of the principal amount outstanding
hereunder allocated to such participant or (iii) the reduction of the rate of
interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the participant is
entitled to receive under its agreement with such Lender. Such Lender may
furnish any information concerning any LCC Consolidated Entity or any of their
respective affiliates in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants);
provided that such Lender shall require
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any such prospective assignee or such participant (prospective or otherwise) to
agree in writing to maintain the confidentiality of such information. In
connection with any assignment or sale of a participation interest pursuant to
this paragraph (a), the assigning or selling Lender shall pay the
Administrative Agent an administrative fee for processing such assignment or
participation in the amount of $5,000.
(b) In addition to the assignments and participations
permitted under paragraph (a) above, any Lender may assign and pledge all or
any portion of the Obligations held by it to (i) any affiliate of such Lender
or (ii) any Federal Reserve Bank as collateral security pursuant to Regulation
A of the Board of Governors of the Federal Reserve System and any Operating
Circular issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
SECTION 13.06. NOTICES...Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be given in writing to the
Administrative Agent, to the Lenders, to the Borrower, to the Subsidiary
Borrower and to the Subsidiary Guarantors by ordinary mail, hand delivery,
overnight courier or telecopier addressed to such party at its address on the
signature page of this Agreement. Notices shall be effective: (a) if given by
mail, 72 hours after deposit in the mails with first class postage prepaid,
addressed as aforesaid; and (b) if given by telecopier, when the telecopy is
transmitted to the telecopier number as aforesaid; provided that notices to the
Administrative Agent shall be effective upon receipt.
SECTION 13.07. SETOFF. Each of the Obligors, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim a
Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances (general or special, time or demand, provisional or final) held
by it for the account of such Obligor at any of such Lender's offices, in
Dollars, in Norwegian Krone or in any other currency, against any amount
payable by such Obligor to such Lender under this Agreement, such Lender's
Notes, any Letter of Credit or any other Facility Document which is not paid
when due (regardless of whether such balances are then due to such Obligor), in
which case it shall promptly notify the Borrower and the Administrative Agent
thereof; provided that such Lender's failure to give such notice shall not
affect the validity thereof. Payments by any Obligor hereunder shall be made
without setoff or counterclaim.
SECTION 13.08. JURISDICTION; IMMUNITIES. (a) EACH OF THE OBLIGORS
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED
STATES FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, NOTE, ANY
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LETTER OF CREDIT OR ANY OTHER FACILITY DOCUMENT, AND EACH OF THE OBLIGORS
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT.
EACH OF THE OBLIGORS IRREVOCABLY 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 PERSON AT ITS ADDRESS SPECIFIED IN SECTION 13.06. EACH OF THE OBLIGORS
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. EACH OF THE OBLIGORS FURTHER WAIVES
ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR
PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. EACH OF THE
OBLIGORS FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE
ADMINISTRATIVE AGENT OR ANY LENDER SHALL BE BROUGHT ONLY IN NEW YORK STATE OR
UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY.
(b) EACH OF THE OBLIGORS WAIVES ANY RIGHT IT MAY HAVE TO
JURY TRIAL. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
EACH OF THE OBLIGORS AND EACH OF THE OBLIGORS ACKNOWLEDGES THAT NO PERSON
ACTING ON BEHALF OF ANOTHER PARTY TO THIS AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH OF THE OBLIGORS FURTHER ACKNOWLEDGES THAT
IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
(c) Nothing in this Section 13.08 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 Obligor or its Property in
the courts of any other jurisdictions.
(d) To the extent that any Obligor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
Property, such Obligor hereby irrevocably waives such immunity in respect of
its obligations under this Agreement, the Notes, the Letters of Credit and the
other Facility Documents.
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SECTION 13.09. TABLE OF CONTENTS: HEADINGS. Any table of contents
and the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
SECTION 13.10. SEVERABILITY. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the
validity or enforceability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction. Without limiting the foregoing, to the
extent that mandatory and non-waivable provisions of applicable law (including
but not limited to any applicable business corporation and partnership laws)
otherwise would render the full amount of any Guarantor's obligations under
this Agreement and under the other Facility Documents invalid or unenforceable,
the respective obligations of such Guarantor under this Agreement and under the
other Facility Documents shall be limited to the maximum amount which does not
result in such invalidity or unenforceability.
SECTION 13.11. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Agreement by signing
any such counterpart.
SECTION 13.12. INTEGRATION. The Facility Documents set forth the
entire agreement among the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
SECTION 13.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF
NO SUCH LAWS OR RULES ARE DESIGNATED, THE UCP AND AS TO MATTERS NOT GOVERNED BY
THE UCP, THE LAWS OF THE STATE OF NEW YORK.
SECTION 13.14. CONFIDENTIALITY. Each Lender and the Administrative
Agent agrees (on behalf of itself and each of its affiliates, directors,
officers, employees and representatives) to use reasonable precautions to keep
confidential, in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower pursuant to this
Agreement which is identified by the Borrower as being confidential at the time
the same is delivered to such Lender or
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the Administrative Agent, provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by applicable
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or the Administrative Agent, (iii) to bank examiners, auditors or
accountants, (iv) in connection with any litigation to which any one or more of
the Lenders is a party or (v) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) agrees in writing to use reasonable
precautions to keep such information confidential; and provided finally that in
no event shall any Lender or the Administrative Agent be obligated or required
to return any materials furnished by the Borrower. The obligations of the
Lenders and the Administrative Agent under this Section 13.14 shall survive the
repayment of the Obligations and the termination of the Commitments and the
Letters of Credit.
SECTION 13.15. TREATMENT OF CERTAIN INFORMATION. Each of the
Obligors (a) acknowledges that services may be offered or provided to it (in
connection with this Agreement or otherwise) by each Lender or by one or more
of their respective subsidiaries or affiliates and (b) acknowledges that
information delivered to each Lender by any LCC Consolidated Entity or any
affiliate may be provided to each such subsidiary and affiliate.
SECTION 13.16. ASSUMPTION: REAFFIRMATION. Each of the Subsidiary
Borrower, Microcell and the New Subsidiary Guarantor further agrees, by its
execution and delivery hereof, unconditionally and irrevocably accepts, adheres
to, and becomes a party to and bound as an "Obligor" as defined in and under
the Security Agreement and the Pledge Agreement as fully as if such Person had
been signatory to the Security Agreement and the Pledge Agreement as an
"Obligor" when the Security Agreement and the Pledge Agreement were executed
and delivered by the Obligors ab initio party thereto and the Administrative
Agent. In furtherance of the foregoing, each of the Obligors hereby expressly
grants, bargains, conveys, assigns, transfers, mortgages, hypothecates, pledges
and grants a continuing security interest to the Administrative Agent in all
right, title and interest of such Obligor in and to the "Collateral" as defined
in each of the Security Agreement, the Intellectual Property Security Agreement
and the Pledge Agreement. Each of the Obligors acknowledges that the Liens
granted to the Administrative Agent under the Security Documents in the
Collateral secure all Obligations of each of the Obligors under this Agreement,
the Notes, the Letters of Credit and the other Facility Documents, including,
without limitation, all liabilities and obligations under the Loans as herein
modified and all of the Letter of Credit Obligations. Notwithstanding the
foregoing sentence, it is understood that the pledge by the Subsidiary Borrower
of its Collateral shall only secure the obligations of the Subsidiary Borrower,
and shall not secure the obligations of any other Obligor. All references to
"Note" or "Notes" in any Facility Document shall be deemed to be to the Notes
issued hereunder. All references to "Loan" or "Loans" in any Facility Document
shall be deemed to be to the Loans incurred hereunder. All
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references to "Commitment" or "Commitments" in any Facility shall be deemed to
be to the Commitments granted hereunder. All references to "Secured
Obligations" in any Facility Document shall be deemed to include all liabilities
and obligations under the Loans as herein modified and all of the Letter of
Credit Obligations. Each of the Obligors further acknowledges and reaffirms all
of its other respective obligations and duties under the Facility Documents to
which it is a party.
SECTION 13.17. REVISED SCHEDULES. Each of the Administrative Agent,
the Lenders and the Obligors hereby agrees that (a) Schedule A to the Security
Agreement is hereby amended and restated as set forth on SCHEDULE A hereto, (b)
Schedule A to the Intellectual Property Security Agreement is hereby amended
and restated as set forth on SCHEDULE B hereto and (c) Schedule A to the
Pledge Agreement is hereby amended and restated as set forth on SCHEDULE C
hereto.
SECTION 13.18. REFUND OF TAXES. The obligations of each Obligor
under this Agreement, the Notes, the Letters of Credit and the other Facility
Documents to make payments in Dollars or in Norwegian Krone (the "Obligation
Currency") shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any currency other than
the Obligation Currency, except to the extent that such tender or recovery
results in the effective receipt by the Administrative Agent or a Lender of the
full amount of the Obligation Currency expressed to be payable to them under
this Agreement, the Notes, the Letters of Credit and the other Facility
Documents. If for the purpose of obtaining or enforcing judgment against any
Obligor in any court or in any jurisdiction, it becomes necessary to convert
into or from any currency other than the Obligation Currency (such other
currency being hereinafter referred to as the "Judgment Currency") an amount
due in the Obligation Currency, the conversion shall be made, at the Norwegian
Krone Equivalent or Dollar Equivalent, in the case of Norwegian Krone or
Dollars, and, in the case of other currencies, the rate of exchange (as quoted
by the Administrative Agent or if the Administrative Agent does not quote a
rate of exchange on such currency, by a known dealer in such currency
designated by the Administrative Agent) determined, in each case, as on the day
immediately preceding the day on which the judgment is given (such Banking Day
being hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange
prevailing between the Judgment Currency Conversion Date and the date of actual
payment of the amount due, each Obligor covenants and agrees to pay such
additional amounts, if any, as may be necessary to ensure that the amount paid
in the Judgment Currency, when converted at the rate of exchange prevailing on
the date of payment, will produce the amount of the Obligation Currency which
could have been purchased with the amount of Judgment Currency stipulated in
the judgment or judicial award at the rate of exchange prevailing on the
Judgment Currency Conversion Date.
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(c) For purposes of determining the Norwegian Krone
Equivalent or Dollar Equivalent or rate of exchange for this Section 13.18,
such amount shall include any premium and costs payable in connection with the
purchase of the Obligation Currency.
SECTION 13.19. JUDGMENT CURRENCY. If a Lender shall become aware
that it is eligible for a refund in respect of Taxes actually paid by the
Borrower or the Subsidiary Borrower pursuant to Section 4.06, it shall promptly
notify the Borrower or the Subsidiary Borrower, as applicable, of the
availability of such refund and shall, within 30 days after receipt of a
request by the Borrower or the Subsidiary Borrower, as applicable, apply for
such refund or shall furnish to the Borrower or the Subsidiary Borrower, as
applicable, such forms, duly completed, as will enable the Borrower or the
Subsidiary Borrower, as applicable, to claim such refund on its own behalf. If
any Lender receives a refund in respect of any Taxes paid by the Borrower or
the Subsidiary Borrower, as applicable, pursuant to Section 4.06, it shall
repay such refund within 30 days after receipt, to the Borrower or the
Subsidiary Borrower, as applicable, net of all reasonable out-of-pocket
expenses of such Lender and without interest; provided that the Borrower or the
Subsidiary Borrower, as applicable, agrees to return to such Lender the amount
paid by it to the applicable Lender with respect to such refund (plus
applicable penalties, interest or other charges) in the event such Lender is
required to repay such refund.
SECTION 13.20. LIMITED WAIVE. Each Lender hereby waives any Event
of Default arising from noncompliance by the Borrower with Article 9 of the
Existing Credit Agreement for the Fiscal Quarter ending on September 30, 1998.
Except as otherwise expressly set forth in this Section 13.20, the terms of
this Agreement shall not operate as a waiver by the Lenders, or otherwise
prejudice the right, remedies or powers of the Lenders under this Agreement,
the Existing Credit Agreement, the other Facility Documents or applicable law.
Except as otherwise expressly set forth herein, no terms and provisions of the
other Facility Documents are modified or changed and the terms and provisions
of the other Facility Documents shall continue in full force and effect.
SECTION 13.21. SUBORDINATION AGREEMENTS. Each Lender and the
Administrative Agent hereby acknowledges that it consents and agrees to the
terms of the MCI Subordination Agreement and the Telcom Subordination
Agreement.
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<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
BORROWER:
LCC INTERNATIONAL, INC., A DELAWARE CORPORATION
By: /S/ RICHARD HOZIK
------------------------------------------------
Name: Richard Hozik
Title: Chief Financial Officer
Address for Notices:
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: Chief Financial Officer
Telecopier No.: (703) 527-9433
with a copy to:
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: General Counsel
Telecopier No.: (703) 527-9433
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<PAGE> 96
SUBSIDIARY BORROWER:
LCC EUROPE AS (F/K/A
EUROPEAN TECHNOLOGY PARTNER AS), A NORWEGIAN CORPORATION
By: /S/ PETER A. DELISO
------------------------------------------------
Name: Peter A. Deliso
Title: Chairman
Address for Notices:
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: Chief Financial Officer
Telecopier No.: (703) 527-9433
with a copy to:
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: General Counsel
Telecopier No.: (703) 527-9433
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<PAGE> 97
SUBSIDIARY GUARANTORS:
LCC DESIGN SERVICES, L.L.C., A DELAWARE LIMITED LIABILITY
COMPANY
By: /S/ PETER A. DELISO
------------------------------------------------
Name: Peter A. Deliso
Title: Vice President, General Counsel
LCC DEVELOPMENT COMPANY, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY
By: /S/ PETER A. DELISO
------------------------------------------------
Name: Peter A. Deliso
Title: Vice President, General Counsel
MICROCELL MANAGEMENT, INC., A DELAWARE CORPORATION
By: /S/ RICHARD HOZIK
------------------------------------------------
Name: Richard Hozik
Title:
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<PAGE> 98
KOLL TELECOMMUNICATIONS SERVICES, L.L.C., A DELAWARE
LIMITED LIABILITY COMPANY
By: /S/ PETER A. DELISO
------------------------------------------------
Name: Peter A. Deliso
Title: Vice President, General Counsel
Address for Notices:
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: Chief Financial Officer
Telecopier No.: (703) 873-2300
with a copy to:
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: General Counsel
Telecopier No.: (703) 527-9433
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<PAGE> 99
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By: /S/ ALAN J. ARIA
--------------------------------------------
Name: Alan J. Aria
Title: Vice President
Address for Notices:
4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency
with a copy to:
999 Broad Street
Bridgeport, Connecticut 06604
Attention: Alan Aria
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<PAGE> 100
LENDERS:
THE CHASE MANHATTAN BANK
By: /S/ ALAN J. ARIA
--------------------------------------------
Name: Alan J. Aria
Title: Vice President
Lending Office and Address for
Notices:
999 Broad Street
Bridgeport, Connecticut 06604
Attention: Alan Aria
Telecopier No.: (203) 382-6573
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<PAGE> 101
SCHEDULE I
<TABLE>
<S> <C> <C>
Revolving Credit Commitments
----------------------------
The Chase Manhattan Bank $20,000,000
Swingline Loan Commitments
--------------------------
The Chase Manhattan Bank $ 2,500,000
</TABLE>
<PAGE> 102
SCHEDULE 6.04
LITIGATION, ETC.
1. GBR v. Eurofon Incorp., & Co. KG, (Landgericht Dusseldorf, Germany).
Plaintiff Landlord filed a complaint against Eurofon seeking DM 110,000 on
breach of contract claim for failure to pay rent. Eurofon has filed a
motion seeking postponement of the case until the Appellate Court in
Dusseldorf decides a similar claim. The case was postponed and a decision
regarding the companion case is pending.
2. RCC Consultants, Inc. v. LCC International. At Law No. 96-1395 (Circuit
Court for the County of Arlington). On December 20, 1996, RCC Consultants,
Inc. ("RCC") filed a motion for judgment against LCC seeking $88,000.00 on
a breach of contract claim alleging that LCC had failed to pay for certain
site acquisition services. LCC counterclaimed against RCC, alleging breach
of and seeking damages in the amount of $25,000. The company believes it
has a meritorious defense to RCC's claims.
3. Taylor v. LCC, Inc., ARCO No. 96-145-E, EEOC No. 10B-96-0082. On May 15,
1996, former LCC employee Sherry Taylor filed a complaint with the
Arlington County Human Rights Commission alleging sex discrimination and
sexual harassment in violation of Chapter 31 of the Arlington County Code.
An investigation was conducted by the Human Rights Commission and Ms.
Taylor subsequently withdrew her complaint, claiming that she was not
satisfied with the investigation. The complaint now lies with the Equal
Employment Opportunity Commission who must decide whether or not to pursue
the claim If the EEOC does not decide to pursue the claim, Ms. Taylor with
then have a right to file an individual right of action in the Federal
District Court for the Eastern District of Virginia within 90 days of her
receiving notice of such right from the EEOC. The Company appears to have
a meritorious defense.
4. Deloia Gibson, et al. v. Carl Hatcher, et al. Civil Action No. 98-5-174,
Chancery Court of Sevier County, state of Tennessee. On May 19, 1998,
Deloia Gibson and Harry Harvey, plaintiffs, filed a compliant against five
defendants, including Koll Telecommunications Services, LLC ("KTS") seeking
$250,000 in compensatory damages, plus punitive damages and fees, alleging
encroachment on the plaintiff's property in connection with the
construction of a telecommunications cell site on adjoining property.
Notice of the claim was served on CB Richard Ellis, Inc., ("CBRE"), a
former shareholder in KTS, on July 9, 1998, and CBRE tendered the claim to
LCC under the terms of indemnification contained in the Redemption
Agreement between CBRE and KTS, dated as of August 1998. CBRE has not been
dismissed from the case and
<PAGE> 103
notice has yet to be served on KTS. The Company appears to have a
meritorious defense.
5. Nguyen v. LCC International, Inc. HRC #97482E / EEOC / # 100980082 on
December 5, 1997, Ms. Mihn Nguyen filed a complaint with the Fairfax Human
Rights Commission alleging that she had been subjected to disparate
treatment because of her national origin (Vietnamese) and/or sex (female).
The Company responded to the commission's request for information relating
to Ms. Nguyen and her claim on January 12, 1998. The Company believes it
has meritorious defense. The case remains pending with the Commission.
6. Rathole Drilling, Inc. v. LCC International, Inc. Cause No. 98-11-37080,
in the District Court, 79th Judicial District, Jim Wells County, Texas. On
November 20, 1998, Rathole Drillings, Inc., plaintiff, filed a Petition for
Declaratory Judgment against LCC seeking $130,644 in damages, plus costs
and fees, claiming that LCC breached a verbal contract to engage plaintiff
to perform drilling services on not less than eight sites in the Tampa,
Florida area. LCC received service of process on December 18, 1998, and
LCC's answer is due on February 1, 1999. LCC is in the process of
preparing its defense.
7. Albert Grimes, et al. v. LCC International, et al., Civil Action No.
19657-NC, in the Court of Chancery of the State of Delaware, Castle County.
On February 12, 1999 the Class B Shareholders of Microcell Management, Inc.
filed a Verified Complaint against LCC International, Inc., Microcell
Management, Inc. and the individual defendants, Rich Hozik, Donald Rose,
Peter Deliso and Stuart Lawson (as members of Microcell's Board of
Directors), seeking rescission of the Shareholder's Agreement, the
appointment of a custodian or receiver pendente lite, unspecified monetary
damages, attorney fees and interest. On February 16, 1999, the plaintiffs
filed a motion to expedite and a motion for appointment of a receiver or
custodian. The Complaint and related motions allege that the defendants
(i) breached their fiduciary duty to ensure Microcell's financial health,
to refrain from usurping corporate opportunities from Microcell and to not
waste Microcell's corporate assets, (ii) tortiously interfered with
Microcell's prospective business relations and (iii) violated the
Shareholders' Agreement between LCC and Microcell's minority shareholders.
Microcell and LCC have filed a Motion to Dismiss and this Motion remains
pending.
8. See Schedule 6.07 for a description of certain foreign and state taxes
owing by the LCC Consolidated Entities.
<PAGE> 104
SCHEDULE 6.07
TAXES
1. The Company has approximately $8,009,501 in its Accrued Foreign Tax
liability account at December 31, 1998. Approximately $658,319 of this
amount represents estimated accrued interest on outstanding foreign taxes.
The balance, approximately $7,351,182, represents liabilities which have
been accrued for Income Tax, Branch Profits Tax, and Withholding Tax for
approximately 27 countries.
2. The Company has approximately $3,624,391 in its Accrued State and Local Tax
Liability Account at December 31, 1998. Approximately $15,000 of this
amount represents estimated accrued interest on the outstanding state and
local taxes. The balance, approximately $3,609,391, represents liabilities
which have been accrued for Income Tax, Sales & Use Tax, Payroll Tax,
Property Tax, and Local Gross Receipts Tax.
<PAGE> 105
SCHEDULE 6.09
SUBSIDIARIES, AFFILIATES
SUBSIDIARIES
1. LCC Design Services, L.L.C.
Address: 7925 Jones Branch Drive
McLean, Virginia, 22102
Jurisdiction of Formation: Delaware
Ownership: The Borrower owns 99% and LCC Development Company,
L.L.C. owns 1% of the issued and outstanding membership interests in
LCC Design Services, L.L.C. LCC Design Services, L.L.C. owns 1% of
the issue and outstanding membership interest in LCC Development
Company, L.L.C.
2. LCC Europe Gmbh
Address: Grafenberallee 99
D-40237 Dusseldorf
Germany
Jurisdiction of Formation: Germany
Ownership: The Borrower owns 100% of the ownership interests of
LCC Europe Gmbh
3. Eurofon de France S.A.R.L.
Address: 7 BD Romain Rolland, B.P. 87
92128 Montrouge Cedex, France
Jurisdiction of Formation: France
Ownership: The Borrower owns 100% of the partnership interests
of Eurofon de France S.A.R.L.
4. LCC, United Kingdom, Ltd.:
Address: 43 Crawford St.
1st and Ground Floor
London, W1H-2AP
United Kingdom
Jurisdiction of Formation: United Kingdom
<PAGE> 106
Ownership: The Borrower owns 99% and LCC Design Services, L.L.C. owns
1% of the ordinary shares of LCC, United Kingdom, Ltd.
5. LCC Development Company, L.L.C.:
Address: 7925 Jones Branch Drive
McLean , Virginia 22102
Jurisdiction of Formation: Delaware
Ownership: The Borrower owns 99% and LCC Design Services L.L.C. owns
1% of the issued and outstanding membership interests in LCC
Development Company, L.L.C. LCC Development Company, L.L.C. owns 1%
of the issued and outstanding membership interests in LCC Design
Services, L.L.C.
6. Microcell Management Inc. ("Microcell")
Address: 14502 Greenview Drive, Suite 424
Laurel, MD 20708
Jurisdiction of Formation: Delaware
Ownership: The Borrower owns a 83.75% interest in
Microcell.
7. LCC do Brazil Ltda.
Address: Rue Frei Caneca
1380 - Conj. 82
Sao Paulo, SP 01307-002
Brazil
Jurisdiction of Formation: Brazil
Ownership: The Borrower owns a 100% interest in LCC do Brazil
Ltda.
8. Koll Telecommunications Services, L.L.C ("KTS")
Address: 27401 Los Altos
Suite 220
Mission Viejo, CA 92691
Jurisdiction of Formation: Delaware
Ownership: The Borrower owns a 100% interest in KTS.
<PAGE> 107
9. LCC Asia Pacific LTD PTE ("LCC Asia Pacific")
Address: Centrako Business Centre
6 Battery Road, #22-00
Singapore 049909
Jurisdiction of Formation: Singapore
Ownership: The Borrower owns 100% interest in LCC Asia Pacific.
10. LCC Europe AS
Address: Solheimveien 30
P.O. Box 447
N-1471 Skarer, Norway
Jurisdiction of Formation: Norway
Ownership: LCC owns 100% interest in LCC Europe AS.
11. LCC International Holdings NL, Inc.
Address: 7925 Jones Branch Drive
McLean , Virginia 22102
Jurisdiction of Formation: Delaware
Ownership: LCC owns a 100% equity interest in LCC
International Holdings NL, Inc.
12. LCC International Holdings, Belgium, Inc.
Address: 7925 Jones Branch Drive
McLean , Virginia 22102
Jurisdiction of Formation: Delaware
Ownership: LCC owns a 100% equity interest in LCC
International Holdings, Belgium, Inc.
AFFILIATES
1. Telcom Ventures, L.L.C. ("Telcom Ventures")
<PAGE> 108
Address: 211 North Union Street, 3rd floor
Alexandria, Virginia, 22314
Jurisdiction of Formation: Delaware
Ownership: Cherrywood Holdings, Inc. (formerly LCC,
Incorporated) owns 75% and Carlyle (as that term is defined in the
Formation Agreement dated November 16, 1993 ("Carlyle")) owns 25% of
the issued and outstanding membership interests in Telcom Ventures.
Telcom Ventures owns 99% of the issued and outstanding membership
interests in RF Investors, L.L.C., which in turn owns all of the
outstanding shares of Class B Common Stock of LCC International, Inc.,
which represents approximately 92.2% of the combined voting power of
both classes of Common Stock of the Borrower. Telcom Ventures holds a
convertible subordinated promissory note of LCC in the principal
amount of $5,000,000 (the "TV Note") which is convertible into up to
approximately 882,325 shares of LCC Class A common stock, subject to
adjustment for stock splits, stock dividends, stock combinations and
similar events.
2. Cherrywood Holdings, Inc. (formerly LCC, Incorporated)
Address: 211 North Union Street, 3rd floor
Alexandria, Virginia, 22314
Jurisdiction of Formation: Kansas
Ownership: Cherrywood Holdings, Inc. owns 75% of the issued and
outstanding membership interests in Telcom Ventures, L.L.C., which in
turn owns 99% of the issued and outstanding membership interests in RF
Investors, L.L.C.
3. The Carlyle Group
Address: 1001 Pennsylvania Avenue, North West
Suite 220 South
Washington, DC 20004
Jurisdiction of Formation: Delaware
Ownership: Affiliates of The Carlyle Group owns 25% of the issued
and outstanding membership interests in Telcom Ventures, L.L.C., which
in turn owns 99% of the issued and outstanding membership interests in
RF Investors, L.L.C.
4. RF Investors, L.L.C.
Address: 211 North Union Street, 3rd floor
Alexandria, Virginia, 22314
Jurisdiction of Formation: Delaware
<PAGE> 109
Ownership: RF Investors owns all of the outstanding shares of
Class B Common Stock, which represents 94.8% of the combined voting
power of both classes of Common Stock of LCC International, Inc.,
subject to increase on conversion of the TV Note described above.
5. This list of Affiliates lists only Subsidiaries of the Borrower, Affiliates
in which the Borrower has an ownership interest, and Affiliates which
directly own the Borrower, RF Investors, L.L.C., or Telcom Ventures, L.L.C.
This list does not include affiliates or related parties of the Singh
family.
OTHER SECURITYHOLDINGS
1. NextWave Telecom Inc.: The Borrower holds 1,666,666 shares of
Series B Common Stock of NextWave Telecom Inc., and warrants to purchase an
additional 123,356 shares of Series B Common Stock at $3.00 per share. In
December 1998, NextWave Telecom Inc. filed a voluntary petition for court
protection under Chapter 11 of the US Bankruptcy Code (following an earlier
filing by its subsidiaries on June 8, 1998), and the case remains pending. LCC
fully reserved its exposure with respect to this investment as of December 31,
1996.
2. DCR Communications, Inc. ("DCR"). On March 20, 1996, LCC,
L.L.C. executed a Convertible Note and Investment Agreement with DCR, which
subsequently changes its name to Pocket Communications, Inc., for two loans of
up to $6.5 million, all of which is outstanding. On April 1, 1997 Pocket
Communications, Inc. filed a voluntary petition for court protection under
Chapter 11 of the US Bankruptcy Code, and the case remains pending. LCC fully
reserved its exposure with respect to this note as of December 31, 1996.
3. Communication Consulting Services, Inc.: 1,050,000 shares of
common stock, $.001 par value per share, of Communication Consulting Services,
Inc., an Illinois corporation, have been pledged to the Borrower by John J.
Meyer and Clyde C. Smith to secure payment of a promissory note in the
principal amount of $1,200,000 issued by Messers. Meyer and Smith to the
Borrower as the purchase price for the pledged shares.
<PAGE> 110
SCHEDULE 6.10
CREDIT ARRANGEMENTS
DEBT
1. The Borrower owes $ 20 million in principal under the Subordinated Note due
2000 executed by LCC, L.L.C. in favor of MCI Telecommunications Corporation
plus accrued interest.
2. The Borrower has assumed the obligations of Telcom Ventures under a
Subordinated Note due 2000 in the principal amount of $30 million in favor
of MCI Telecommunications Corporation.
3. See the description of the "TV Note" in item 1 under "Affiliates" on
Schedule 6.09.
4. As of the Closing Date, the Borrower had issued Letter of Credit for the
benefit of CTC Cellular in the amount of $66,946.40 secured by CD #
3300077055707 maturing on 11/28/96.
5. As of the Closing Date one or more of the Obligors is liable with respect to
the outstanding Letters of Credit issued pursuant to this Agreement.
LIENS*
As of September 30, 1996, Liens publicized by the following financing
statements (copies of which are held by the Administrative Agent):
1. UCC-1 financing statement # 92-225660 filed on November 18,
1992 with the Secretary of State of Texas against LCC, Incorporated secured by
DARR Equipment Co.
2. UCC-1 financing statement # 940527 7204 filed on May 27, 1994
with the Virginia State Corporation Commission against LCC, Incorporated
secured by Advanced Computer Concepts.
3. UCC-1 financing statement # 940613 7169 filed on June 13, 1994
with the Virginia State Corporation Commission against LCC, Incorporated
secured by Pitney Bowes Credit Corporation.
4. UCC-1 financing statement # 94-11297017 filed on November 29,
1994 with the Virginia State Corporation Commission against LCC, Incorporated
secured by Pitney Bowes Credit Corporation.
<PAGE> 111
5. UCC-1 financing statement # 54682 filed on November 30, 1994
with Arlington County, Virginia against LCC, Incorporated secured by Aristidis
Kopsidas together with attachments thereto.
6. UCC-1 financing statement # 941214 7168 filed on December 14,
1994 with the Virginia State Corporation Commission against LCC, Incorporated
secured by Aristidis Kopsidas together with attachments.
7. UCC-1 financing statement # 94-248131 filed on December 27,
1994 with the Secretary of State of Texas against LCC, Incorporated secured by
Plank Co.
8. UCC-1 financing statement # 950224 7117 filed on February 24,
1995 with the Virginia State Corporation Commission against LCC, Incorporated
secured by Pitney Bowes Credit Corporation.
9. UCC-1 financing statement # 950509 7087 filed on May 9, 1995
with the Virginia State Corporation Commission against LCC, Incorporated
secured by Pitney Bowes Credit Corporation.
10. UCC-1 financing statement # 55401 filed on June 20, 1995 with
Arlington County, Virginia against LCC, L.L.C. secured by AT&T Capital
Services Corp. covering MAR/2957B Asset # 700953.
11. UCC-1 financing statement # 950620 7701 filed on June 20, 1995
with the Virginia State Corporation Commission against LCC, L.L.C. secured by
AT&T Capital Services Corp. covering MAR/2957B Asset # 700953
12. UCC-1 financing statement # 55453 filed on July 5, 1995 with
Arlington County, Virginia against LCC, L.L.C. secured by AT&T Capital Services
Corp. covering MAR/2957B Asset # 692818.
13. UCC-1 financing statement # 55454 filed on July 5, 1995 with
Arlington County, Virginia against LCC, L.L.C. secured by AT&T Capital Services
Corp. covering MAR/2957D Asset # 711130.
14. UCC-1 financing statement # 950705 7312 filed on July 7, 1995
with the Virginia State Corporation Commission against LCC, L.L.C. secured by
Telogy, Inc. together with attachments thereto.
15. UCC-1 financing statement # 55477 filed on July 10, 1995 with
Arlington County, Virginia against LCC, L.L.C. secured by Telogy, Inc.
covering HP 8594E.
<PAGE> 112
16. UCC-1 financing statement # 950717 7050 filed on July 17, 1995
with the Virginia State Corporation Commission against LCC, Incorporated
secured by Pitney Bowes Credit Corporation.
17. UCC-1 financing statement # 950824 7805 filed on August 24,
1995 with the Virginia State Corporation Commission against LCC, Incorporation
secured by AT&T Capital Services Corporation.
18. UCC-1 financing statement # 55634 filed on August 28, 1995
with Arlington County, Virginia against LCC, Incorporated secured by AT&T
Capital Services Corp. covering MAR/2957D, MAR/2957B & MAR/8593E.
19. UCC-1 financing statement #9509227248 filed on September 22,
1995 with the Virginia State Corporation Commission against LCC, L.L.C. secured
by Telogy, Inc.
20. UCC-1 financing statement # 55753 filed on September 25, 1995
with Arlington County, Virginia against LCC, L.L.C. secured by Telogy, Inc.
covering MAR/2957D.
21. UCC-1 financing statement # 56263 filed on February 23, 1996
with Arlington County, Virginia against LCC, L.L.C. secured by AT&T Capital
Services Corp. covering MAR/2967D.
22. UCC-1 financing statement #9603227216 filed on March 22, 1996
with the Virginia State Corporation Commission against LCC, L.L.C. secured by
Telogy, Inc.
23. UCC-1 financing statement # 56393 filed on March 25, 1996 with
Arlington County, Virginia against LCC, L.L.C. secured by Telogy, Inc.
24. UCC-1 financing statement # 56433 filed on April 2, 1996 with
Arlington County, Virginia against LCC, Inc. secured by AT&T Capital Services
Corp. covering MAR/2031.
25. UCC-1 financing statement # 960402 7832 filed on April 2, 1996
with the Virginia State Corporation Commission against LCC, Incorporated
secured by AT&T Capital Services Corp.
26. UCC-1 financing statement # 56580 filed on May 9, 1996 with
Arlington County, Virginia against LCC, Inc. secured by AT&T Capital Services
Corp. covering WAV/3600D.
27. UCC-1 financing statement # 960510 7817 filed on May 10, 1996
with the Virginia State Corporation Commission. against Telcom Ventures,
L.L.C. secured by Nomura Holding America Inc.
<PAGE> 113
28. UCC-1 financing statement # 57092 filed on August 29, 1996
with Arlington County, Virginia against LCC, Inc. secured by AT&T Capital
Corporation covering R&S SME03.
- ----------------------------
* In addition, there are numerous filings of Chase Manhattan
Bank (National Association) as Administrative Agent pursuant to the Credit
Agreement date June 14, 1996 among LCC, L.L.C., LCC Design Services L.L.C., LCC
Development Company, L.L.C., the Lenders signatory thereto, and Chase Manhattan
Bank (National Association) as Administrative Agent.
INVESTMENTS
1. The Borrower owns 1,666,666 shares of Series B Common Stock of NextWave
Telecom Inc. and warrants to purchase 123,356 shares of series B Common
Stock.
2. The Borrower has executed a Convertible Note and Investment Agreement with
Pocket Communications, Inc. for two loans of up to $6.5 million,
approximately $6.5 million of which is outstanding.
3. The Borrower has received a Promissory Note, dated December 31, 1996, from
Pocket Communications, Inc., in the original principal amount of
$948,990.86. The principal amount has not been increased, but Pocket
continues to owe the Borrower additional amounts for services rendered
during 1996 and 1997. Please refer to the Borrower's Annual Report on Form
10-K, for the year ended December 31, 1997 in the Notes to Consolidated
Financial Statements, Note (9), "Special Charge" for a discussion
regarding these amounts.
4. The Borrower has received a Promissory Note, dated December 31, 1996 from
NextWave Telecom, Inc., in the original principal amount of $ 10,000,000.
On April 11, 1997, this amount and certain trade receivables were
consolidated under a revised payment plan as described in that certain
agreement between the parties executed as of the same date (the "April
Agreement"). NextWave continues to owe the Borrower approximately
$11,000,000 under the April Agreement. Please refer to the Borrower's
Annual Report on Form 10-K, for the year ended December 31, 1997, in the
Notes to Consolidated Financial Statements, Note (9), "Special Charge"" for
a discussion regarding these amounts. NextWave also owes Koll
Telecommunications Services, L.L.C. $2,100,000 under an outstanding
promissory note.
5. The Borrower has received a Promissory Note, dated September 26, 1996, from
Telecom Ventures, L.L.C., in the principal amount of $3,500,000.
<PAGE> 114
Approximately $2.1 million in principal amount remains outstanding as of
12/31/98.
6. The Borrower has extended a revolving credit note to Microcell Management,
Inc., dated December 31, 1996, in the maximum principal amount of
$35,000,000. Approximately $18,822,000 is outstanding thereunder as of
12/31/98.
7. The Borrower has extended a revolving credit note to LCC Europe AS
(formerly European Technology Partners AS), dated June 16, 1997, in the
maximum principal amount of $10,000,000. Approximately US$10,807,555 of
debt outstanding under this Note was converted by LCC to share capital of
LCC Europe AS effective on or about December 28, 1998.
8. The Borrower has received a Promissory Note, dated September 30, 1998, from
John J. Meyer and Clyde C. Smith in the original principal amount of
$1,200,000. This note was issued in payment of the purchase price of
1,050,000 shares of common stock, par value $.0001 per share, of
Communication Consulting Services, Inc., an Illinois corporation, purchased
from the Borrower by Messers. Meyer and Smith. Payment of such purchase
price is secured by a pledge of such shares.
GUARANTEES
1. The Borrower has guaranteed the obligations of Microcell Management, Inc.
under its Master Construction Agreement, dated May 15, 1997, with PrimeCo
Personal Communications, L.P. and certain leases and related documents
issued thereunder.
2. The Borrower has guaranteed the payment obligations of Microcell
Management, Inc. under certain purchase orders for tower equipment issued
to the Fort Worth Tower Company.
<PAGE> 115
SCHEDULE 6.11
MATERIAL CONTRACTS
1. Limited Liability Company Agreement of LCC Design Services, L.L.C. dated
August 1, 1994 as amended.
2. Limited Liability Company Agreement of Koll Telecommunications Services,
L.L.C. dated as of October 15, 1994.
3. Limited Liability Company Agreement of LCC Development Company, L.L.C.
dated January 24, 1996.
4. Shareholders Rights Agreement dated November 30, 1995 between NextWave
Telecom Inc. and LCC, L.L.C.
5. Amended and Restated Shareholders Rights Agreement dated February 1996
between NextWave Telecom Inc. and LCC, L.L.C.
6. Letter Agreement dated March 12, 1996 between NextWave Telecom Inc. and
LCC, L.L.C.
7. Subscription Agreement dated March 12, 1996 between NextWave Telecom Inc.
and LCC, L.L.C.
8. Agreement, dated April 11, 1997, between NextWave Telecom Inc. and LCC
International, Inc. regarding, among other things, payment of outstanding
receivables.
9. Convertible Loan and Investment Agreement dated March 20, 1996 between LCC,
L.L.C. and DCR Communications, Inc.
10. Series D Convertible Debenture due March 27, 2001 by DCR Communications,
Inc. dated March 27, 1996.
11. Series D Convertible Debenture due May 10, 2001 by DCR Communications, Inc.
dated May 10, 1996.
12. Subordinated Note due 2000 dated June 28, 1994 between LCC, L.L.C. and MCI
Telecommunications Corporation in the principal amount of $20,000,000 as
amended by Amendment to Subordinated Note Due 2000 dated as of July 25,
1996, Second Amendment to Subordinated Note Due 2000 1996 and Amendment to
Registration Rights Agreement dated as of October 23, 1997 and letters
dated August 10, 1998 and August 24, 1998 between LCC International, Inc.
and MCI Telecommunications Corporation.
<PAGE> 116
13. Subordinated Note due 2000 dated June 28, 1994 between LCC, L.L.C. and
Telcom Ventures, L.L.C. in the principal amount of $30,000,000, as amended
by Amendment to Subordinated Note Due 2000 dated as of July 25, 1996,
Second Amendment to Subordinated Note Due 2000 dated as of September __,
1996, Third Amendment to Subordinated Note Due 2000 dated as of September
27, 1996, and Fourth Amendment to Subordinated Note Due 2000 and Amendment
to Registration Rights Agreement dated as of October 23, 1997 and letters
dated August 10, 1998 and August 24, 1998 between LCC International, Inc.
and MCI Telecommunications Corporation (the "TV Note").
14. Notice of Assignment of TV Note by Telcom Ventures, L.L.C. and LCC, L.L.C.
to MCI Telecommunications Corporation, dated as of September 27, 1996.
15. Amended and Restated Securityholders Agreement dated as July 25, 1996, by
and among Telcom Ventures, L.L.C., LCC, L.L.C. TC Group, L.L.C., LCC,
Incorporated and MCI Telecommunications Corporation, as amended by
Amendment to Amended and Restated Securityholders Agreement dated as of
July 25, 1996.
16. Subordination and Intercreditor Agreement, dated as of September 30, 1996,
by and among The Chase Manhattan Bank, as administrative agent, MCI
Telecommunications Corporation and LCC International, Inc., as amended by
letter dated November 7, 1996 between LCC International, Inc. and MCI
Telecommunications Corporation.
17. Registration Rights Agreement dated July 25, 1996 between LCC
International, Inc., RF Investors, L.L.C. and MCI Telecommunications
Corporation, as amended by Fourth Amendment to Subordinated Note Due 2000
and Amendment to Registration Rights Agreement dated as of October 23, 1997
and Second Amendment to Subordinated Note Due 2000 1996 and Amendment to
Registration Rights Agreement dated as of October 23, 1997.
18. Stock Purchase Agreement, dated as of September 30, 1998, by and among John
J. Meyer, Clyde C. Smith and LCC International, Inc.
19. Stock Pledge Agreement, dated as of September 30, 1998, by and among John
J. Meyer, Clyde C. Smith and LCC International, Inc.
20. Promissory Note, dated September 30, 1998, of John J. Meyer and Clyde C.
Smith in the principal amount of $1,200,000 issued to LCC International,
Inc.
21. Guarantee Agreement, dated as of September 30, 1998, by Communications
Consulting Services, Inc. for the benefit of LCC International, Inc.
22. Promissory Note, dated January 28, 1998, of LCC International, Inc. in the
principal amount of $5,000,000 issued to Telcom Ventures, L.L.C.
<PAGE> 117
23. Subordination and Intercreditor Agreement, dated as of January 28, 1999, by
and among The Chase Manhattan Bank, as Administrative Agent, Telcom
Ventures, L.L.C. and LCC International, Inc.
24. Revolving Credit Facility and Security Agreement, dated as of December 31,
1996, by and between LCC International, Inc. and Microcell Management, Inc.
and letter, dated March 12, 1999, btween the parties relating thereto.
25. Revolving Credit Note, dated December 31 1996, in the principal amount of
$35,000,000 issued by Microcell Management, Inc. to LCC International, Inc.
26. Shareholders' Agreement of Microcell Management, Inc., dated as of December
31, 1996, by and among Albert F. Grimes, Donald G. McClure, Jr., R.
Michael Gill, Roy R. Markert, III, Joseph D. Croft, III, Pamela H. O'Neil
and Gary L. Grimes and LCC International, Inc.
27. Trademark License Agreement, dated as of December 31, 1996, by and between
LCC International, Inc. and Microcell Management, Inc.
28. Registration Rights Agreement, dated as of December 31, 1996, by and
between Microcell Management, Inc., LCC International, Inc. and the
individual shareholders of Microcell Management, Inc. named therein.
29. Agreement dated May 17, 1996, between LCC, L.L.C. and West*Park Associates
Limited Partnership.
30. Agreement dated May 17, 1996, between LCC, L.L.C. and West*Park Associates
Limited Partnership, as amended January 24, 1997, June 15, 1998 and
February 26, 1999.
31. Sublease Agreement between LCC International, Inc. and Capital One Services
Incorporated, dated January 19, 1999.
32. Intercompany Agreement dated August 27, 1996 between LCC International,
Inc., Telcom Ventures, L.L.C., LCC, L.L.C., Cherrywood Holdings, Inc.,
Rajendra Singh, Nerra Singh, certain trusts for the benefit of members of
the Singh family, Carlyle-LCC Investors I, L.P., Carlyle-LCC Investors II,
L.P., Carlyle-LCC Investors III, L.P., Carlyle-LCC IV (E), L.P., MDLCC,
L.L.C. and TC Group, L.L.C.
33. Overhead and Administrative Services Agreement dated August 27, 1996
between LCC International, Inc. and Telcom Ventures, L.L.C.
34. Stock Option Agreement dated September 1996 between LCC International, Inc.
and the Carlyle Option Designees.
<PAGE> 118
35. LCC International, Inc. 1996 Directors Stock Option Plan stock option
agreement and agreements issued pursuant thereto (other than Mark D. Ein).
36. LCC International, Inc. 1996 Directors Stock Option Plan stock option
agreements for Mark D. Ein.
37. LCC International, Inc. 1996 Employee Stock Option Plan incentive stock
option agreement and agreements issued pursuant thereto.
38. LCC International, Inc. 1996 Employee Stock Option Plan non-incentive stock
option agreement and agreements issued pursuant thereto.
39. LCC International, Inc. 1996 Employee Stock Option Plan non-incentive stock
option agreement (for employees who had been eligible to participate in the
LCC, L.L.C. 1994 Phantom Membership Plan or the LCC, L.L.C. 1996 Employee
Option Plan)
40. Phantom Membership Plan Exchange Agreement for Piyush Sodha and Donald R.
Rose.
41. Phantom Membership Plan Exchange Agreement for all other participants in
the LCC, L.L.C. 1994 Phantom Membership Plan.
42. LCC International, Inc. 1996 Employee Stock Purchase Plan and agreements
issued pursuant thereto.
43. LCC International, Inc. Director Indemnity Agreements with Directors and
Officers of LCC Consolidated Entities.
44. Letter Agreement dated August 22, 1996 between LCC International, Inc. and
Arno Penzias.
45. Agreement Regarding Resignation of Employment and Other Matters, dated as
of October 5, 1998, between LCC International, Inc. and Geoffrey S.
Carroll.
<PAGE> 119
DEFAULTS UNDER MATERIAL CONTRACTS
1. NextWave Telecom Inc. is in default under the agreement described in Item 8
above and may be in default under the agreements described in Items 4
through 7 above.
2. DCR is in default under the debentures described in Items 10 and 11 above
and may be in default under the agreement described in Item 9 above.
3. See Item 7 of Schedule 6.04 regarding allegations that one or more of the
Obligors is in violation of one or more of the agreements described in
Items 24 through 28 above.
<PAGE> 120
SCHEDULE 6.12
PROPRIETARY RIGHTS
TRADE AND SERVICE MARKS OF LCC CONSOLIDATED ENTITIES
<TABLE>
<CAPTION>
Mark TM/ Serial Registration Registration
---- SM Number Date/Status Number
-- ------ ----------- ------
<S> <C> <C> <C> <C>
AFPlanner TM 74/198828 07/14/92 1700375
CellCAD TM 74/539166 8/15/95 1911208
CellCONNECT TM 74/393243 10/24/95 1930166
CellHOST TM 74/393242 3/26/95 1886569
CellSIGHT TM 74/220464 02/09/93 1751835
CellTRAC TM 74/220463 02/02/93 1750739
CelluMATE TM 73/774403 06/26/90 1603462
CM1000 TM 74/092084 07/19/94 1700238
EXP-2001 TM 74/430523 07/19/94 1845456
InfoSITE TM 74/360562 04/02/96 1965885
LCC (logo) TM/SM 74/092006 11/05/91 1663246
LL-2000 TM 74/430525 12/20/94 1868855
MICROSTORE TM 74/430524 Statement of Use filed n/a
MSAT TM 74/424885 8/6/96 1991530
PENCAT TM 74/019646 3/18/97 2045612
RSAT TM 73/818914 04/17/90 1591831
RSAT-PLUS TM 74/118833 10/29/91 1662324
RSAT 2000 TM 74/306751 04/16/93 1764314
DESKCAT TM n/a Application Date: 8/20/96 Application No.
75/153392
AQS TM n/a Application Date: 8/20/96 Application No.
75/153393 and No.
75/153391
</TABLE>
All of the foregoing are owned by the Borrower.
<PAGE> 121
REGISTERED COPYRIGHTS OF LCC CONSOLIDATED ENTITIES
<TABLE>
<CAPTION>
LCC Software Programs Copyright Registration No. Expiration Date
--------------------- -------------------------- ---------------
<S> <C> <C>
CMA 3 592-612 July 1, 2168
CellTRAC 3 579-231 July 1, 2168
ANET 3 582-718 July 1, 2168
CellSIGHT 3 561-058 August 13, 2168
CellCAD 3 594-400 July 1, 2168
</TABLE>
PATENTS OF LCC CONSOLIDATED ENTITIES
1. U.S. Serial Number: n/a
Filed: Sept. 20, 1996
Description: Polarization Diversity Antenna Array
2. US Serial Number: 08/895,874
Files: July 17, 1997
Description: A Quality Measurement System and Method for
Wireless Communications
Networks
All of the foregoing are owned by the Borrower.
<PAGE> 122
MATERIAL PROPRIETARY RIGHTS GRANTED BY THIRD PARTIES
1. Agreement dated April 27, 1995 between Definitive Cellular Limited and
LCC, L.L.C.
2. Software License and Services Agreement dated February 24, 1995 between
LCC, L.L.C. and Oracle Corporation.
STEPS TAKEN TO PROTECT PROPRIETARY INFORMATION
Prior to commencement of employment with LCC, International ,
Inc. ("LCC") LCC's employees each sign an agreement which: (i) protects LCC,'s
proprietary and confidential information and prohibits disclosure of such LCC
information and (ii) establishes LCC's ownership of any work product of LCC
employees and provides for assignment of any related rights. Each
consultant, affiliate, agent or other contractor or subcontract signs a
comprehensive non-disclosure and ownership of work product agreement prior to
providing any services for LCC.
LCC protects its confidential and proprietary information by:
(i) only providing proprietary information to parties that have a need to know;
and (ii) by providing such information pursuant to an executed non-disclosure
agreement that specifically related to the proprietary information being
provided to the third party.
LCC provides its proprietary network modeling and system
monitoring software products (i.e., CellCAD and CellSIGHT) to clients who have
executed a comprehensive licensing agreement that has provisions that
establishes LCC's exclusive ownership of the software, the software manuals,
related software documentation and any other documentation provided to the
client and the agreements further prohibits; (i) use of the software or
documentation by any party other than licensee; and (ii) disclosure of any
information provided by LCC. LCC's field test measurement software products
(i.e., DeskCAT, Optimeyes, etc.) are licensed under "shrink-wrap" licenses
containing similar protection.
In addition, LCC customers, among other things, agree not to:
(i) reverse engineer, disassemble, decompile, interrogate or decode LCC's
software or any data files created by or associated with the software; (ii)
derive source code, methodologies or proprietary algorithms from the software;
(iii) modify the software or otherwise create any derivative work from the
software; (iv) assert the invalidity or contest the ownership by LCC of the
software, either as a complete or partial defense to any claim made by LCC or
any third party, or (v) take any action which may prejudice the validity of
LCC's rights, title and interest in and to the software. Each licensee agrees
that it shall not sell, assign, lease, sublease, license, sub-license or
otherwise transfer LCC's Software.
<PAGE> 123
SECURITY AGREEMENT
SCHEDULE A
PLACES OF BUSINESS
1. Principal place of business, chief executive office and location of
books and records of each Obligor:
LCC, International, Inc.
LCC Design Services, L.L.C.
LCC Development Company, L.L.C.
7925 Jones Branch Drive
McLean, Virginia 22102
Microcell Management L.L.C.
8365 Cherry Lane
Laurel, MD 20707
LCC Europe A.S.
Solheimveien 30, P.O. Box 447
N-1471 Skarer, Norway
Koll Telecommunications Services, L.L.C
27401 Los Altos
Mission Viejo, CA 92691
2. The subsidiaries of LCC International, Inc. which are not Obligors
have the following places of business:
LCC International Holdings NL, Inc.
LCC International Holdings Belgium, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
LCC, United Kingdom, Ltd.
43 Crawford Street
1st and Ground Floor
London W1H-2AP
United Kingdom
LCC Europe Gmbh
Grafenberger Allee
D-40237 Dusseldorf
Germany
<PAGE> 124
Eurfon de France S.A.R.L.
7 BD Romain Rolland, B.P. 87
92128 Montrouge Cedex, France
LCC do Brazil Ltda.
Rue Frei Caneca, 1380-Conj. 82
Sao Paulo, SP 01307-002 Brazil
LCC Asia Pacific LTD PTE
Centrako Business Centre, 6 Battery Road, #22-00
Singapore 049909
3. Other places of business where collateral was located as of
March 12, 1999:
LB&B
9151 G. Red Branch Rd.
Columbia, MD 21045
<PAGE> 125
INTELLECTUAL PROPERTY SECURITY AGREEMENT
SCHEDULE A
PROPRIETARY RIGHTS
1. COPYRIGHTS OF THE OBLIGORS
<TABLE>
<CAPTION>
LCC Software Programs Copyright Registration No. Expiration Date
--------------------- -------------------------- ---------------
<S> <C> <C>
CMA 3 592-612 July 1, 2168
CellTRAC 3 579-231 July 1, 2168
ANET 3 582-718 July 1, 2168
CellSIGHT 3 561-058 August 13, 2168
CellCAD 3 594-400 July 1, 2168
Microstore n/a n/a
CellQuest n/a n/a
CellCONNECT n/a n/a
COLLECT n/a n/a
DeskCAT n/a n/a
OptimEyes n/a n/a
Auryst n/a n/a
CellAD n/a n/a
</TABLE>
All of the foregoing are owned by the Borrower, with the exception of CellAD,
which is owned by LCC Europe AS.
2. PATENTS OF THE OBLIGORS
1. U.S. Serial Number: n/a
Filed: Sept. 20, 1996
Description: Polarization Diversity Antenna Array
2. US Serial Number: 08/895,874
Files: July 17, 1997
Description: A Quality Measurement System and Method for
Wireless Communications
Networks
All of the foregoing are owned by the Borrower.
<PAGE> 126
3. TRADE AND SERVICE MARKS OF THE OBLIGORS
<TABLE>
<CAPTION>
Mark TM/ Serial Registration Registration
---- SM Number Date/Status Number
-- ------ ----------- ------
<S> <C> <C> <C> <C>
AFPlanner TM 74/198828 07/14/92 1700375
CellCAD TM 74/539166 8/15/95 1911208
CellCONNECT TM 74/393243 10/24/95 1930166
CellHOST TM 74/393242 3/26/95 1886569
CellSIGHT TM 74/220464 02/09/93 1751835
CellTRAC TM 74/220463 02/02/93 1750739
CelluMATE TM 73/774403 06/26/90 1603462
CM1000 TM 74/092084 07/19/94 1700238
EXP-2001 TM 74/430523 07/19/94 1845456
InfoSITE TM 74/360562 04/02/96 1965885
LCC (logo) TM/SM 74/092006 11/05/91 1663246
LL-2000 TM 74/430525 12/20/94 1868855
MICROSTORE TM 74/430524 Statement of Use filed n/a
MSAT TM 74/424885 8/6/96 1991530
PENCAT TM 74/019646 3/18/97 2045612
RSAT TM 73/818914 04/17/90 1591831
RSAT-PLUS TM 74/118833 10/29/91 1662324
RSAT 2000 TM 74/306751 04/16/93 1764314
DESKCAT TM n/a Application Date: 8/20/96 Application No.
75/153392
AQS TM n/a Application Date: 8/20/96 Application No.
75/153393 and No.
75/153391
</TABLE>
All of the foregoing are owned by the Borrower.
TRADE OR CORPORATE NAMES OF LCC CORPORATE ENTITIES
1. LCC, United Kingdom, Ltd.
2. LCC Development Company, L.L.C.
<PAGE> 127
3. Eurofon de France S.A.R.L.
4. LCC International, Inc.
5. LCC Asia Pacific Pte Ltd.
6. LCC Design Services, L.L.C.
7. LCC Europe Gmbh
8. LCC do Brazil Ltda.
9. LCC International Holdings NL, Inc.
10. LCC International Holdings, Belgium, Inc.
11. Koll Telecommunications Services, L.L.C.
12. Microcell Management, Inc.
13. LCC Europe AS
<PAGE> 128
OBLIGORS PLEDGE AGREEMENT
SCHEDULE A
SECTION 3.01
1. DCR Debentures.
2. Note, dated September 30, 1996 in the principal amount of $3,500,00.00
issued by Telcom Ventures, L.L.C. to the Borrower.
3. All of the membership interests in LCC Design Services, L.L.C. held by the
Borrower. The Borrower owns 99% of the membership interests in LCC Design
Services, L.L.C.
4. All of the membership interests in LCC Development Company, L.L.C. held by
the Borrower. The Borrower owns 99% of the membership interests in LCC
Development Company, L.L.C.
5. All of the membership interests in Eurofon Incorp. & Co. KG held by the
Borrower. The Borrower owns 100% of the membership interests in Eurofon
Incorp. & Co. KG.
6. All of the membership interests in Eurofon de France S.A.R.L. The Borrower
owns 100% of the membership interests in Eurofon de France S.A.R.L.
7. 65% of the outstanding ordinary shares of LCC, United Kingdom, Ltd. The
Borrower owns 99% of the outstanding ordinary shares of LCC, United
Kingdom, Ltd.
8. All of the membership interests in LCC Development Company, L.L.C. held by
LCC Design Services, L.L.C. LCC Design Services, L.L.C. owns 1% of the
membership interests in LCC Development Company, L.L.C.
9. All of the membership interests in LCC Design Services, L.L.C. held by LCC
Development Company, L.L.C. LCC Development Company, L.L.C. owns 1% of the
membership interests in LCC Design Services, L.L.C.
10. All of the membership interests in Koll Telecommunications Services, L.L.C.
held by the Borrower. The Borrower owns 100% of the membership interests
in Koll Telecommunications Services, L.L.C.
11. Revolving Credit Note, dated December 31, 1996, in the principal amount of
$35,000,000 issued by Microcell Management, Inc. to the Borrower.
<PAGE> 129
12. 64,090 shares of the Common Stock of LCC Europe AS held by LCC
International, Inc.
13. 83,750 shares of Class A Common Stock, $.01 par value per share, of
Microcell Management, Inc. held by LCC International, Inc.*
14. Promissory Note, dated __________, of LCC Europe AS to LCC International,
Inc.
15. Promissory Note, dated September 30, 1998, in the principal amount of
$1,200,000 issued by John J. Meyer and Clyde C. Smith to LCC International,
Inc.
16. 1,050,000 shares of common stock, par value $.0001 per share, of
Communication Consulting Services, Inc. pledged to LCC International, Inc.
John J. Meyer and Clyde C. Smith upon foreclosure thereof pursuant to the
Stock Pledge Agreement, dated as of September 30, 1998, by and among John
J. Meyer, Clyde C. Smith and LCC International, Inc.
- -------------------------------------------
* LCC International, Inc. ("LCC") is party to a certain Shareholders'
Agreement of Microcell Management, Inc., dated as of December 31, 1996,
which may require that LCC or its successors or assigns obtain consents or
follow certain procedures prescribed therein prior to effecting any
transfer, pledge, assignment or other encumbrance of any of its rights in
such shares.
<PAGE> 1
EXHIBIT 10.64
CASH COLLATERAL ACCOUNT AGREEMENT
Dated as of December 30, 1998
by
DR. RAJENDRA SINGH
in favor of
THE CHASE MANHATTAN BANK
as Administrative Agent
<PAGE> 2
CASH COLLATERAL ACCOUNT AGREEMENT
CASH COLLATERAL ACCOUNT AGREEMENT, dated as of December 30, 1998 (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), made by DR. RAJENDRA SINGH, an individual residing at 3801 Belle
Rive Terrace, Alexandria, Virginia 22309 (the "Individual Guarantor") in favor
of THE CHASE MANHATTAN BANK, a bank organized under the laws of New York, as
administrative agent (in such capacity, together with its successors in such
capacity, the "Administrative Agent") for the benefit of each of the lenders
(the "Lenders") a party to the Third Amended and Restated Credit Agreement dated
as of December 30, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") among LCC International, Inc., a Delaware
corporation (the "Borrower"), LCC Europe AS, a Norwegian limited liability
company (the "Subsidiary Borrower"), LCC Design Services, L.L.C., a Delaware
limited liability company, LCC Development Company, L.L.C., a Delaware limited
liability company, Microcell Management, Inc., a Delaware corporation, and Koll
Telecommunications Services, L.L.C., a Delaware limited liability company (the
"Subsidiary Guarantors" and, together with the Borrower and the Subsidiary
Borrower, the "Obligors"), the Administrative Agent and the Lenders.
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Credit Agreement and the other
Facility Documents, the Lenders have agreed to extend credit to the Obligors
upon the terms and subject to the conditions set forth therein to be evidenced
by the Notes issued by the Borrower and the Subsidiary Borrower thereunder and
the Letters of Credit issued thereunder and to be guarantied by the Subsidiary
Guarantors thereunder and by the Individual Guarantor under the Unconditional
Guaranty dated as of December 30, 1998 (the "Singh Guaranty"); and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their extensions of credit to the Obligors under the Credit Agreement that
the Individual Guarantor shall have executed and delivered this Agreement to the
Administrative Agent to secure the obligations of the Individual Guarantor under
the Singh Guaranty.
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective Loans and to purchase Participating Interests in Letters of
Credit issued under the Credit Agreement, the Individual Guarantor hereby agrees
with the Administrative Agent, as follows:
<PAGE> 3
ARTICLE 1. DEFINITIONS.
Unless otherwise defined herein, terms which are defined in the Credit
Agreement and used herein are so used as so defined; and the following terms
have the following meanings:
"Account" means the special non-interest bearing cash collateral account
opened by the Individual Guarantor with the Administrative Agent in the name of
the Individual Guarantor but under the sole control and dominion of the
Administrative Agent and subject to the terms of this Agreement.
"Code" means the Uniform Commercial Code as in effect in the State of New
York.
"Collateral" means (a) the Account and all certificates and instruments,
if any, from time to time representing or evidencing the Account; (b) all cash
and amounts from time to time deposited in the Account; (c) all Investments (as
hereinafter defined) from time to time and all certificates and instruments, if
any, from time to time representing or evidencing the Investments; (d) all
notes, certificates of deposit and other instruments from time to time hereafter
delivered to or otherwise possessed by the Administrative Agent for or on behalf
of the Individual Guarantor in substitution for or in addition to any or all of
the then existing Collateral; (e) all interest, dividends, cash, instru-ments
and other property from time to time received, receiv-able or otherwise
distributed in respect of or in exchange for any or all of the then existing
Collateral; and (f) all proceeds of any or all of the foregoing Collateral,
whether now owned or hereafter acquired, together with all the proceeds thereof
and dividends thereon and any replacements, additions or substitutions thereof
or thereto and all accounts arising from the sale or disposition thereof.
"Guarantied Obligations" means (a) the sum of (i) the principal amount of
Loans and Letter of Credit Obligations incurred in excess of the lesser of (A)
the Borrowing Base and (B) $10,000,000, plus (ii) if, at any time, after giving
effect to clause (i), the principal amount of the outstanding Loans and Letter
of Credit Obligations is greater than $7,500,000 and was equal to or less than
the Borrowing Base when incurred, the amount by which such principal amount
exceeds the Borrowing Base at such time up to a maximum of $2,500,000; provided
that in no event shall the aggregate amount of Guarantied Obligations under this
clause (a) exceed $12,500,000; (b) all unpaid interest thereon (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding); and (c) all unpaid fees, indemnities, costs and expenses relating
to the collection thereof (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or any
2
<PAGE> 4
Lender). The examples set forth in the definition of "Guarantied Obligations"
contained in the Credit Agreement are hereby incorporated by reference.
"Security" has the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
ARTICLE 2. COLLATERAL
Section 2.01. Grant of Security Interest. As security for the payment by
the Individual Guarantor of the Guarantied Obligations, the Individual Guarantor
does hereby grant, bargain, convey, assign, transfer, mortgage, hypothecate,
pledge, confirm and grant a continuing security interest to the Administrative
Agent in and to all right, title and interest of the Individual Guarantor (but
none of its obligations) in the Collateral.
Section 2.02. Delivery of Collateral. All certifi-cates or instruments,
if any, representing or evidencing the Collateral shall be delivered to and held
by or on behalf of the Administrative Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
exe-cuted instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Administrative Agent. The Administrative Agent
shall have the right, at any time in its discretion and with-out notice to the
Individual Guarantor, to transfer to or to register in the name of the
Administrative Agent or any of its nominees any or all of the Collateral. In
addition, the Administrative Agent shall have the right at any time to exchange
certificates or instruments repre-senting or evidencing Collateral for
certificates or instru-ments of smaller or larger denominations.
Section 2.03. Investing of Amounts in the Account. If requested by the
Individual Guarantor, the Administrative Agent will, subject to the provisions
of Article 4, from time to time (a) invest amounts on deposit in the Account in
such notes, cer-tificates of deposit and other debt instruments as the
Individual Guarantor may select and the Administrative Agent may approve and (b)
invest interest paid on the notes, certificates of deposit and other instruments
referred to in clause (a) above, and reinvest other proceeds of any such notes,
certificates of deposit and other instruments which may mature or be sold, in
each case in such notes, certificates of deposit and other debt instru-ments as
the Individual Guarantor may select and the Administrative Agent may approve
(the notes, certificates of deposit and other instruments referred to in clauses
(a) and (b) above being collectively the "Investments"). Interest and proceeds
which are not invested or reinvested in Investments as provided above shall be
deposited and held in the Account.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING
SECURITY
3
<PAGE> 5
Section 3.01. Title; Liens. The Individual Guarantor represents, warrants
and covenants that the Collateral is owned solely by the Individual Guarantor
and, except for the Liens granted to the Administrative Agent hereunder, no
other Person has any right, title, interest, claim or Lien thereon, or thereto.
Section 3.02. Sale of Collateral; Liens. The Individual Guarantor
(a) will not sell, assign or otherwise transfer any of the
Collateral,
(b) will keep all Collateral in existence on the date, and all
Collateral acquired after the date, of execution of this Agreement, free from
all Liens, and
(c) will pay and discharge, when due, all taxes, levies and
governmental charges upon any Collateral, and shall defend all Collateral
against all claims of any Person other than the Administrative Agent.
Section 3.03. Certain Additional Rights. In connection with any sale of
Collateral by the Administrative Agent in accordance with Article 4, the
Administrative Agent shall have the right to execute any document or form, in
its name or the name of the Individual Guarantor, that may be necessary or
desirable in connection with such sale.
Section 3.04. Reimbursement. The Individual Guarantor shall pay any and
all reasonable costs, including, without limitation, attorneys' fees, legal
expenses and court costs, that the Administrative Agent may incur in enforcing,
defending or protecting its Lien on, or rights and interests in, the Collateral,
or any of its rights and remedies under this or any other agreement between the
parties hereto or in respect to any of the transaction to be had thereunder or
hereunder and, until paid by the Individual Guarantor, such sums shall be
considered as additional obligations owing by the Individual Guarantor hereunder
and, as such shall be secured by all of the Collateral. Subject to the terms of
the Credit Agreement and except to the extent specifically limited by applicable
law, the Administrative Agent shall not be liable or responsible in any way for
the safekeeping of the Collateral or for any loss or damage thereto or for any
diminution in the value thereof, all of which shall be at the sole risk of the
Individual Guarantor.
Section 3.05. Further Assurances. So long as any of the Obligations, any
Letter of Credit or any Commitment shall be outstanding, the Individual
Guarantor, at his expense, will timely execute, acknowledge, deliver, file and
record, or will cause to be executed, acknowledged, delivered, filed or
recorded, all such further instruments, conveyances, transfers, financing
statements, continuation statements and assurances as may be necessary or
appropriate (and, in any event, as may be requested by the Administrative Agent)
to subject to the Lien of this Agreement, and to preserve, continue and protect
the Lien of this Agreement on, the Collateral, including, without limitation,
any Collateral acquired
4
<PAGE> 6
after the date of this Agreement, or as the Administrative Agent may reasonably
require for the better granting, bargaining, selling, demising, releasing,
confirming, conveying, warranting, assigning, transferring, pledging, delivering
and setting over to the Administrative Agent, and for perfecting the
Administrative Agent's rights in, every part of the Collateral, or as may be
required in order to transfer to, or perfect the rights of any new agent or
agents in, the Collateral.
ARTICLE 4. DEFAULTS -- REMEDIES
Section 4.01. Nature of Events. An "Event of Default" shall exist if any
Event of Default under, and as defined in, the Credit Agreement occurs and is
continuing.
Section 4.02. Default Remedies. (a) If an Event of Default exists, the
Administrative Agent may exercise all of the rights and remedies of a secured
party under the Code and all of the rights and remedies conferred in this
Agreement and in each of the other Facility Documents, it being expressly
understood that no such remedy is intended to be exclusive of any other remedy
or remedies; but each and every remedy shall be cumulative and shall be in
addition to every other remedy given in this Agreement or now or hereafter
existing at law or in equity or by statute, and may be exercised from time to
time as often as may be deemed expedient by the Administrative Agent.
(b) If an Event of Default exists, the Administrative Agent shall
have the right, at any time or from time to time, to sell any or all of the
Collateral.
(c) The Individual Guarantor and the Administrative Agent agree
that ten (10) days' notice to the Individual Guarantor of any public or private
sale or other disposition of Collateral shall be reasonable notice thereof, and
such sale shall be at such reasonable locations as the Administrative Agent
shall designate in such notice. Any other requirement of notice, demand or
advertisement for sale is, to the extent permitted by law, waived by the
Individual Guarantor. Sales for cash, or on credit to a wholesaler, retailer or
user of the Collateral, at any public or private sale are all hereby deemed
(without limitation) to be commercially reasonable (as defined in the Code). The
Administrative Agent shall have the right to bid at any such sale on behalf of
any one or more Lenders (who shall also have the right to bid individually).
Proceeds arising from any such sale shall be applied in the manner set forth in
the Credit Agreement.
(d) If an Event of Default exists, the Administrative Agent may
also, with or without proceeding with sale or foreclosure or demanding payment
of the Guarantied Obligations, without notice, appropriate and apply to the
payment of the Guarantied Obligations and the other obligations secured under
this Agreement any and all Collateral in its possession and any and all
balances,
5
<PAGE> 7
credits, deposit accounts, reserves or other moneys due or owing to
the Individual Guarantor held by the Administrative Agent under this Agreement
or otherwise.
(e) Anything in this Agreement contained to the contrary
notwithstanding, and in view of the fact that federal and state securities laws
may impose certain restrictions on the method by which a sale of the Collateral
that consists of Securities may be effected after an Event of Default, the
Individual Guarantor agrees that upon the occurrence and continuance of an Event
of Default, the Administrative Agent may, from time to time, attempt to sell all
or any part of such Collateral by means of a private placement restricting the
bidders and prospective purchasers to those who will represent or agree as to
their investment intent or method of resale or both in a manner reasonably
required by the Administrative Agent to assure compliance with applicable
securities laws. In so doing, the Administrative Agent may solicit offers to buy
such Collateral, or any part of it, for cash, from a limited number of investors
deemed by the Administrative Agent, in its exclusive judgment, to be responsible
parties who might be interested in purchasing such Collateral, and if the
Administrative Agent solicits such offers from not less than three (3) such
investors, then the acceptance by the Administrative Agent of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition (as defined in the Code) of such Collateral unless applicable law
provides otherwise.
(f) All covenants, conditions, provisions, warranties, guaranties,
indemnities and other undertakings of the Individual Guarantor contained in this
Agreement or any other Facility Document, or in any document referred to in this
Agreement or any other Facility Document or contained in any agreement
supplementary to this Agreement or any other Facility Document, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions or agreements of the Individual Guarantor contained in
this Agreement or any other Facility Document.
(g) The Individual Guarantor will pay to the Administrative Agent
all reasonable expenses (including court costs and reasonable attorneys' fees
and expenses) of, or incident to, the enforcement of any of the provisions of
this Agreement and all other charges due against the Collateral, including,
without limitation, taxes, assessments, security interests, Liens or
encumbrances upon the Collateral and any expenses, including transfer or other
taxes, arising in connection with any sale, transfer or other disposition of
Collateral.
Section 4.03. Other Enforcement Rights. The Administrative Agent may
proceed to protect and enforce this Agreement by suit or suits or proceedings in
equity, at law or in bankruptcy, and whether for the specific performance of any
covenant or agreement in this Agreement contained or in execution or aid of any
power in this Agreement granted, or for foreclosure under this Agreement, or for
the appointment of a receiver or receivers for the Collateral or any part
thereof, for the
6
<PAGE> 8
recovery of judgment for the obligations secured by this Agreement or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law.
Section 4.04. Effect of Sale, etc . (a) Any sale or sales pursuant to the
provisions of this Agreement, whether under any right or power granted hereby or
thereby or pursuant to any legal proceedings, shall operate to divest the
Individual Guarantor of all right, title, interest, claim and demand whatsoever,
either at law or in equity, of, in and to the Collateral, or any part thereof,
so sold, and any Property so sold shall be free and clear of any and all rights
of redemption by, through or under such Obligor. At any such sale any Lender may
bid for and purchase the Property sold and may make payment therefor as set
forth in clause (b) of this Section 4.04, and any such Lender so purchasing any
such Property, upon compliance with the terms of sale, may hold, retain and
dispose of such Property without further accountability.
(b) The receipt by the Administrative Agent, or by any Person
authorized under any judicial proceedings to make any such sale, of the proceeds
of any such sale shall be a sufficient discharge to any purchaser of the
Collateral, or of any part thereof, sold as aforesaid; and no such purchaser
shall be bound to see to the application of such proceeds, or be bound to
inquire as to the authorization, necessity or propriety of any such sale. In the
event that, at any such sale, any Lender is the successful purchaser, it shall
be entitled, for the purpose of making settlement or payment, to use and apply
such Collateral to the Guarantied Obligations by crediting thereon the amount
apportionable and applicable thereto out of the net proceeds of such sale.
Section 4.05. Delay or Omission; No Waiver. No course of dealing on the
part of the Administrative Agent or any Lender nor any delay or failure on the
part of the Administrative Agent or any Lender to exercise any right shall
impair such right or operate as a waiver of such right or otherwise prejudice
the Administrative Agent's or such Lender's rights, powers and remedies. No
waiver by the Administrative Agent or any Lender of any Default or Event of
Default, whether such waiver be full or partial, shall extend to or be taken to
affect any subsequent Default or Event of Default, or to impair the rights
resulting therefrom except as may be otherwise expressly provided in this
Agreement. Every right and remedy given by this Agreement, by any other Facility
Document or by law to the Administrative Agent may be exercised from time to
time as often as may be deemed expedient by the Administrative Agent.
Section 4.06. Restoration of Rights and Remedies. If the Administrative
Agent shall have instituted any proceeding to enforce any right or remedy under
this Agreement or under any other Facility Document and such proceeding shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Administrative Agent, then and in every such case
the
7
<PAGE> 9
Administrative Agent and the Individual Guarantor and the Lenders shall, subject
to any determination in such proceeding, be restored severally and respectively
to their former positions under this Agreement and under the other Facility
Documents, and thereafter all rights and remedies of the Administrative Agent
shall continue as though no such proceeding had been instituted.
Section 4.07. Application of Proceeds. The proceeds of any exercise of
rights with respect to the Collateral, or any part thereof, and the proceeds and
the avails of any remedy under this Agreement shall be paid to and applied in
accordance with the provisions of the Credit Agreement. If there is a
deficiency, the Individual Guarantor shall, subject always to the other
provisions of this Agreement, remain liable therefor and shall forthwith pay the
amount of any such deficiency to the Administrative Agent.
Section 4.08. Cumulative Remedies. No remedy under this Agreement or
under any other Facility Document is intended to be exclusive of any other
remedy, but each and every remedy shall be cumulative and in addition to any and
every other remedy given under this Agreement or under any other Facility
Document or otherwise existing; nor shall the giving, taking or enforcement of
any other or additional security, collateral or guaranty for the payment or
performance of the Obligations operate to prejudice, waive or affect the
security of this Agreement or any rights, powers or remedies under this
Agreement, nor shall the Administrative Agent or any Lender be required to look
first to, enforce or exhaust any such other or additional security, collateral
or guaranties.
Section 4.09. Waivers by the Individual Guarantor. (a) The
Individual Guarantor hereby waives notice of acceptance of this Agreement and of
extensions of credit, loans, advances or other financial assistance under the
Facility Documents or under any other agreement, note, document or instrument
now or at any time or times hereafter executed by the Individual Guarantor and
delivered to the Administrative Agent or any Lender. The Individual Guarantor
further waives presentment and demand for payment of any of the Guarantied
Obligations, protest and notice of dishonor or default with respect to any of
the Guarantied Obligations, and all other notices to which the Individual
Guarantor might otherwise be entitled, except as otherwise expressly provided in
this Agreement or in the other Facility Documents.
(b) The Individual Guarantor (to the extent that he may lawfully
do so) covenants that it will not at any time insist upon or plead, or in any
manner claim or take the benefit or advance of, any stay (except in connection
with a pending appeal), valuation, appraisal, redemption or extension law now or
at any time hereafter in force that, but for this waiver, might be applicable to
any sale made under any judgment, order or decree based on this Agreement or any
other Facility Document; and the Individual Guarantor (to the extent that he may
lawfully do so) hereby expressly waives and relinquishes all benefit and advance
of
8
<PAGE> 10
any and all such laws and hereby covenants that he will not hinder, delay or
impede the execution of any power in this Agreement or therein granted and
delegated to the Administrative Agent, but that he will suffer and permit the
execution of every such power as though no such law or laws had been made or
enacted.
Section 4.10. Consent. Except as may be otherwise provided in Section
6.01 or in the other Facility Documents, the Individual Guarantor hereby
consents that from time to time, before or after the occurrence or existence of
any Event of Default, with or without notice to or assent from the Individual
Guarantor, any security at any time held by or available to the Administrative
Agent for any of the Obligations, or any other security at any time held by or
available to the Administrative Agent for any obligation of any other Person
secondarily or otherwise liable for any of the Guarantied Obligations, may be
exchanged, surrendered, or released and any of the Guarantied Obligations may be
changed, altered, renewed, extended, continued, surrendered, compromised, waived
or released, in whole or in part, as the Administrative Agent or any holder
thereof may see fit, and the Individual Guarantor shall remain bound under this
Agreement notwithstanding any such exchange, surrender, release, change,
alteration, renewal, extension, continuance, compromise, waiver or release.
ARTICLE 5. DEFEASANCE
Section 5.01. Satisfaction and Discharge. If the Obligors shall pay and
discharge the entire indebtedness on all Obligations outstanding by well and
truly paying or causing to be paid the principal of, and interest on, all
Obligations outstanding, as and when the same become due and payable; and if the
Obligors shall also pay or cause to be paid all other sums payable under this
Agreement with respect to the Obligations and all sums payable under any one or
more of the other Facility Documents, and fully and faithfully discharges or
causes to be discharged every other obligation herein or in any other Facility
Document contained or otherwise secured by any of the Facility Documents; and if
all Commitments shall have been terminated, then and in that case all of the
right, title and interest of the Administrative Agent in the Collateral created
hereby shall cease and terminate, and thereupon the Administrative Agent, upon
written request of the Individual Guarantor, shall forthwith execute and
deliver, without recourse, assignments and other instruments acknowledging
satisfaction and discharging all of the right, title and interest of the
Administrative Agent in the Collateral created hereby (subject to any
disposition thereof that may have been made by the Administrative Agent pursuant
to any of the Facility Documents).
Section 5.02. Release of Collateral. If, at any time, the amount of
Collateral held by the Administrative Agent under this Agreement exceeds the
amount of the Guarantied Obligations, then the Administrative Agent, upon
request of the Individual Guarantor, shall remit such excess to the Individual
Guarantor.
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ARTICLE 6. MISCELLANEOUS
Section 6.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Individual Guarantor,
the Administrative Agent and the Required Lenders, or by the Individual
Guarantor and the Administrative Agent acting with the consent of the Required
Lenders and any provision of this Agreement may be waived by the Required
Lenders or by the Administrative Agent acting with the consent of the Required
Lenders; provided that no amendment, modification or waiver shall, unless by an
instrument signed by all of the Lenders or by the Administrative Agent acting
with the consent of all of the Lenders: (a) permit the creation of any Lien with
respect to any of the Collateral; (b) effect the deprivation of any Lender of
the benefit of any Lien upon all or any part of the Collateral; (c) create any
priority with respect to any portion of the Guarantied Obligations over any
other portion with respect to the Lien upon all or any part of the Collateral;
or (d) amend, waive or modify the definition of Guarantied Obligations.
Section 6.02. Survival. The obligations of the Individual Guarantor under
Section 3.04 or Section 4.02(h) shall survive the repayment of the Loans and the
termination of the Commitments.
Section 6.03. Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of, the Individual Guarantor, the Lenders
and their respective successors and assigns.
Section 6.04. Notices. Unless the party to be notified otherwise notifies
the other party in writing as provided in this Section, and except as otherwise
provided in this Agreement, notices shall be given in writing to the
Administrative Agent, to the Lenders and to the Individual Guarantor by ordinary
mail, hand delivery, overnight courier or telecopier addressed to such party at
its address on the signature page of this Agreement. Notices shall be effective:
(a) if given by mail, 72 hours after deposit in the mails with first class
postage prepaid, addressed as aforesaid; and (b) if given by telecopier, when
the telecopy is transmitted to the telecopier number as aforesaid; provided that
notices to the Administrative Agent shall be effective upon receipt.
SECTION 6.05. JURISDICTION, IMMUNITIES. (A) THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED
STATES FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND THE INDIVIDUAL GUARANTOR
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
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ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT. THE INDIVIDUAL GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF
ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF
SUCH PROCESS TO THE INDIVIDUAL GUARANTOR AT HIS ADDRESS SPECIFIED IN SECTION
6.04. THE INDIVIDUAL GUARANTOR 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. THE INDIVIDUAL
GUARANTOR FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION
TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS.
THE INDIVIDUAL GUARANTOR FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT
AGAINST THE ADMINISTRATIVE AGENT OR ANY LENDER SHALL BE BROUGHT ONLY IN NEW YORK
STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY. THE INDIVIDUAL
GUARANTOR WAIVES ANY RIGHT HE MAY HAVE TO JURY TRIAL.
(b) Nothing in this Section 6.05 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 the Individual Guarantor or his
property in the courts of any other jurisdictions.
(c) To the extent that the Individual Guarantor has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Individual Guarantor hereby irrevocably waives such
immunity in respect of his obligations under this Agreement.
Section 6.06. Headings. The headings and captions hereunder are for
convenience only and shall not affect the interpretation or construction of this
Agreement.
Section 6.07. Severability. The provisions of this Agreement are intended
to be severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
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Section 6.08. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
SECTION 6.09. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 6.10. Subject to the Credit Agreement. Any and all rights granted
to the Administrative Agent under this Agreement are to be held and exercised by
the Administrative Agent for the benefit of the Lenders, pursuant to the
provisions of the Credit Agreement. To the extent set forth in the Facility
Documents, each of the Lenders shall be a beneficiary of the terms of this
Agreement. Any and all obligations under this Agreement of the parties to this
Agreement, and the rights granted to the Administrative Agent under this
Agreement, are created and granted subject to the terms of the Credit Agreement.
Section 6.11. Power of Attorney. The Individual Guarantor hereby makes,
constitutes and appoints the Administrative Agent the true and lawful agent and
attorney in fact of the Individual Guarantor, with full power of substitution
(a) if an Event of Default exists and is continuing, and to the
fullest extent permitted by applicable law, to transfer any of the Collateral to
the name of the Administrative Agent or its nominee, and to indorse for
negotiation its name;
(b) if an Event of Default exists and is continuing, and to the
fullest extent permitted by applicable law, to receive, open and dispose of all
mail addressed to the Individual Guarantor relating to the Collateral and remove
therefrom any notes, checks, acceptances, drafts, money orders or other
instruments included in the Collateral, with full power to endorse the name of
the Individual Guarantor upon any such notes, checks, acceptances, drafts, money
orders, instruments or other documents relating to the Collateral and to effect
the deposit and collection thereof, and the further right and power to endorse
the name of the Individual Guarantor on any document relating to the Collateral;
(c) if an Event of Default exists and is continuing, to sign the
name of the Individual Guarantor to drafts against its debtors, to notices to
such debtors, to assignments and notices of assignments, financing statements,
continuation statements or other public records or notices and all other
instruments and documents; and
(d) after a request by the Administrative Agent to take any action
to carry out the provisions of this Agreement, including, without limitation,
the grant of the security interest granted to the Administrative Agent with
respect to
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the Collateral and the Administrative Agent's rights created under
this Agreement after a request by the Administrative Agent to take any action,
and the failure or refusal of the Individual Guarantor to comply with such
request within five (5) days, to do any and all things necessary to take such
action in the name and on behalf of the Individual Guarantor.
The Individual Guarantor agrees, in the absence of willful wrongdoing or
gross negligence, that neither the Administrative Agent nor any of its agents,
designees or attorneys-in-fact will be liable for any acts of commission or
omission, or for any error of judgment or mistake of fact or law with respect to
the exercise of the power of attorney granted under this Section 6.11. The power
of attorney granted under this Section 6.11 is coupled with an interest and
shall be irrevocable so long as any Obligation or Commitment remains
outstanding.
Section 6.12. Term of Agreement. This Agreement shall be and remain in
full force and effect so long as any Obligation shall remain unpaid, any Letter
of Credit shall remain outstanding or any Lender shall have any Commitments.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/S/ RAJENDRA SINGH
-------------------
Dr. Rajendra Singh
in his individual capacity
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Telecopier No.: (703) 873-2300
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By: /S/ ALAN J. ARIA
-------------------
Name: Alan J. Aria
Title: Vice President
Address for Notices:
4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency
with a copy to:
999 Broad Street
Bridgeport, Connecticut 06604
Attention: Alan Aria
Telecopier No.: (203) 382-6573
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EXHIBIT 10.65
UNCONDITIONAL GUARANTY
Dated as of December 30, 1998
by
DR. RAJENDRA SINGH
in favor of
THE CHASE MANHATTAN BANK
as Administrative Agent
<PAGE> 2
UNCONDITIONAL GUARANTY
UNCONDITIONAL GUARANTY, dated as of December 30, 1998 (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), made by
DR. RAJENDRA SINGH, an individual residing at 3801 Belle Rive Terrace,
Alexandria, Virginia 22309 (the "Individual Guarantor") in favor of THE CHASE
MANHATTAN BANK, a bank organized under the laws of New York, as administrative
agent (in such capacity, together with its successors in such capacity, the
"Administrative Agent") for the benefit of each of the lenders (the "Lenders") a
party to the Third Amended and Restated Credit Agreement dated as of December
30, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among LCC International, Inc., a Delaware corporation (the
"Borrower"), LCC Europe AS, a Norwegian limited liability company (the
"Subsidiary Borrower"), LCC Design Services, L.L.C., a Delaware limited
liability company, LCC Development Company, L.L.C., a Delaware limited liability
company, Microcell Management, Inc., a Delaware corporation, and Koll
Telecommunications Services, L.L.C., a Delaware limited liability company (the
"Subsidiary Guarantors" and, together with the Borrower and the Subsidiary
Borrower, the "Obligors"), the Administrative Agent and the Lenders.
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Credit Agreement and the other
Facility Documents, the Lenders have agreed to extend credit to the Obligors
upon the terms and subject to the conditions set forth therein to be evidenced
by the Notes issued by the Borrower and the Subsidiary Borrower thereunder and
the Letters of Credit issued thereunder and to be guarantied by the Subsidiary
Guarantors thereunder and by the Individual Guarantor hereunder;
WHEREAS, the Individual Guarantor has beneficial ownership of
approximately 41.2% of the outstanding Capital Stock of the Borrower and the
Individual Guarantor will directly benefit from the making of the Loans and the
issuance of the Letters of Credit; and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their extensions of credit to the Obligors under the Credit Agreement that
the Individual Guarantor shall have executed and delivered this Agreement to the
Administrative Agent to guaranty the obligations of the Obligor under the Notes,
the Letters of Credit, the Credit Agreement and the other Facility Documents.
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective Loans and to purchase Participating Interests in Letters of
Credit issued
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under the Credit Agreement, the Individual Guarantor hereby agrees with the
Administrative Agent, as follows:
Section 1. Guaranteed Obligations. The Individual Guarantor, in
consideration of the execution and delivery of the Credit Agreement by the
Lenders and the Administrative Agent, hereby irrevocably and unconditionally
guarantees to the Administrative Agent, for the benefit of the Lenders, as and
for the Individual Guarantor's own debt, until final payment has been made, the
due and punctual payment in full in cash of the Obligations in (a) the sum of
(i) the principal amount of Loans and Letter of Credit Obligations incurred in
excess of the lesser of (A) the Borrowing Base and (B) $10,000,000, plus (ii)
if, at any time, after giving effect to clause (i), the principal amount of the
outstanding Loans and Letter of Credit Obligations is greater than $7,500,000
and was equal to or less than the Borrowing Base when incurred, the amount by
which such principal amount exceeds the Borrowing Base at such time up to a
maximum of $2,500,000; provided that in no event shall the aggregate amount of
Guarantied Obligations under this clause (a) exceed $12,500,000; (b) all unpaid
interest thereon (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding); and (c) all unpaid fees, indemnities,
costs and expenses relating to the collection thereof (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or
any Lender) (collectively, the "Guarantied Obligations"), in each case when and
as the same shall become due and payable, whether at maturity, pursuant to
mandatory or optional prepayment, by acceleration or otherwise, all in
accordance with the terms and provisions of the Credit Agreement and the other
Facility Documents, it being the intent of the Individual Guarantor that the
guaranty set forth in this Section 1 (the "Unconditional Guaranty") shall be a
guaranty of payment and not a guaranty of collection. The examples set forth in
the definition of "Guarantied Obligations" contained in the Credit Agreement are
hereby incorporated by reference.
Section 2. Performance Under This Agreement. In the event any Obligor
fails to make, on or before the due date thereof, any payment of the principal
of, or interest on, the Notes, the Letter of Credit Obligations or the other
Obligations, and any such failure shall remain uncured at the expiration of any
applicable cure period provided in the Credit Agreement or in the other Facility
Documents, the Individual Guarantor shall cause forthwith to be paid the moneys,
or to be performed, kept, observed, or fulfilled each of the Guarantied
Obligations, in respect of which such failure has occurred.
Section 3. Waivers. To the fullest extent permitted by law, the
Individual Guarantor does hereby waive:
(a) notice of acceptance of the Unconditional Guaranty;
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(b) notice of any borrowings under the Credit Agreement, or the
creation, existence or acquisition of any of the Obligations, subject to the
Individual Guarantor's right to make inquiry of the Administrative Agent from
time to time to ascertain the amount of the Obligations and the basis for the
determination thereof (it being understood that the Administrative Agent be
obligated to respond promptly to any such inquiry);
(c) notice of the amount of the Obligations, subject to the
Individual Guarantor's right to make inquiry of the Administrative Agent from
time to time to ascertain the amount of the Obligations and the basis for the
determination thereof (it being understood that the Administrative Agent be
obligated to respond promptly to any such inquiry);
(d) notice of adverse change in the financial condition of the
Borrower, the Subsidiary Borrower, any other guarantor or any other fact that
might increase the Individual Guarantor's risk hereunder;
(e) notice of presentment for payment, demand, protest, and notice
thereof as to the Notes or any other Facility Document;
(f) notice of any Default or Event of Default;
(g) all other notices and demands to which the Individual
Guarantor might otherwise be entitled (except if such notice or demand is
specifically otherwise required to be given to the Individual Guarantor
hereunder);
(h) the right by statute or otherwise to require any or each
Lender or the Administrative Agent to institute suit against
the Borrower, the Subsidiary Borrower or any other guarantor or to exhaust the
rights and remedies of any or each Lender or the Administrative Agent against
the Borrower, the Subsidiary Borrower or any other guarantor, the Individual
Guarantor being bound to the payment of each and all Guarantied Obligations,
whether now existing or hereafter accruing, as fully as if such Guarantied
Obligations were directly owing to each Lender by the Individual Guarantor;
(i) any defense arising by reason of any disability or other
defense (other than the defense that the Guarantied Obligations shall have been
fully and finally performed and indefeasibly paid) of the Borrower or the
Subsidiary Borrower or by reason of the cessation from any cause whatsoever of
the liability of the Borrower or the Subsidiary Borrower in respect thereof; and
(j) any stay (except in connection with a pending appeal),
valuation, appraisal, redemption or extension law now or at any time hereafter
in force which, but for this waiver, might be applicable to any sale of Property
of the Individual Guarantor made under any judgment, order or decree based on
this Agreement, and the Individual Guarantor covenants that it will not at any
time
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insist upon or plead, or in any manner claim or take the benefit or advantage of
such law.
Until all of the Obligations shall have been paid in full, the Individual
Guarantor hereby agrees to completely subordinate any right of subrogation,
reimbursement, or indemnity whatsoever in respect thereof and any right of
recourse to or with respect to any Property of the Borrower or the Subsidiary
Borrower. Nothing shall discharge or satisfy the obligations of the Individual
Guarantor hereunder except the full and final performance and indefeasible
payment in cash in the applicable currency of the Obligations. All of the
Obligations shall in the manner and subject to the limitations provided herein
for the acceleration thereof forthwith become due and payable without notice.
Section 4. Releases. The Individual Guarantor consents and agrees that,
without notice to or by the Individual Guarantor and without affecting or
impairing the obligations of the Individual Guarantor hereunder, each Lender or
the Administrative Agent, in the manner provided herein, by action or inaction,
may:
(a) compromise or settle, extend the period of duration or the
time for the payment, or discharge the performance of, or may refuse to, or
otherwise not, enforce, or may, by action or inaction, release all or any one or
more parties to, any one or more of the Notes or the other Facility Documents;
(b) grant other indulgences to the Borrower or the Subsidiary
Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or from time to
time) any one or more of the Notes, the Letters of Credit and the other Facility
Documents in accordance with Section 13.01 of the Credit Agreement or otherwise;
(d) release or substitute any one or more of the endorsers or
guarantors of the Obligations whether parties hereto or not; and
(e) exchange, enforce, waive, or release, by action or inaction,
any security for the Obligations (including, without limitation, any of the
collateral therefor) or any other guaranty of any of the Obligations.
Section 5. Marshalling. The Individual Guarantor consents and agrees
that:
(a) neither the Administrative Agent nor any Lender shall be under
any obligation to marshal any assets in favor of the Individual Guarantor or
against or in payment of any or all of the Obligations; and
(b) to the extent the Borrower, the Subsidiary Borrower or any
other guarantor makes a payment or payments to any Lender, which payment or
payments or any part thereof are subsequently invalidated, declared to be
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<PAGE> 6
fraudulent or preferential, set aside, or required, for any of the foregoing
reasons or for any other reason, to be repaid or paid over to a custodian,
trustee, receiver, or any other party under any bankruptcy law, common law, or
equitable cause, then to the extent of such payment or repayment, the
Obligations or part thereof intended to be satisfied thereby shall be revived
and continued in full force and effect as if said payment or payments had not
been made and the Individual Guarantor shall remain liable for such Obligation
to the extent provided in Section 1 hereof.
Section 6. Liability. The Individual Guarantor agrees that the liability
of the Individual Guarantor in respect of this Agreement shall not be contingent
upon the exercise or enforcement by any Lender or the Administrative Agent of
whatever remedies such Lender or the Administrative Agent may have against the
Borrower, the Subsidiary Borrower or any other guarantor or the enforcement of
any Lien or realization upon any security such Lender or the Administrative
Agent may at any time possess.
Section 7. Unconditional Obligations. The Unconditional Guaranty set
forth in this Agreement is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full and final payment of the Obligations without respect
to future changes in conditions, including change of law or any invalidity or
irregularity with respect to the issuance or assumption of any obligations
(including, without limitation, the Notes and the Letter of Credit Obligations)
of or by the Borrower, the Subsidiary Borrower or any other guarantor, or with
respect to the execution and delivery of any agreement (including, without
limitation, the Notes and the other Facility Documents) of the Borrower, the
Subsidiary Borrower or any other guarantor.
Section 8. Election to Perform Obligations. Any election by the
Individual Guarantor to pay or otherwise perform any of the obligations of any
Obligor under the Notes or under any of the other Facility Documents, whether
pursuant to this Agreement or otherwise, shall not release such Obligor from any
of its other obligations under the Notes, the Letters of Credit or any of the
other Facility Documents.
Section 9. No Election. The Administrative Agent shall have the right to
seek recourse against the Individual Guarantor to the fullest extent provided
for herein for the Individual Guarantor's obligations under this Agreement in
respect of the Notes, the Letters of Credit and the other Facility Documents. No
election to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of the Administrative Agent's
right to proceed in any other form of action or proceeding or against other
parties unless the Administrative Agent has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by any Lender or the Administrative Agent against any
Obligor under any document or instrument evidencing obligations of the sole
Obligor to such Lender or the Administrative Agent shall serve to diminish the
liability of the Individual
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Guarantor under this Agreement except to the extent
that the Administrative Agent or such Lender finally and unconditionally shall
have realized payment by such action or proceeding, notwithstanding the effect
of any such action or proceeding upon the Individual Guarantor's right of
subrogation against any Obligor.
Section 10. Severability. Subject to applicable law, each of the rights
and remedies granted under this Agreement to the Administrative Agent may be
exercised by the Administrative Agent without notice by the Administrative Agent
to, or the consent of or any other action by, any Lender, provided that the
Administrative Agent will promptly thereafter give each Lender notice of any
exercise of rights and remedies by the Administrative Agent under this
Agreement.
Section 11. Other Enforcement Rights. The Administrative Agent may
proceed, as provided in this Agreement, to protect and enforce the Unconditional
Guaranty by suit or suits or proceedings in equity, at law or in bankruptcy, and
whether for the specific performance of any covenant or agreement contained
herein or in execution or aid of any power herein granted; or for the recovery
of judgment for the obligations hereby guarantied or for the enforcement of any
other proper, legal or equitable remedy available under applicable law. Each of
the Lenders shall have, to the fullest extent permitted by law and this
Agreement, a right of set-off against, any and all credits and any and all other
Property of the Individual Guarantor, now or at any time whatsoever with, or in
the possession of, such Lender, or anyone acting for such Lender, as security
for any and all obligations of the Individual Guarantor hereunder.
Section 12. Delay or Omission; No Waiver. No course of dealing on the
part of any Lender or the Administrative Agent and no delay or failure on the
part of any such Person to exercise any right hereunder shall impair such right
or operate as a waiver of such right or otherwise prejudice such Person's
rights, powers and remedies hereunder. Every right and remedy given by the
Unconditional Guaranty or by law to any Lender or the Administrative Agent may
be exercised from time to time as often as may be deemed expedient by such
Person.
Section 13. Restoration of Rights and Remedies. If any Lender or the
Administrative Agent shall have instituted any proceeding to enforce any right
or remedy under the Unconditional Guaranty, under any Note held by such Lender,
or under any Security Document, and such proceeding shall have been discontinued
or abandoned for any reason, or shall have been determined adversely to such
Lender or the Administrative Agent, then and in every such case each such
Lender, the Administrative Agent, the Borrower, the Subsidiary Borrower and the
Individual Guarantor shall, except as may be limited or affected by any
determination in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid, the rights and remedies of such Lender or the Administrative Agent
shall continue as though no such proceeding had been instituted.
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Section 14. Cumulative Remedies. No remedy under this Agreement, the
Notes, the Letters of Credit or any of the other Facility Documents is intended
to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given under this
Agreement, the Notes, the Letters of Credit or any of the other Facility
Documents.
Section 15. Survival. The obligations of the Individual Guarantor under
this Agreement shall survive the transfer and payment of any Obligation until
the indefeasible payment in full of all the Obligations and the expiration and
termination of the Letters of Credit and the Commitments.
Section 16. No Setoff, Counterclaim or Withholding; Gross Up. Each
payment by the Individual Guarantor shall be made without setoff or counterclaim
and without withholding for or on account of any present or future taxes imposed
by any Governmental Authority. If any such withholding is so required, such
Individual Guarantor shall make the withholding and pay the amount withheld to
the appropriate Governmental Authority before penalties attach thereto or
interest accrues thereon.
Section 17. Payment in Applicable Currency. Any payment of an Obligation
required to be made pursuant to this Agreement shall be made in the currency in
which such Obligation is required to be made pursuant to the Credit Agreement,
any Note or any other Facility Document.
Section 18. Representations and Warranties. The Individual Guarantor
hereby represents and warrants:
(a) No Conflicts. The execution, delivery and performance by the
Individual Guarantor of the Facility Documents to which it is a party do not and
will not: (i) violate any provision of, or require any filing (other than the
filings required pursuant to the terms of the Security Documents), registration,
consent or approval under, any law, rule, regulation (including, without
limitation, Regulation U), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Individual Guarantor; (ii) result in a breach of or constitute a default or
require any consent under any indenture or loan or credit agreement, or any
other agreement, lease or instrument to which the Individual Guarantor is a
party or by which his Properties may be bound or affected which has not been
obtained; (iii) result in, or require, the creation or imposition of any Lien
(other than as created under the Security Documents), upon or with respect to
any of the Properties now owned or hereafter acquired by the Individual
Guarantor; or (iv) cause the Individual Guarantor to be in default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.
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(b) Legally Enforceable Agreements. Each Facility Document to which the
Individual Guarantor is a party is a legal, valid and binding obligation of such
Person enforceable against such Person in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
(c) Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of the Individual Guarantor, threatened against or affecting the
Individual Guarantor before any Governmental Authority that could reasonably be
expected to have a material adverse effect on the business, profits, Properties,
condition or prospects of the Individual Guarantor to perform his obligations
under the Facility Documents to which he is a party.
(d) Financial Statements. The balance sheet of the Individual Guarantor
as at December 31, 1998, copies of which have been furnished to each of the
Lenders, is complete and correct in all material respects and fairly presents
the financial condition of the Individual Guarantor at such date. After giving
effect to the Unconditional Guaranty pursuant to this Agreement and the
application of the net proceeds thereof, the present fair saleable value of the
assets of the Individual Guarantor exceeds the amount that will be required to
be paid on or in respect of the existing Debts and other liabilities (including
contingent liabilities) of the Individual Guarantor as they mature.
Section 19. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent may exercise all of the rights and remedies
conferred in this Agreement and in each of the other Facility Documents; it
being expressly understood that no such remedy is intended to be exclusive of
any other remedy or remedies; but each and every remedy shall be cumulative and
shall be in addition to every other remedy given in this Agreement or now or
hereafter existing at law or in equity or by statute, and may be exercised from
time to time as often as may be deemed expedient by the Administrative Agent.
Section 20. Defined Terms. The terms used herein and not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
Section 21. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Individual Guarantor,
the Administrative Agent and the Required Lenders, or by the Individual
Guarantor and the Administrative Agent acting with the consent of the Required
Lenders and any provision of this Agreement may be waived by the Required
Lenders or by the Administrative Agent acting with the consent of the Required
Lenders; provided that no amendment, modification or waiver shall, unless by an
instrument signed by all of the Lenders or by the Administrative Agent acting
with the consent of all
9
<PAGE> 10
of the Lenders: (a) discharge the Individual Guarantor from the Unconditional
Guaranty; or (b) amend, waive or modify the definition of Obligations.
Section 22. Expenses. The Individual Guarantor shall reimburse the
Administrative Agent and each Lender for all reasonable out-of-pocket costs,
expenses and charges (including, without limitation, reasonable fees and charges
of external legal counsel for the Administrative Agent and each Lender) in
connection with the enforcement or preservation of any rights or remedies during
the existence of an Event of Default (including, without limitation, in
connection with any restructuring or insolvency or bankruptcy proceeding) under
this Agreement.
Section 23. Survival. The obligations of the Individual Guarantor under
Section 22 shall survive the repayment of the Loans and the termination of the
Letters of Credit and the Commitments.
Section 24. Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the Individual Guarantor, the Administrative
Agent, the Lenders and their respective successors and assigns.
Section 25. Notices. Unless the party to be notified otherwise notifies
the other party in writing as provided in this Section, and except as otherwise
provided in this Agreement, notices shall be given in writing to the
Administrative Agent, to the Lenders and to the Individual Guarantor by ordinary
mail, hand delivery, overnight courier or telecopier addressed to such party at
its address on the signature page of this Agreement. Notices shall be effective:
(a) if given by mail, 72 hours after deposit in the mails with first class
postage prepaid, addressed as aforesaid; and (b) if given by telecopier, when
confirmation of delivery of the telecopy to the telecopier number as aforesaid
is transmitted; provided that notices to the Administrative Agent shall be
effective upon receipt.
SECTION 26. JURISDICTION; IMMUNITIES. (a) THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, AND THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE INDIVIDUAL
GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE INDIVIDUAL
GUARANTOR AT ITS ADDRESS SPECIFIED IN SECTION 25. THE INDIVIDUAL GUARANTOR
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
10
<PAGE> 11
OR IN ANY OTHER MANNER PROVIDED BY LAW. THE INDIVIDUAL GUARANTOR FURTHER WAIVES
ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR
PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. THE INDIVIDUAL
GUARANTOR FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE
ADMINISTRATIVE AGENT OR ANY LENDER SHALL BE BROUGHT ONLY IN NEW YORK STATE OR
UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY.
(b) THE INDIVIDUAL GUARANTOR WAIVES ANY RIGHT HE MAY HAVE TO JURY
TRIAL. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY THE
INDIVIDUAL GUARANTOR AND THE INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT NO PERSON
ACTING ON BEHALF OF ANOTHER PARTY TO THIS AGREEMENT HAS MADE ANY REPRESENTATIONS
OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR
NULLIFY ITS EFFECT. THE INDIVIDUAL GUARANTOR FURTHER ACKNOWLEDGES THAT HE HAS
BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF HIS OWN FREE WILL AND THAT HE HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL.
(c) Nothing in this Section 26 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 the Individual Guarantor or his
Property in the courts of any other jurisdictions.
(d) To the extent that the Individual Guarantor has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Individual Guarantor hereby irrevocably waives such
immunity in respect of his obligations under this Agreement.
Section 27. Headings. The headings and captions hereunder are for
convenience only and shall not affect the interpretation or construction of this
Agreement.
Section 28. Severability. The provisions of this Agreement are intended
to be severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability
11
<PAGE> 12
without in any manner affecting the validity or enforceability thereof in any
other jurisdiction or the remaining provisions hereof in any jurisdiction.
Section 29. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
SECTION 30. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 31. Subject to the Credit Agreement. Any and all rights granted
to the Administrative Agent under this Agreement are to be held and exercised by
the Administrative Agent for the benefit of the Lenders, pursuant to the
provisions of the Credit Agreement. To the extent set forth in the Facility
Documents, each of the Lenders shall be a beneficiary of the terms of this
Agreement. Any and all obligations under this Agreement of the parties to this
Agreement, and the rights granted to the Administrative Agent under this
Agreement, are created and granted subject to the terms of the Credit Agreement.
Section 32. Term of Agreement. This Agreement shall be and remain in full
force and effect so long as any Obligation shall remain unpaid, any Letter of
Credit shall remain outstanding or any Lender shall have any Commitment.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/S/ RAJENDRA SINGH
-------------------
Dr. Rajendra Singh
in his individual capacity
c/o LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Telecopier No.: (703) 873-2300
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By: /S/ ALAN J. ARIA
----------------
Name: Alan J. Aria
Title: Vice President
Address for Notices:
4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency
with a copy to:
999 Broad Street
Bridgeport, Connecticut 06604
Attention: Alan Aria
Telecopier No.: (203) 382-6573
13
<PAGE> 1
Exhibit 10.66
March 12, 1999
Microcell Management, Inc.
14502 Greenview Drive, Suite 424
Laurel, MD 20708
Gentlemen:
This letter is being entered into by LCC International, Inc., a Delaware
corporation ("LCC"), and Microcell Management, Inc., a Delaware corporation
("Microcell"), in connection with the Third Amended and Restated Credit
Agreement dated as of December 30, 1998 (the "Amended Credit Agreement"), among
LCC, Microcell, LCC Europe AS, LCC Design Services, L.L.C., LCC Development
Company, L.L.C., Koll Telecommunications Services, L.L.C., the lenders party
thereto (the "Lenders") and The Chase Manhattan Bank, as Administrative Agent
(in such capacity, the "Administrative Agent").
The purpose of this letter is to confirm LCC's agreement that, in
consideration of Microcell executing and delivering the Amended Credit Agreement
as a "Subsidiary Guarantor" (as defined therein), any amounts paid by Microcell
under the Amended Credit Agreement, whether to the Lenders, to the
Administrative Agent or otherwise, will be deemed to constitute payments to LCC
under the Revolving Credit Facility and Security Agreement dated December 31,
1996 between LCC and Microcell and the Revolving Credit Note dated December 31,
1996 of Microcell in favor of LCC issued thereunder (collectively, the
"Microcell Facility"), and will offset, on a dollar for dollar basis, amounts
then owed by Microcell to LCC under the Microcell Facility.
<PAGE> 2
March __, 1999
Page 2
If you are in agreement with the foregoing, please sign and return one
copy of this letter.
Very truly yours,
LCC International, Inc.
By /S/ STUART B. LAWSON
--------------------
Title: Vice President, Controller
ACCEPTED AND AGREED:
Microcell Management, Inc.
By: /S/ PETER A. DELISO
-------------------
Title: Vice President, General Counsel
ACKNOWLEDGE AND APPROVED:
The Chase Manhattan Bank, as Administrative
Agent on behalf of the Lenders
By: /S/ ALAN J. ARIA
----------------
Title: Vice President
<PAGE> 1
Exhibit 10.67
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AND INTERCREDITOR AGREEMENT
DATED AS OF JANUARY 28, 1999, AMONG THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE
AGENT, TELCOM VENTURES, L.L.C. AND LCC INTERNATIONAL, INC., WHICH, AMONG OTHER
THINGS, CONTAINS PROVISIONS SUBORDINATING THE OBLIGATIONS OF THE MAKER OF THIS
INSTRUMENT TO THE PAYEE HEREOF TO SUCH MAKER'S OBLIGATIONS TO THE HOLDERS OF THE
SENIOR DEBT (AS DEFINED IN SAID SUBORDINATION AND INTERCREDITOR AGREEMENT), TO
WHICH PROVISIONS THE HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF,
AGREES.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$5,000,000 January 28 , 1999
FOR VALUE RECEIVED, LCC International, Inc., a Delaware corporation
("Maker"), promises to pay to the order of Telcom Ventures, L.L.C., a Delaware
limited liability company ("Payee"), on April 30, 2000 (the "Maturity Date"),
the principal amount of Five Million Dollars ($5,000,000), together with
interest on the unpaid principal balance from (i) the date hereof, in the case
of the portion of such principal balance for which the January 5, 1999 Note (as
defined below) was exchanged and (ii) the date on which Payee advances the
balance of the original principal amount of this Note, in the case of such
balance, in each of the foregoing cases said interest to be due and payable on
the Maturity Date, at a rate per annum equal to nine percent (9%) simple
interest, provided that, should an Event of Default (as defined below) exist and
be continuing for ten Business Days (as defined below), simple interest shall
instead accrue on the outstanding principal balance of this Note from the date
of such Event of Default at the rate of 12% per annum until such Event of
Default is cured or waived, all principal or interest under this Note is paid in
full or this Note is duly converted in full into Maker Common Stock (as defined
below) pursuant to the provisions of this Note. Interest shall be calculated on
the basis of a year of 365 days, as applicable, and charged for the actual
number of days elapsed. All payments hereunder shall be made in lawful money of
the United States of America (except to the extent paid in Maker Common Stock
upon Conversion of this Note as provided below).
The outstanding principal amount of this Note, together with interest
accrued thereon as provided herein, (the "Maturity Amount") shall be due and
payable in full on the Maturity Date or such earlier date on which (i) a Major
Business Transaction (as defined below) occurs or (ii) this Note may become due
following an Event of Default (as defined below) as provided below. In addition,
in
<PAGE> 2
the event this Note becomes due and payable as a result of the occurrence of a
Major Business Transaction at any time prior to August 1, 1999, additional
interest in the amount of the product of (i) $1,250 and (ii) the number of days
elapsed between February 1, 1999 and the date on which such Major Business
Transaction occurred shall be due and payable at such time.
All payments of principal and interest on this Note shall be made by
check or wire transfer of immediately available funds to an account specified by
Payee in written instructions to Maker at least three (3) Business Days prior to
the Maturity Date (or such earlier date on which this Note may become due). If
any payment of principal or interest on this Note is due on a day which is not a
Business Day, such payment shall be due on the next succeeding Business Day, and
such extension of time shall be taken into account in calculating the amount of
interest payable under this Note. "Business Day" means any day other than
Saturday, Sunday or a legal holiday in the Commonwealth of Virginia.
At any time after August 1, 1999 and prior to the Maturity Date, Maker
may prepay all or any portion of the outstanding principal balance and accrued
interest under this Note to Payee, upon at least ten (10) Business Days' notice
to Payee stating the date and amount of prepayment (both as to principal and
interest) and providing Payee with an opportunity to exercise its Conversion (as
defined below) option as set forth below. If Payee does not exercise its
Conversion option as set forth below prior to the prepayment date set forth in
the prepayment notice, Maker may proceed with such prepayment, and the
Conversion option shall be deemed to have expired with respect to the amount so
prepaid.
The occurrence of any one or more of the following events with respect to
Maker shall constitute the occurrence of a Major Business Transaction for
purposes of this Note ("Major Business Transaction"):
(a) Sale of equity securities of Maker as a result of which one "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Act of 1934, as amended), other than Payee or Affiliates of Payee, holds more
than 50% of Maker's outstanding common stock, provided that a sale of equity
securities solely by Payee or any of its Affiliates shall not be taken into
account in determining whether the foregoing threshold has been reached.
"Affiliate" means, as to any person, any other person that, directly or
indirectly, controls, is controlled by or is under common control with such
person or is a director or officer of such person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a person means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting stock, by
contract or otherwise;
2
<PAGE> 3
(b) Sale of all or substantially all of the assets of Maker, in one
transaction or series of related transactions, other than to Payee or Affiliates
of Payee;
(c) Occurrence with respect to Maker of an Event of Voluntary Bankruptcy
(as defined below) or an Event of Involuntary Bankruptcy (as defined below);
(d) Distributions with respect to the capital stock of Maker of more than
5% of Maker's assets, other than to Payee or Affiliates of Payee;
(e) Receipt by Maker, Microcell Management, Inc. ("MMI") or any other
subsidiary or division of Maker from any person or entity other than Payee or
any Affiliate of Payee of equity financing or debt financing having a maturity
of at least one year, in each case in an amount of at least Ten Million Dollars
($10,000,000), provided, however, if such financing is provided pursuant to the
Credit Agreement (as defined below) as amended from time to time, the provisions
of this clause (e) shall not apply until the total principal amount available to
Maker and its subsidiaries under the Credit Agreement is in excess of Twenty
Million Dollars ($20,000,000); or
(f) Sale of all or substantially all of Maker's interest in MMI or sale
or all or substantially all of Maker's interest in any other subsidiary or
division of Maker for a gross sale price of at least Ten Million Dollars
($10,000,000), other than any such sale to Payee or any Affiliate of Payee.
The occurrence of any one of more the following events with respect to
Maker shall constitute an event of default hereunder ("Event
of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for
five days;
(b) If, pursuant to or within the meaning of the United States Bankruptcy
Code or any other federal or state law relating to insolvency or relief of
debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary case or
proceeding; (ii) consent to the entry of an order for relief against it in an
involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due (each, an "Event of Voluntary Bankruptcy");
(c) If a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (i) is for relief against Maker in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official for
Maker or substantially all of Maker's properties, or (iii) orders the
liquidation of
3
<PAGE> 4
Maker, and in each case the order or decree is not dismissed within 60 days
(each, an "Event of Involuntary Bankruptcy"); or
(d) If any Indebtedness (as defined below) of Maker in excess of $500,000
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled prepayment), prior to the maturity date thereof. For
purposes of the foregoing, "Indebtedness" means any obligation of Maker for the
payment of borrowed money other than trade debt or operating leases incurred in
the ordinary course of business.
If any Event of Default shall have occurred and be continuing, Payee may, by
notice to Maker, declare the entire outstanding principal of this Note, and all
accrued and unpaid interest thereon, to be due and payable immediately, and upon
any such declaration the entire outstanding principal of this Note, and said
accrued and unpaid interest, shall become immediately due and payable, provided
that, if an Event of Default under clause (b) or (c) of the foregoing sentence
shall have occured, the outstanding principal of this Note, and all accrued and
unpaid interest thereon, shall immediately become due and payable without any
declaration.
At any time from and after August 1, 1999, either Maker or Payee, at its
sole and absolute option, may convert (the "Conversion"), the then outstanding
principal and accrued but unpaid interest under this Note, in whole but not in
part, into the number of shares of the Class A Common Stock, par value $.01 per
share, of Maker ("Maker Common Stock"), equal to such then outstanding principal
and accrued but unpaid interest due under this Note divided by $6.22, subject to
adjustment as provided below (the "Conversion Price"). In addition, as provided
above, Payee shall have the right to convert the portion of the outstanding
principal and interest due under this Note that Maker proposes to prepay from
and after August 1, 1999 into the number of shares of Maker Common Stock equal
to the portion of the outstanding principal and interest to be prepaid divided
by the Conversion Price. Each Conversion shall constitute payment in full of the
amount being so converted.
If Maker at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) the outstanding shares of Maker Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if Maker at any time
combines (by reverse stock split or otherwise) the outstanding shares of Maker
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased. Any
adjustment in the Conversion Price shall, in the case of a dividend or
distribution, be made as of the record date therefor and, in all other cases, be
made as of the effective date thereof. Promptly upon any adjustment of the
Conversion Price, Maker shall give written notice thereof to Payee, setting
forth in reasonable detail the calculation thereof.
4
<PAGE> 5
In the event of any reorganization or recapitalization of Maker or in the
event Maker consolidates with or merges into or with another entity, then and in
each such event, Payee, upon any Conversion occurring at any time after the
consummation of such reorganization, recapitalization, consolidation or merger,
shall be entitled to receive shares of Maker Common Stock or other securities or
property to which Payee would have been entitled upon such consummation if the
outstanding principal balance and interest due under this Note had been
converted in full prior to such consummation. In such case, the terms of this
Note regarding Conversion shall survive the consummation of any such
reorganization, recapitalization, consolidation or merger and shall be
applicable to the Maker Common Stock, securities or other property receivable
upon any Conversion after such consummation, with appropriate adjustments
thereto.
If Maker at any time distributes the shares of common stock or other
equity securities having general rights to elect the directors or equivalent
managers of any of its subsidiaries to the shareholders of Maker ("Subsidiary
Spin-Off Shares"), Payee shall have the right upon any Conversion hereunder to
receive a pro rata portion, based upon the proportion of the total amount
outstanding under this Note at the time of such Conversion represented by the
amount outstanding under this Note being so converted, such number of Subsidiary
Spin-Off Shares as Payee would have been entitled to receive had the total
amount outstanding under this Note been converted in full prior to such
distribution, adjusted to take into account any subdivision (by any stock split,
stock dividend, recapitalization or otherwise) or any combination (by reverse
stock split or otherwise) of the Subsidiary Spin-Off Shares which occurs at any
time following such distribution. Maker shall take such actions in connection
with such distribution as shall be reasonably necessary to implement the rights
of Payee under this paragraph.
Maker or Payee may effect a Conversion hereunder by written notice to the
other party, at any time or from time to time until the outstanding principal
and accrued but unpaid interest under this Note has been paid in full, of its
election to effect the Conversion and the portion of the outstanding principal
and accrued but unpaid interest being converted. Such Conversion shall be deemed
effective upon receipt of such notice by the recipient party. Maker shall at all
times reserve and keep available for issuance upon the Conversion of this Note,
free from any preemptive rights, such number of its authorized but unissued
shares of Maker Common Stock as will from time to time be sufficient to permit
the exercise in full by either Maker or Payee of the Conversion rights
hereunder. Maker shall deliver or cause to be delivered, to Payee, promptly
following any Conversion a certificate for the number of shares of Maker Common
Stock issued upon such Conversion. Payee shall have the right, through its
subsidiary RF Investors, L.L.C. ("RF Investors"), to include the shares of Maker
Common Stock issued pursuant to any Conversion in registrations of shares of
Maker Common Stock effected on behalf of RF Investors pursuant to the
Registration Rights Agreement, dated as of July 25,
5
<PAGE> 6
1996, by and among Maker, RF Investors and MCI Telecommunications Corporation.
Notwithstanding any provision of this Note to the contrary, Maker
covenants and agrees, and Payee by acceptance of this Note likewise covenants
and agrees, that the payment of the principal of, interest on and all other
amounts under this Note shall be subject to the terms of that certain
Subordination and Intercreditor Agreement, dated the date hereof, among The
Chase Manhattan Bank, Administrative Agent, Maker and Payee.
This Note shall be pari passu with the terms of the indebtedness between
Maker and MCI Telecommunications Corporation pursuant to the (i) Subordinated
Note due 2000, dated June 28, 1994, of Maker (as successor to LCC, L.L.C.) to
MCI Telecommunications Corporation in the principal amount of $20,000,000 and
(ii) Subordinated Note due 2000, dated June 28, 1994, of Maker (as successor to
LCC, L.L.C., successor to Telcom Ventures, L.L.C.) to MCI Telecommunications
Corporation in the principal amount of $30,000,000.
Presentment, demand, protest and all other notices of any kind from or to
be given by Payee are hereby expressly waived. No failure or delay on the part
of Payee in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. No waiver by Payee of a breach of any term,
provision or condition of this Note will constitute a waiver of any succeeding
breach of the same or any other provision hereof. No waiver, amendment,
modification or termination of any provision of this Note shall be effective
unless signed in writing by the party to be charged thereby.
The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to Payee at law or in equity or otherwise. In
the event it is necessary for any person or entity to take any legal action to
enforce any of the terms, provisions or conditions of this Note, the prevailing
party will be entitled to recover from the losing party all reasonable
attorneys' fees and all costs and expenses relating to such legal action.
Notwithstanding anything else to the contrary herein, the effectiveness
of any Conversion shall be delayed in the event and to the extent, but only to
the extent (and notice of Conversion shall be deemed revised to the extent
necessary to permit Maker to comply with this sentence), that shareholder
approval would be required for such Conversion (taken together with any issuance
of Maker Common Stock which would be considered under laws or applicable rules
and regulations of The Nasdaq Stock Market together with such Conversion in
determining whether shareholder approval is required) or in the event the
issuance of Maker Common Stock is subject to a filing under the
Hart-Scott-Rodino Antitrust
6
<PAGE> 7
Improvements Act of 1976, as amended (the "HSR Act"), unless and until such
shareholder approval has been obtained or until the termination or expiration of
any waiting periods under the HSR Act, respectively. Maker shall use its best
efforts to obtain all necessary shareholder approvals to such Conversion,
including without limitation submitting such matters to a vote of the
shareholders of the Corporation at the next annual meeting of shareholders to be
held after the date hereof. Maker shall, and by its acceptance of this Note,
Payee agrees to, use its reasonable efforts to make any filings required under
the HSR Act as promptly as practicable and to cooperate with any requests for
additional information made by any governmental agency in connection therewith,
provided, that, in the event that despite such reasonable efforts by Maker and
Payee any approvals required under the HSR Act are not obtained within nine
months from the original contemplated date of the Conversion, the party electing
to make the Conversion may elect to abandon the Conversion, in which event this
Note shall continue to remain outstanding.
All notices and other communications provided for hereunder shall be in
writing and mailed, telecopied or delivered, if to Payee, at Telcom Ventures,
L.L.C., 211 North Union Street, Suite 300, Alexandria, Virginia 22314,
Attention: President and General Counsel, Facsimile (703) 706-3801; and if to
Maker, at LCC International, Inc., 7925 Jones Branch Drive, McLean, Virginia
22102, Attention: Peter A. Deliso, Facsimile (703) 873-2900; or as to each such
party, at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall be
effective when received as indicated by confirmation of such receipt set forth
on a return receipt, telecopier confirmation, or other form of receipt
confirmation.
This Note shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Virginia, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective successors and assigns.
This Note supersedes in its entirety and is being exchanged for all
amounts due under that certain Subordinated Promissory Note executed and
delivered by Maker, dated January 5, 1999, in favor of Payee (the "January 5,
1999 Note"), and Payee by acceptance of this Note agrees that this Note
supersedes in its entirety and is being exchanged for the January 5, 1999 Note
and that no amounts are or hereafter will become due and owing under the January
5, 1999 Note.
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned has duly executed this Note, or has
caused this Note to be duly executed on its behalf, as of the day and year first
hereinabove set forth.
[SEAL] LCC INTERNATIONAL, INC.
By: /S/ RICHARD HOZIK
-----------------
Name: Richard Hozik
Title: Chief Financial Officer
8
<PAGE> 1
Exhibit 10.68
SUBORDINATION AND INTERCREDITOR AGREEMENT
SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of January 28, 1999
(this "Intercreditor Agreement"), made and entered into by and among THE CHASE
MANHATTAN BANK, a New York bank, as administrative agent in such capacity,
together with its successors and assigns in such capacity (the "Senior Creditor
Representative"), for the benefit of each of the lenders (together with their
respective successors and assigns, the "Senior Creditors") a party to the Third
Amended and Restated Credit Agreement dated as of December 30, 1998 (as from
time to time amended, modified or supplemented in accordance with the terms
thereof, the "Senior Credit Agreement"), TELCOM VENTURES, L.L.C., a Delaware
limited liability company ("TV" and, together with its successors and assigns,
the "Subordinated Creditor"), and LCC INTERNATIONAL, INC., a Delaware
corporation (together with its successors and assigns, the "Company").
W I T N E S S E T H
WHEREAS, the Company has issued to TV its Convertible Subordinated
Promissory Note dated January 28, 1999 in the principal amount of $5,000,000
(the "Subordinated Note");
WHEREAS, on the date hereof, the Company, LCC Europe AS, LCC Design
Services, L.L.C., LCC Development Company, L.L.C., Koll Telecommunications,
L.L.C., Microcell Management, Inc., the Senior Creditor Representative and the
Senior Creditors are entering into the Senior Credit Agreement, pursuant to
which the Senior Creditors have agreed to extend credit to the Company upon the
terms and subject to the conditions set forth therein to be evidenced by the
Notes issued by the Company thereunder and the Letters of Credit issued
thereunder in the maximum aggregate principal amount of $22,500,000
(collectively, as from time to time amended, modified or supplemented in
accordance with the terms thereof, the "Senior Notes");
NOW, THEREFORE, in order to induce the Senior Creditors to enter into the
Senior Credit Documents (as hereinafter defined), and pursuant to Section
5.01(g) of the Senior Credit Agreement, the Company and the Subordinated
Creditor hereby agree with the Senior Creditor Representative that, until the
Senior Debt (as hereinafter defined) shall have been paid in full in cash, the
Company and the Subordinated Creditor Representative each will comply with such
of the following provisions as are applicable to it:
1. Definitions.
Capitalized terms used in this Intercreditor Agreement without definition
shall have the respective meanings ascribed to them in the Senior Credit
<PAGE> 2
Agreement, as in effect on the date hereof. As used in this Intercreditor
Agreement, the terms set forth below shall have the following meanings:
"Permitted Proceeds" means the proceeds of any equity financings, debt
financings or asset sales of the Company or any of its subsidiaries (it being
understood that (a) any debt incurrence by the Company or any its subsidiaries
shall remain subject to any required approvals under the Senior Credit Agreement
and (b) any asset sale by the Company or any of its Subsidiaries shall remain
subject to any required approvals under the Senior Credit Agreement and, where
such approval is required, the proceeds of such asset sale shall constitute
"Permitted Proceeds" only to the extent that the holders of the Senior Debt have
not elected to apply the same to the payment of Senior Debt).
"Reorganization Securities" means securities of the Company or any other
Person provided for by a plan of reorganization, composition, arrangement,
adjustment or readjustment of the Company or of its securities, and issued or
distributed in any bankruptcy or other proceeding referred to in Section 2.2.
hereof, to the extent consisting of (a) shares of common stock, or warrants or
rights to purchase shares of common stock, of the Company or such other Person,
or (b) debt securities of the Company or such other Person, provided that (i)
such debt securities shall mature no earlier than the later of (x) April 30,
2000 and (y) the first anniversary of the final stated maturity date of any debt
securities issued or distributed to the holders of Senior Debt pursuant to such
plan or reorganization, composition, arrangement, adjustment or readjustment,
(ii) the covenants, events of default, representations, warranties and other
provisions contained in such debt securities and in any agreements, instruments
and documents executed pursuant to or in connection therewith shall be
substantially similar to, and not more burdensome to the Company than, the
corresponding provisions with respect to the Subordinated Debt contained in the
Subordinated Note, and (iii) the payment of such debt securities shall be
subordinate and subject, at least to the extent provided in this Intercreditor
Agreement with respect to the Subordinated Debt, to the payment of all Senior
Debt of the Company at the time outstanding, and to the payment of all
securities issued in exchange therefor to the holders of such Senior Debt at the
time outstanding.
"Senior Credit Documents" means the Senior Credit Agreement, the Senior
Notes and all notes, security agreements, pledge agreements, mortgages,
indentures, deeds of trust, letters of credit, interest rate protection
agreements, currency protection agreements, financing statements, Guaranties and
other agreements, instruments and documents now or hereafter executed pursuant
thereto or in connection therewith, and all credit agreements, loan agreements,
notes, mortgages, indentures, deed of trusts, security agreements, pledge
agreements, letters of credit, interest rate protection agreements, currency
protection agreements, financing statements, Guaranties and other agreements,
instruments and documents hereafter executed in connection with any extension,
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<PAGE> 3
renewal, refunding or refinancing thereof, as any of the same may hereafter from
time to time be amended, modified or supplemented in accordance with the terms
thereof.
"Senior Debt" means (a) the principal amount of Debt now or hereafter
incurred by the Company under the Senior Credit Documents, (b) prepayment
charges, if any, payable with respect thereto, (c) interest thereon (including,
without limitation, interest accruing subsequent to the commencement by or
against the Company of any proceeding under the Bankruptcy Code, whether or not
such interest is allowed on a claim in such proceeding), (d) all obligations of
any Person under any Guaranty of any of such Debt now or hereafter executed
pursuant to the Senior Credit Documents, and (e) all fees including, without
limitation, attorneys' fees), costs, expenses, indemnities and other amounts now
or hereafter payable pursuant to the terms or in connection with any of the
Senior Credit Documents.
"Senior Default" means any Default or Event of Default as defined in
Section 10.01 of the Senior Credit Agreement, or as defined in any comparable
provision of any subsequent or successor agreement hereafter executed in
connection with any extension, renewal, refunding or refinancing of Senior Debt.
"Senior Payment Default" means any Senior Default occurring by reason of
the failure of the Company to pay when due all or any part of the principal
amount of the Senior Debt, interest thereon, or any fees payable under the
Senior Credit Documents.
"Subordinated Debt" means the principal amount of all Debt of the Company
now or hereafter outstanding under the Subordinated Note Documents together with
interest thereon and prepayment charges (if any) payable with respect thereto,
all fees, costs, expenses, indemnities and other amounts now or hereafter
payable pursuant to the terms or in connection with any of the Subordinated Note
Documents, and all obligations of the Company or any other Person under any
Guaranty of any of such Debt now existing or hereafter executed pursuant to the
Subordinated Note or otherwise. "Subordinated Debt" shall also include, without
limitation, any obligation or claim with respect to an optional or mandatory
prepayment or redemption of the Subordinated Note and any obligation or claim
(whether for rescission or damages and whether based on contract, tort, duty
imposed by law, or any other theory of liability) relating to or arising out of
the offer, issuance or sale of the Subordinated Note or the execution or
delivery of any Guaranties or other instruments issued by the Company pursuant
to any of the Subordinated Note Documents. "Subordinated Debt" shall not include
the obligation of the Company to issue Capital Stock in the Company upon
conversion of the Subordinated Note; provided, however, that any payment
obligation of the Company that arises under the Subordinated Note Documents upon
such issuance shall be included as "Subordinated Debt."
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<PAGE> 4
"Subordinated Default" means (i) any Event of Default as defined in the
Subordinated Note, and (ii) any other breach of, or default under, any provision
of any of the Subordinated Note Documents.
"Subordinated Note Documents" means the Subordinated Note and all other
agreements, instruments and documents now existing or hereafter executed
pursuant to or in connection with the Subordinated Note, as any of the same may
hereafter from time to time be amended, modified or supplemented in accordance
with the terms thereof.
2. Subordination.
2.1 Subordinated Debt Subordinated to Senior Debt. Each of the Company
and the Subordinated Creditor, for itself and its successors and assigns
(including without limitation all subsequent holders of Subordinated Debt),
covenants and agrees, that the payment of the Subordinated Debt shall be
subordinate and subject in right of payment, to the extent and in the manner
hereinafter set forth, to the prior payment in full in cash of all Senior Debt,
and that each holder of Senior Debt, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Senior Debt in reliance upon the provisions contained in this Intercreditor
Agreement.
2.2. Subordinated Debt Subordinated to Prior Payment of All Senior Debt
on Dissolution, Liquidation, Reorganization, Etc. Upon any payment or
distribution of the assets of the Company of any kind or character, whether in
cash, property or securities from any source whatsoever (including any
collateral, and proceeds thereof whether in cash or in kind, at any time
securing the Subordinated Debt, and including any payment or distribution that
is payable by reason of the payment of any other Debt of the Company being
subordinated to the payment of the Subordinated Debt), to creditors upon any
dissolution, winding-up, total or partial liquidation, reorganization,
composition, arrangement, adjustment or readjustment of the Company or its
securities (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshaling of the assets and
liabilities of the Company, or otherwise), then in such event:
(i) the holders of the Senior Debt shall be entitled to receive
payment in full in cash of all amounts due or to become due or in respect of all
Senior Debt, before any payment is made on account of or applied on the
Subordinated Debt;
(ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities from any source
whatsoever (other than Reorganization Securities), to which the holders of the
Subordinated Debt would be entitled except for the provisions of this Section 2,
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<PAGE> 5
shall be paid or delivered by any debtor, custodian, liquidating trustee, agent
or other Person making such payment or distribution, directly to the holders of
such Senior Debt, or their representative or representatives, ratably according
to the aggregate amounts remaining unpaid on account of the principal of and
interest on such Senior Debt held or represented by each, for application to the
payment of all such Senior Debt in full in cash after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt; and
(iii) in the event that, notwithstanding the foregoing provisions
of this Section 2.2, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities from any source
whatsoever (other than Reorganization Securities), shall be received by any
holder of Subordinated Debt before all such Senior Debt is paid in full in cash,
such payment or distribution shall be held in trust for the benefit of, and
shall immediately be paid or delivered by such holder to, as the case may be,
the holders of such Senior Debt remaining unpaid, or their representative or
representatives, for application to the payment of all such Senior Debt
remaining unpaid, ratably according to the aggregate amounts remaining unpaid on
account of such Senior Debt held or represented by each, to the extent necessary
to pay all such Senior Debt in full in cash after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
Upon any distribution of assets of the Company referred to in this
Section 2.2, the holders of Subordinated Debt shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
bankruptcy, insolvency, reorganization, liquidation, receivership or other
proceeding is pending, or a certificate of the debtor, custodian, liquidating
trustee, agent or other Person making any distribution to such holders, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 2.2.
2.3. Restrictions on Payments With Respect to Subordinated Debt;
Restrictions on Remedies.
(a) No payment on account of the Subordinated Debt or any satisfaction
of any judgment with respect thereto shall be made unless made from Permitted
Proceeds.
(b) No payment on account of the Subordinated Debt or any judgment
with respect thereto shall be made by or on behalf of the Company if, at the
time such payment is to be made, any Senior Payment Default shall have occurred,
and such Senior Payment Default shall not have been cured or waived in
accordance with the applicable provisions of the Senior Credit Documents.
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<PAGE> 6
(c) In the event that at any time any holder of Senior Debt, or Person
duly acting as agent or representative of the holders of Senior Debt, shall give
written notice (each a "Payment Bar Notice") to the Company and TV of the
occurrence of any Senior Default other than a Senior Payment Default, no payment
on account of the Subordinated Debt or any judgment with respect thereto shall
be made by or on behalf of the Company during the period (each a "Payment Bar
Period") commencing on the date of receipt by the Company of such Payment Bar
Notice and ending on the earlier of (i) the date (if any) on which such Senior
Default shall be cured (if capable of being cured) or waived in accordance with
the applicable provisions of the Senior Credit Documents, and (ii) the 180th
consecutive day following the date of receipt by the Company of such Payment Bar
Notice: provided, however, that following receipt by the Company of any Payment
Bar Notice, no additional or further Payment Bar Notice may be given until the
90th consecutive day following the date of expiration or termination of the
Payment Bar Period that shall have commenced on the date of receipt of such
Payment Bar Notice.
(d) Following any acceleration of the maturity of any Senior Debt and as
long as such acceleration shall continue unrescinded and unannulled, such Senior
Debt shall first be paid in full in cash before any payment is made on account
of or applied to the Subordinated Debt.
(e) Following any acceleration of the maturity of any Subordinated Debt,
and as long as such acceleration shall continue unrescinded and unannulled, all
Senior Debt shall first be paid in full in cash before any payment is made on
account of or applied on the Subordinated Debt.
(f) In the event that, notwithstanding the foregoing provisions of this
Section 2.3, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, from any source whatsoever,
shall be received by any holder of Subordinated Debt contrary to the foregoing
provisions of this Section 2.3, such payment or distribution shall be held in
trust for the benefit of, and shall be immediately paid or delivered by such
holder to, as the case may be, the holders of such Senior Debt remaining unpaid,
or their representative or representatives, for application to the payment or
prepayment of all such Senior Debt remaining unpaid, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Debt held or
represented by each, to the extent necessary to pay all such Senior Debt in full
in cash after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
(g) If (i) no Senior Payment Default has occurred which has not been
cured or waived (including any Senior Payment Default as may occur upon an
acceleration of the maturity of any Senior Debt), (ii) no Payment Bar Period has
commenced and is continuing and (iii) the maturity of any Subordinated Debt has
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<PAGE> 7
not been accelerated (or any such acceleration has been rescinded), the Company
may pay, and the Subordinated Creditor may receive and retain any required
payment (including any required prepayment) or permitted prepayment of principal
or interest under the Subordinated Note.
(h) Notwithstanding the occurrence and continuance of any Subordinated
Default, no holder of Subordinated Debt shall take any action to (i) accelerate
the maturity of all or any of the Subordinated Debt, (ii) commence or join in
the commencement of any involuntary proceeding under the Bankruptcy Code against
the Company, (iii) commence, prosecute or participate in any other legal or
equitable judicial, administrative, arbitration or other proceeding against the
Company or any of its Property seeking to collect any of the Subordinated Debt
or to enforce any of their other rights as holders of the Subordinated Debt,
(iv) take any action to create or perfect any Lien on any of the Company's real
or personal Property to secure any of the Subordinated Debt or any judgment in
respect thereto, (v) enforce or apply any Lien now or hereafter existing
securing any of the Subordinated Debt, or (vi) exercise any other rights or
remedies under the provisions of the Subordinated Note Documents, or at law or
in equity or otherwise, which it may have by reason of the occurrence and
continuance of any Subordinated Default, until (x) the Company and the holders
of the Senior Debt shall have received written notice from the holders of a
majority of the outstanding principal amount of the Subordinated Debt, or any
agent or representative acting on behalf of such holders, of the occurrence of
such Subordinated Default specifying what action such holders intend to take in
respect thereto, and 180 days shall have elapsed after the date of receipt of
such notice and such Subordinated Default shall then be continuing, or (y) if
earlier, the date on which the maturity of the Senior Debt shall have been
accelerated in accordance with the terms of the Senior Credit Documents.
Notwithstanding anything to the contrary herein, there shall be no restriction
on the ability of the Subordinated Creditor to convert the Subordinated Note as
provided therein.
(i) The Company shall give prompt written notice to each holder of
outstanding Subordinated Debt of the occurrence of any Senior Default and of any
acceleration of the maturity of any Senior Debt, but no failure or delay by the
Company in giving any such notice shall affect the rights hereunder of the
holders of Senior Debt. The Senior Creditor Representative shall also endeavor
to give written notice of any acceleration of the maturity of any Senior Debt to
TV, but no failure or delay by the Senior Creditor Representative in giving any
such notice shall affect the rights hereunder of the holders of the Senior Debt.
(j) In the event of the occurrence or continuance of any default under
the Subordinated Debt, the holder of Subordinated Debt shall not exercise any
rights of set-off, whether contractual, legal or equitable, which it may have
with respect to any obligations of the holder of Subordinated Debt to the
Company under that certain Promissory Note, dated September 30, 1996, of Telcom
Ventures,
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<PAGE> 8
L.L.C. in the principal amount of $3.5 million, it being understood as
between the Company and the holder of Subordinated Debt that the foregoing
provision shall not constitute a waiver of the exercise of such rights of
set-off at such time as such provision is no longer in effect.
2.4 Holders of Subordinated Debt to be Subrogated to Rights of Holders
of Senior Debt. Subject to the prior payment in full in cash of all Senior Debt,
the holders of the Subordinated Debt shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of assets of the
Company applicable to the Senior Debt and the security interest of the holders
of Senior Debt until the Subordinated Debt shall be paid in full, and for
purposes of such subrogation, no payment or distribution to the holders of the
Senior Debt of assets, whether in cash, property or securities, distributable to
the holders of Senior Debt under the provisions hereof to which the holders of
the Subordinated Debt would be entitled except for the provisions of this
Section 2, and no payment pursuant to the provisions of this Section 2 to the
holders of Senior Debt by the holders of the Subordinated Debt shall, as between
the Company, their creditors other than the holders of the Senior Debt and
holders of the Subordinated Debt, be deemed to be a payment by the Company to or
on account of such Senior Debt, it being understood that the provisions of this
Section 2 are, and are intended, solely for the purpose of defining the relative
rights of the holders of the Subordinated Debt, on the one hand, and the holders
of Senior Debt, on the other hand.
2.5 Obligations of the Company Unconditional. Nothing contained in
this Section 2 or elsewhere in this Intercreditor Agreement or in the
Subordinated Note Documents is intended to or shall impair, as between the
Company and its creditors other than the holders of Senior Debt, the obligations
of the Company to the holders of the Subordinated Debt to pay the Subordinated
Debt as and when it shall become due and payable in accordance with its terms,
or is intended to or shall affect the relative rights of the holders of the
Subordinated Debt and creditors of the Company other than the holders of the
Senior Debt, nor shall anything herein or therein (except as otherwise expressly
provided in this Intercreditor Agreement) prevent any holder of Subordinated
Debt from exercising all remedies otherwise permitted by applicable law upon the
happening of a Subordinated Default, subject to the rights, if any, under this
Section 2 of the holders of Senior Debt in respect to assets, whether in cash,
property or securities, of the Company received upon the exercise of any such
remedy. The failure of the Company to make payment on account of the
Subordinated Debt by reason of any provision of this Section 2 shall not be
construed as preventing the occurrence or continuance of a Subordinated Default
under the Subordinated Note Documents.
3. Reinstatement. To the extent any payment of Senior Debt (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside, rescinded or required to be paid to a trustee, receiver, debtor in
possession or
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<PAGE> 9
other similar party under any bankruptcy, insolvency, receivership or similar
law, then to the extent such payment is recovered by, or paid over to, such
trustee, receiver, debtor in possession or other similar party, the Senior Debt
or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred. All Senior Debt
shall be and remain Senior Debt for all purposes of this Intercreditor
Agreement, whether or not subordinated, in any bankruptcy, insolvency,
reorganization, liquidation, receivership, assignment for the benefit of
creditors or similar proceeding.
4. No Waiver of Subordination Provisions. Except with the prior
written consent of the Subordinated Creditor, the Company will not incur Senior
Debt in an aggregate principal amount in excess of $25,000,000. Except in the
case of a breach of the agreement with the Subordinated Creditor set forth in
the immediately preceding sentence of this Section 4, no right of any holder of
Senior Debt to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any act or failure to act on the part of any such holder or
holders, or by any noncompliance by the Company with the terms, provisions and
conditions of the Senior Credit Documents regardless of any knowledge thereof
which the holders of Senior Debt, or any of them, may have or be otherwise
charged with. Without in any way limiting the generality of the foregoing, the
holders of Senior Debt, or any of them, may, at any time and from time to time,
without the consent of or notice to the holders of the Subordinated Debt,
without incurring any liabilities to any such holders and without impairing or
releasing the subordination and other benefits provided in this Intercreditor
Agreement or the obligations hereunder of the holders, of Subordinated Debt to
the holders of Senior Debt, even if any right of reimbursement or subrogation or
other right or remedy of any holder of the Subordinated Debt is affected,
impaired or extinguished thereby, do any one or more of the following:
(i) change the manner, place or terms of payment or change or
extend the time of payment of, or renew, exchange, amend, increase or
alter, the terms of any Senior Debt, any security therefor or Guarantee
thereof or any liability of the Company to such holder, or any liability
incurred directly or indirectly in respect thereof, or otherwise amend,
renew, exchange, extend, modify, increase or supplement in any manner
Senior Debt or any instrument evidencing or guaranteeing or securing the
same or any agreement under which Senior Debt is outstanding; provided,
however, that, except with the prior written consent of the Subordinated
Creditor, no increase in the principal amount of the Senior Debt which
would result in the aggregate outstanding principal amount of Senior Debt
to exceed $25,000,000, and no extension of the maturity date of the
Senior Debt beyond December 31, 2010 may be effected without the prior
written consent of the Subordinated Creditor;
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<PAGE> 10
(ii) settle or compromise any Senior Debt or any security therefor
or any liability incurred directly or indirectly in respect thereof and
apply any sums by whomsoever paid and however realized to any of the
Senior Debt in any manner or order; and
(iii) fail to take or to record or otherwise perfect, for any
reason or for no reason, any Lien securing Senior Debt by whomsoever
granted, exercise or delay in or refrain from exercising any right or
remedy against the Company or any other Person or any security, elect any
remedy and otherwise deal freely with any security and with the Company
or any liability of the Company to such holder or any liability incurred
directly or indirectly in respect thereof.
All rights and interests under this Intercreditor Agreement of the
holders of Senior Debt, and all agreements and obligations of the holders of
Subordinated Debt and the Company hereunder, shall remain in full force and
effect irrespective of (i) any lack of validity or enforceability of the Senior
Credit Documents, or of any provision of any thereof, or (ii) any other
circumstance that might otherwise constitute a defense available to, or be
discharge of, the Company in respect of the Senior Debt.
5. Authorization to Take Action to Effect Subordination. If any
holder of Subordinated Debt shall fail to file a proper claim or proof of debt
or other document or amendment thereof in form required in any proceeding under
the Bankruptcy Code prior to 30 days before the expiration of time to file such
claim or other document or amendment thereof, then the Senior Creditor
Representative shall have the right (but not the obligation) in such proceeding,
and the Senior Credit Representative is hereby irrevocably appointed lawful
attorney for such holder of Subordinated Debt for the purposes of enabling the
Senior Creditor Representative to demand, sue for, collect, receive and give
receipt for payments and distributions in respect of the Subordinated Debt that
are made in such proceedings and that are required to be paid or delivered to
the holders of Senior Debt as provided in Section 2.2 hereof, and to file and
prove all claims therefor and to execute and deliver all documents in such
proceedings in the name of such holder of Subordinated Debt or otherwise in
respect of such claims, as the Senior Creditor Representative may determine to
be necessary or appropriate; provided that if a proper proof of claim with
respect to the Subordinated Debt held by such holder shall be filed, such holder
shall have the right upon written notice to the Senior Creditor Representative
to terminate the right of the Senior Creditor Representative to take any further
actions with respect to such claim of such holder and such holder shall
thereafter be entitled to pursue such claim and to pursue the rights and
remedies respecting such claim (including the right to vote in connection with
one or more proposed plans of reorganization) in such proceedings, so long as
such holder shall do so diligently and in good faith.
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6. Legend. The Company and each holder of any Subordinated Note or
other note evidencing Subordinated Debt now or hereafter outstanding covenant to
cause such note to have affixed upon it at all times a conspicuous legend which
reads substantially as follows:
"This instrument is subject to the Subordination and Intercreditor
Agreement dated as of January 28, 1999, among The Chase Manhattan
Bank, as Administrative Agent, Telcom Ventures, L.L.C., and LCC
International, Inc., which, among other things, contains
provisions subordinating the obligations of the maker of this
instrument to the payee hereof to such maker's obligations to the
holders of the Senior Debt (as defined in said Subordination and
Intercreditor Agreement), to which provisions the holder of this
instrument, by its acceptance hereof, agrees."
7. Amendments and Waivers to Subordinated Note Documents. No
provision of the Subordinated Note Documents shall be further amended,
supplemented, modified or waived without the prior written consent of the Senior
Creditor Representative.
8. Notices. All notices hereunder shall be in writing and shall be
conclusively deemed to have been received and shall be effective (a) on the day
on which delivered if delivered personally or transmitted by telecopier, or (b)
one Business Day after the date on which the same is delivered to a nationally
recognized overnight courier service, and shall be addressed:
(i) if to the Company, to it at the following address (or, in
the case of a telecopy, to the following telecopy number):
LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: President and Chief Executive Officer
Telecopy No.: (703) 873-2900;
with copies to:
LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: Peter A. Deliso, Esq.
Telecopy No.: (703) 873-2900; and
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Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004-1109
Attention: Lorraine Sostowski, Esq.
Telecopy No.: (202) 637-5910;
(ii) if to the Subordinated Creditor, to it at the following
address:
Telcom Ventures, L.L.C.
211 North Main Street, Suite 300
Alexandria, Virginia 22314
Attention: President
Telecopy No.: (703) 706-3801
with a copy to:
Telcom Ventures, L.L.C.
211 North Main Street, Suite 300
Alexandria, Virginia 22314
Attention: General Counsel
Telecopy No.: (703) 706-3801; and
(iii) If to the Senior Creditor Representative, to it at its
address for notice (or, in the case of a telecopy, to the telecopy
number) provided for in the Senior Creditor Agreement;
or at such other address and/or telecopy number and/or to the attention of such
other Persons as any of such Persons shall have advised the others by notice in
the manner herein specified.
9. Successors; Continuing Effect; Etc. This Agreement is being
entered into for the benefit of, and shall be binding upon, the Senior Creditor
Representative and the Subordinated Creditor and their respective successors and
assigns, including, without limitation, all subsequent holders of Senior Debt
and Subordinated Debt whether now outstanding or hereafter incurred. This
Agreement shall be binding upon the Company and its successors and assigns. This
Agreement shall be a continuing agreement and shall be irrevocable and shall
remain in full force and effect as long as there is both Senior Debt and
Subordinated Debt outstanding, but shall terminate upon the payment in full in
cash of all outstanding Senior Debt.
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10. Specific Performance. The holders of Senior Debt are hereby
authorized to demand specific performance of this Intercreditor Agreement,
whether or not the Company or any holder of Subordinated Debt shall have
complied with any of the provisions hereof applicable to it, at any time when
the Company or such holder of Subordinated Debt shall have failed to comply with
any of the provisions of this Intercreditor Agreement applicable to it. The
Company and each holder of Subordinated Debt irrevocably waives any defense
based on the adequacy of a remedy at law, which might be asserted as a bar to
such remedy of specific performance.
11. No Disposition of Subordinated Debt. No Holder of Subordinated
Debt will sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to this Intercreditor Agreement.
12. Amendments, etc. This Agreement may be amended, and the terms
hereof may be waived, only with the written consent of the Company, the holders
of a majority in outstanding principal amount of the Senior Debt and the holders
of a majority in outstanding principal amount of the Subordinated Debt.
13. Conflicting Provisions. In the event of any conflict or
inconsistency between the provisions of this Intercreditor Agreement, on the one
hand, and any term or provision of the Senior Creditor Documents or the
Subordinated Note Documents, on the other hand, the provisions of this
Intercreditor Agreement govern and prevail.
14. Miscellaneous. This Agreement, which may be executed in any number
of counterparts, shall be governed by and construed and interpreted in
accordance with the laws of the State of New York. The headings in this
Intercreditor Agreement are for convenience of reference only and shall not
alter or otherwise affect the meaning hereof.
15. Submission to Jurisdiction, Waiver of Venue.
(a) EACH OF THE COMPANY, THE SUBORDINATED CREDITOR AND THE SENIOR
CREDITOR REPRESENTATIVE CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND WAIVES
ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN.
(b) NOTHING IN THIS SECTION 15 SHALL AFFECT THE RIGHT OF THE SENIOR
CREDITOR REPRESENTATIVE OR ANY HOLDER OF SENIOR DEBT TO BRING ANY ACTION OR
PROCEEDING AGAINST THE
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<PAGE> 14
COMPANY OR THE SUBORDINATED CREDITOR OR THEIR RESPECTIVE PROPERTY IN THE COURTS
OF ANY OTHER JURISDICTION.
16. Waiver of Right to Trial by Jury. EACH OF THE COMPANY, THE SENIOR
CREDITOR REPRESENTATIVE AND THE SUBORDINATED CREDITOR HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE. EACH OF THE COMPANY, THE SENIOR CREDITOR REPRESENTATIVE
AND THE SUBORDINATED CREDITOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
17. Consents. The Subordinated Creditor hereby consents to the
execution, delivery and performance by the Company of the Senior Credit
Documents and to the incurring of the Debt and granting of Liens in accordance
with the terms thereof.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor
Agreement as of the date first written above.
SENIOR CREDITOR REPRESENTATIVE:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /S/ ALAN J. ARIA
-------------------
Its: Vice President
SUBORDINATED CREDITOR:
TELCOM VENTURES, L.L.C.
By: /S/ RAJENDRA SINGH
--------------------
Its:
COMPANY:
LCC INTERNATIONAL, INC.
By: /S/ PETER A. DELIZO
--------------------
Its: Vice President, General Counsel
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<PAGE> 1
Exhibit 10.69
AGREEMENT
REGARDING RESIGNATION OF EMPLOYMENT
AND OTHER MATTERS
THIS AGREEMENT REGARDING RESIGNATION OF EMPLOYMENT AND OTHER MATTERS
(this "Agreement") is made and dated as of October 5, 1998, between LCC
International, Inc., a Delaware corporation (the "Company"), and Geoffrey S.
Carroll ("Carroll").
WHEREAS, Carroll and the Company jointly and amicably agree that Carroll
shall resign as an officer, employee, director and Board or other committee
member of the Company and terminate his employment and service with the Company
and each and every subsidiary of the Company (other than as a member of the
Board of Directors of the Company and as an advisor to the Chairman of the Board
of Directors of the Company described below);
WHEREAS, Carroll and the Company have heretofore entered into an
Employment Agreement dated as of January 15, 1998, (the "Employment Agreement")
and Carroll and the Company have entered into stock option agreements dated as
of January 15, 1998; and
WHEREAS, Carroll and the Company desire to set forth the terms and
conditions of their joint and amicable agreements regarding the resignation of
Carroll and the termination of Carroll's employment and service (other than the
Services (as defined below)) with the Company and its subsidiaries and the
effect of such termination on the Employment Agreement and such stock option
agreements.
WHEREAS, the Company desires to obtain the advisory services of Carroll
as an independent contractor to assist with strategic planning, the development
of outsourcing opportunities for the Company, to provide advice and counsel to
the Chairman of the Board of Directors and to provide such other advice, counsel
and assistance as the Chairman of the Board of Directors may require;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
1. RESIGNATION FROM AND TERMINATION OF EMPLOYMENT. The Company and
Carroll agree that Carroll's last day of employment with the Company under the
Employment Agreement shall be October 5, 1998 (the "Effective Date"). Carroll
hereby resigns, effective as of October 5, 1998, from all of his offices and
positions with the Company and each of its subsidiaries, including without
limitation, his position as Chief Executive Officer of the Company and his
membership on the boards of directors of any and all subsidiaries of the Company
and his membership on Board or other committees formed by the Company or any of
its subsidiaries, including without limitation, governance, advisory, compliance
and similar committees, but expressly excluding his position as a member of
Board
<PAGE> 2
of Directors of the Company. Carroll shall take no official action in the name
and on behalf of the Company or any of its subsidiaries nor have any authority
to bind the Company or any of its subsidiaries after the Effective Date, except
as permitted by this Agreement or as otherwise expressly authorized by the
Chairman of the Board of Directors of the Company in writing. Carroll agrees to
execute and deliver to the Company and its subsidiaries such documents
concerning such resignation and termination as may be reasonably requested by
the Company or any of its subsidiaries from time to time.
2. ENGAGEMENT.
(a) During the term of this Agreement (as set out in Section 4
hereof), Carroll shall serve as Advisor to the Chairman of the Board of
Directors of the Company (the "Chairman"). Carroll shall perform advisory
services as and when reasonably requested by the Chairman. Carroll shall render
advisory and consulting services to the Chairman consistent with the knowledge
and experience possessed by Carroll. Carroll's services shall include assisting
the Chairman with strategic planning, the development of outsourcing
opportunities for the Company, providing advice and counsel to the Chairman of
the Board of Directors and providing such other advice, counsel and assistance
as the Chairman of the Board of Directors may require and serving as a member of
the Board of Directors of the Company (the "Services"). Carroll shall coordinate
all Services through the Chairman of the Board of Directors of the Company or
such person as the Chairman shall designate and as the parties may mutually
agree. Carroll shall perform his services at the Company's offices or at such
other locations as the parties may mutually agree. Unless the parties otherwise
agree in writing, Carroll's services with the Company shall terminate at the end
of the term of this Agreement.
(b) In the time that Carroll is not providing services to the Company,
he may participate in other activities without obtaining the Company's approval
thereof; provided, however, that such other engagements and activities (i) do
not involve any violation of this Agreement and (ii) are disclosed in advance to
the Chairman.
(c) For a period of one year from the Effective Date, Carroll agrees
to make himself reasonably available, considering Carroll's other obligations,
duties and responsibilities at the time, to the Company relating to his
activities as an employee of the Company under the Employment Agreement
including, but not limited to, assisting the Company and acting as a witness in
connection with any pending or threatened litigation or other legal proceeding
with respect to which the Company reasonably determines his participation to be
necessary and responding to questions and inquiries with respect to such prior
services. Such assistance will be without additional compensation to Carroll
even if Carroll's services as an Advisor hereunder has terminated, however, he
will be reimbursed for any out-of-pocket expenses he incurs in providing such
assistance.
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<PAGE> 3
3. COMPENSATION AND EXPENSES.
(a) The Company agrees to pay Carroll advisory fees during the
term of this Agreement, commencing as of the Effective Date, at the rate of Four
Hundred Thousand Dollars ($400,000) per year ("Fees"), payable in arrears in
substantially equal semi-monthly installments. Carroll shall not be entitled to
additional compensation for serving as a member of the Board of Directors of the
Company. The Company shall promptly reimburse Carroll for all reasonable,
ordinary and necessary travel and lodging expenses incurred by Carroll in
connection with Carroll's performance of services hereunder, provided that all
such expenses are in accordance with the Company's policies applicable to
similar expenses incurred by its executive management employees and are approved
in advance by the Chairman. Carroll will invoice the Company monthly in arrears
for any reimbursement of expenses payable hereunder in respect of services
performed and expenses incurred during the previous month, and each such invoice
shall be accompanied by receipts and other supporting documentation of expenses
incurred as reasonably requested by the Company.
(b) Carroll shall reimburse the Company for $19,600 in expenses
paid by the Company during the period of Carroll's employment with the Company.
The Company shall have the right to offset all amounts due Carroll pursuant to
this Agreement by such amounts. The first six bimonthly payments to Carroll
pursuant to this Agreement will be reduced by a pro-rata portion of this amount.
Within 60 days after the Effective Date, Carroll agrees to provide documentation
satisfactory to the Company's auditors substantiating the legal basis for, and
payment of $38,890 of fees paid in connection with the termination of a certain
lease of his prior residence in Brussels, Belgium incurred at the time Carroll
was hired by the Company.
(c) The parties agree that Carroll shall sublet the apartment
located at 228 East 67th Street, New York, New York 10021, from the Company for
the remaining term of the lease and that the rent and other expenses associated
therewith shall be Carroll's responsibility. Carroll and the Company will use
their best efforts to have the lease novated to Carroll. The Company shall
continue to pay the monthly rent on the apartment prior to completion of such
sublease, and the monthly rent and all expenditures incurred by the Company in
connection with the apartment prior to such sublease shall be offset against any
payments due Carroll pursuant to this Agreement. Carroll shall have the
exclusive right to use and occupy the apartment during the term of this
Agreement.
(d) Nothing in this Agreement shall entitle Carroll to participate
in or accrue benefits under any plan of the Company relating to stock options
(other than as provided herein), stock purchases, pension, thrift, profit
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<PAGE> 4
sharing, employee stock ownership, group life insurance, medical coverage,
disability insurance, education, or other retirement or employee benefits,
except to the extent that Carroll may be entitled to continuation coverage
(COBRA), at Carroll's expense, under the health and dental insurance plan
maintained by the Company.
(e) Anything in this Agreement to the contrary notwithstanding,
all payments required to be made by the Company hereunder to Carroll or his
estate or beneficiaries in connection with may be subject to the withholding of
such amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company may, in its sole discretion,
accept other provisions for the payment of taxes and any withholdings as
required by law, provided that the Company is satisfied that all requirements of
law affecting its responsibilities to withhold compensation have been satisfied.
4. TERM. The term of this Agreement shall be for twelve (12) months
commencing on October 5, 1998, unless earlier ---- terminated pursuant to
Section 7 hereof. At the end of the term of this Agreement, Carroll shall resign
from the Board of Directors of the Company.
5. EFFECT ON OPTION AGREEMENTS. The stock option agreements between
the Company and Carroll made as of January 15, 1998 and all rights and benefits
of Carroll thereunder (including without limitation all stock options granted
therein) are hereby terminated and canceled and shall be of no further force or
effect as of the Effective Date, except to the extent provided herein. Carroll
will continue to hold, and is vested in, non-qualified stock options to purchase
(i) 90,000 shares of Company Series A Common Stock ("Stock") at an exercise
price equal to $12.625 per share, and (ii) 105,000 shares of Stock at an
exercise price equal to $18.84 per share, and such non-qualified stock options
shall remain exercisable for a period of the lesser of (i) twelve (12) months
from the Effective Date or (ii) six (6) from termination of services under this
Agreement.
6. STANDARDS. Carroll shall perform his duties and responsibilities
under this Agreement to the best of his ability and using his best efforts, in a
diligent, timely, professional and workmanlike manner, in accordance with
performance standards generally prevailing in the telecommunications industry.
He shall perform is duties as a member of the Board of Directors of the Company
in accordance with the duty of loyalty and fiduciary obligations applicable to
members of boards of directors certain of which are summarized in Exhibit A,
attached hereto, and his services hereunder in compliance with applicable
securities laws certain of which are summarized in Exhibit B, attached hereto
and all other applicable laws and related rules and regulations, including, but
not limited to, the Foreign Corrupt Practices Act.
4
<PAGE> 5
7. TERMINATION OF SERVICES.
(a) General. Carroll's service hereunder shall terminate upon
Carroll's death or "Disability" and may be terminated with or without "Cause"
(as defined in this Section 7) by the Company or Carroll at any time during the
term of this Agreement. Disability shall mean a physical or mental condition
resulting from bodily injury or mental disease which renders Carroll incapable
of continuing any gainful occupation and which condition constitutes total
disability under the federal Social Security Acts. If the Company terminates
Carroll, the effective date of Carroll's termination of services is the date of
written notice of termination given by or on behalf of the Board to Carroll. If
the termination of Carroll is on account of Disability, the effective date of
Carroll's termination of services is the date Carroll ceased performing services
for the Company on account of Disability. If Carroll terminates his services,
the effective date of Carroll's termination of services is the date Carroll
terminates services or such other date as Carroll and the Company mutually agree
in writing. The Company shall have the right to terminate Carroll's services
under this Agreement if he becomes employed with another employer or is
self-employed and such self-employment interferes with the performance of his
services under this Agreement.
(b) Termination For "Cause" or Voluntarily, Death or Disability. In
the event of Carroll's death, Disability, termination of services by the Company
for Cause (as defined in this Section 7) or in the event Carroll voluntarily
terminates his services, the Company shall promptly thereafter pay to Carroll
(his legal representatives, estate, beneficiaries or heirs) all compensation,
benefits and other payments to which he was entitled hereunder only through the
effective date of termination of services, and the Company shall thereafter have
no further obligation to Carroll or his legal representatives, estate,
beneficiaries or heirs for any compensation, benefits or other payments
hereunder. Carroll shall remain obligated to make the payments and
reimbursements provided in Section 3(b) and (c) hereof, and the Company shall
have the right to set off such amounts against any amount due to Carroll
pursuant to this Agreement.
(c) Termination Without "Cause". In the event of Carroll's termination
of services by the Company without Cause, the Company shall continue to pay to
Carroll his Fees (as defined in Section 3), payable in arrears in substantially
equal semi-monthly installments, commencing on the effective date of his
termination of services, for the remaining term of this Agreement provided
however that in the event that Carroll commences employment (including
self-employment) with another employer then such payment obligation shall
terminate on the later of (i) the date Carroll commences such employment, or
(ii) six months from the Effective Date. Carroll shall not be obligated to seek
or accept employment to mitigate the amounts payable under
5
<PAGE> 6
this section. Carroll shall remain obligated to make the payments and
reimbursements provided in Section 3(b) and (c) hereof, and the Company shall
have the right to set off such amounts against any amount due to Carroll
pursuant to this Agreement.
(d) Definition of "Cause". For purposes of this Agreement, "Cause" for
termination of Carroll's services by the Company hereunder shall be deemed to
exist if, after the date of this Agreement, (a) Carroll commits an act of fraud,
material dishonesty or theft against, or a felony involving, the Company; (b)
Carroll commits a crime involving moral turpitude; (c) Carroll has compromised
trade secrets or other proprietary information of the Company; (d) Carroll shall
breach in any material respect the terms of this Agreement; (e) Carroll has
willfully failed or refused to perform material assigned duties consistent with
his responsibilities; or (f) Carroll engaged in gross or willful misconduct that
causes substantial and material harm to the business and operations of the
Company or a subsidiary, the continuation of which will continue to
substantially and materially harm the business and operations of the Company or
a subsidiary in the future.
8. RESTRICTIVE COVENANTS.
(a) Confidentiality. Except as authorized or directed by the Company,
Carroll shall not, at any time during or subsequent to the term of this
Agreement, directly or indirectly publish or disclose any confidential
information of the Company or of any of its subsidiaries (as defined in this
Section 8) or confidential information of others that has come into the
possession of the Company or of any of its subsidiaries or into his possession
in the course of his services with the Company or his services and duties
hereunder to any person or entity, and Carroll shall not use any such
confidential information for his own personal use or advantage or make it
available to others for use. All information, whether written or oral, regarding
the business or affairs of the Company or any of its subsidiaries, including,
without limitation, information as to their products, services, systems,
software, inventions, finances (including prices, costs and revenues), marketing
plans, programs, methods of operation, prospective and existing contracts and
other business arrangements or business plans, procedures, and strategies, shall
be deemed confidential information, except to the extent the same shall have
been lawfully and without breach of confidential obligation made available to
the general public without restriction. The Company shall be under no obligation
to specifically identify any information as to which the protection of this
Section 8(a) extends by any notice or other action. For purposes of this
Agreement, the term "subsidiary" shall mean any entity of which the majority
equity or other ownership interest or a controlling interest is held directly,
or indirectly, by the Company or any of their successors. Nothwithstanding the
foregoing, Carroll shall not be considered in breach of this section if (a) such
6
<PAGE> 7
disclosure or publication is compelled by a court of competent jurisdiction
provided the Company has been given advance notice of the proposed disclosure or
publication and has had an opportunity to object or to seek a protective order
or (b) such disclosure or publication is necessary in order to defend Carroll
from an action or claim by the Company under this Agreement.
(b) Non-Compete. During the period which is the greater of (i) twelve
months from the Effective Date and (ii) six months from the termination of
Carroll's services, Carroll will not, directly or indirectly, as a stockholder
owning beneficially or of record more than five percent of the outstanding
shares of any class of stock of any issuer, or as an officer, director,
employee, consultant, partner, joint venturer, proprietor, or otherwise engage
in or become interested in any business that directly or indirectly is in
competition with any material business of the Company or any of its subsidiaries
(or any of their successors) as conducted or proposed to be conducted (i) if
during the term, during the period of services or (ii) after termination of
services, then at the time of any such termination, provided, however, that this
provision shall not prohibit Carroll from acting as an officer, director,
employee, consultant, partner, joint-venturer or proprietor of any entity that
has a separate subsidiary or division that is in competition with the business
of the Company so long as Carroll as no direct or indirect responsibility or
involvement in the activities of the subsidiary or division or in the
competitive activity. During the period of Carroll's services and for a period
of twelve months thereafter, Carroll shall not, without the prior written
consent of the Company, solicit or hire or induce the termination of employment
of any employees or other personnel providing services to the Company, or any of
its subsidiaries, who are employees or providing services at the time or within
six months of such solicitation, hiring or inducement, for any business
activity, other than a business activity owned or controlled, directly or
indirectly, by the Company or any of its subsidiaries.
(c) Work Product. Carroll acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable) that
relate to the actual or anticipated business, research and development or
existing or future products or services of the Company or its subsidiaries that
are conceived, developed, made or reduced to practice by Carroll while providing
services to the Company or any of its subsidiaries ("Work Product") belong to
the Company and Carroll hereby assigns, and agrees to assign, all of the above
to the Company. Any copyrightable work prepared in whole or in part by Carroll
in the course of Carroll's work for any of the foregoing entities shall be
deemed a "work made for hire" under the copyright laws, and the Company shall
own all rights therein. To the extent that any such copyrightable work is not a
"work made for hire," Carroll hereby assigns and agrees to assign to Company all
right, title and interest, including without limitation, copyright in and to
such copyrightable work. Carroll shall promptly disclose such Work Product and
copyrightable work to the Chairman of the Board of Directors and perform all
actions reasonably requested by the Chairman of
7
<PAGE> 8
the Board of Directors (whether during or after the term of this Agreement) to
establish and confirm the Company's ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
(d) Enforcement. Carroll acknowledges and warrants that he will
be fully able to earn an adequate livelihood for himself and his dependents if
Section 8(b) should be specifically enforced against him. Carroll also
acknowledges that the restrictions contained in this Section 8 are reasonable
and necessary to protect the business and interests of the Company, the Company
is relying upon the enforceability of such restrictions in entering into this
Agreement, and any violation of these restrictions will cause substantial
irreparable injury to the Company. Therefore, Carroll agrees that the Company is
entitled, in addition to other remedies, to preliminary and permanent injunctive
relief to secure specific performance, and to prevent a breach or contemplated
breach, of this Section 8. The restrictions set forth herein shall be construed
as independent covenants, and the existence of any claim or cause of action
against the Company, whether predicated upon this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the restrictions
contained in this Section 8. Carroll hereby consents to the jurisdiction over
his person of any courts within the Commonwealth of Virginia with respect to any
proceedings in law or in equity arising out of this Agreement. If any court of
competent jurisdiction shall hold that the restrictions contained in Section
8(b) are unreasonable as to time or geographical area, said restrictions shall
be deemed to be reduced to the extent necessary in the opinion of such court to
make them reasonable. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including, without limitation, recovery of damages from
Carroll.
9. RELEASE.
(a) Carroll, on behalf of himself and his heirs, executors,
administrators, successors and assigns, forever releases and discharges the
Company and its stockholders and affiliates, and the Company's and its
stockholders' and affiliates' respective agents, officers, employees and
directors, and their respective successors and assigns, from and against any and
all known claims, damages, lawsuits, actions, causes of action, and liabilities
whatsoever, absolute or contingent, accrued or unaccrued, including but not
limited to, all claims arising from or in any way connected with Carroll's
employment by the Company and the termination of Carroll's employment with the
Company, but excluding any claims, damages or liabilities associated with (i)
the stock option agreements to the extent not terminated by this Agreement, (ii)
benefits payable under the terms of employee benefit plans maintained by the
Company or its subsidiaries, or (iii) any breach by the Company of the terms of
this Agreement. This release includes, but is not limited to, rights or claims
arising under Title VII of the Civil Rights Act of 1964, as
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<PAGE> 9
amended, the Age Discrimination in Employment Act of 1967, as amended, the
Employee Retirement Income Security Act of 1974, as amended, the Americans with
Disabilities Act, and any other federal, state or local statutes or common-law
rights of action prohibiting employment discrimination based on age, sex, race,
color, national origin, religion, handicap or veteran status or otherwise
concerning Carroll's employment. Carroll also agrees not to sue or otherwise
institute or cause to be instituted or in any way voluntarily participate in the
prosecution of any complaints or charges against any person or entity released
herein in any federal, state, District of Columbia or other court,
administrative agency or other forum concerning any claims released herein.
(b) Carroll acknowledges that he has carefully read this Agreement
which includes the release set forth in Section 9(a) (the "Release of Claims")
and fully understands all of its terms. Carroll is signing this Agreement
voluntarily and with full knowledge of its significance and acknowledges that he
has not relied upon any representation or statement, written or oral, not set
forth in this Agreement.
(c) Carroll acknowledges that he received this Agreement on October 2,
1998, and that he understands that he has twenty-one (21) days after the
foregoing date within which to consider this Agreement, including the Release of
Claims, before signing it. Carroll understands that he has been given the
opportunity to and has in fact consulted with legal counsel of his own choosing
and that if he signs this Agreement prior to the twenty-first day, he does so on
a purely voluntary basis.
(d) Carroll further understands that for a period of seven (7) days
after he signs this Agreement, which includes the Release of Claims, that he may
revoke or cancel it by written notification to the Company and by returning any
sums paid to Carroll under this Agreement, and that this Agreement, including
the Release of Claims, will not become effective or enforceable until that
seven-day period has passed.
(e) Company, its officers, directors, agents, assigns, predecessors,
divisions, subsidiaries, affiliates, and related entities hereby waive, release
and forever discharge Carroll from all known claims, charges, complaints,
obligations, damages and causes of actions against Carroll, and with respect to
all such claims, charges, complaints, obligations, damages and causes of action,
will institute no legal proceedings or claims against Carroll; provided that
such release shall not apply to Carroll's obligations under the terms of this
Agreement.
10. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall be binding upon its successors and assigns and may be assigned
by the Company to the successors in interest of the Company. The rights and
obligations of Carroll under this Agreement shall be binding upon his heirs,
legatees, personal representatives, executors or administrators. This
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<PAGE> 10
Agreement may not be assigned by Carroll, but any amount owed to Carroll upon
his death shall inure to the benefit of his heirs, legatees, personal
representatives, executors, or administrators.
11. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered, sent by overnight courier,
or mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telecopy, or telex,
addressed as follows:
If to the Company:
LCC International, Inc.
7925 Jones Branch Drive
McLean, Virginia 22102
Attention: Peter Deliso, Esq.
Telecopy No.: (703) 873-2100
If to Carroll:
Dr. Geoffrey S. Carroll
228 East 67th Street
New York, New York 10021
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto, and supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
The Employment Agreement shall be terminated as of the Effective Date and shall
be of no further force or effect thereafter. The stock option agreements shall
be terminated as of the Effective Date except to the extent provided in Section
5 hereof.
13. HEADINGS. Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
14. SEVERABILITY. If any part of any provision of this Agreement shall
be invalid or unenforceable under applicable law, such part shall be ineffective
to the extent of such invalidity or unenforceability only,
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<PAGE> 11
without in any way affecting the remaining parts of such provision or the
remaining provisions of this Agreement.
15. GOVERNING LAW. This Agreement, the rights and obligations of the
arties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the Commonwealth of Virginia
(excluding the choice of law rules thereof). The parties irrevocably submit to
the exclusive jurisdiction of the Commonwealth of Virginia and the venue of
Fairfax County in any action brought by the parties concerning this Agreement or
the performance thereof.
16. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver of the terms of this Agreement shall be valid unless made in writing and
duly executed by Carroll and the Company. No delay or failure at any time on the
part of the Company or Carroll in exercising any right, power or privilege under
this Agreement, or in enforcing any provision of this Agreement, shall impair
any such right, power, or privilege, or be construed as a waiver of any default
or as any acquiescence therein, or shall affect the right of the Company or
Carroll thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
17. INDEPENDENT CONTRACTOR STATUS. Carroll shall have sole control of
the manner and means of performing his services under this Agreement and shall
complete such services in accordance with his own means and methods of work. The
parties intend that Carroll shall be an independent contractor, self-employed
individual and that Carroll shall be responsible for the payment of applicable
income and self-employment taxes with respect to his compensation under this
Agreement.
18. MAIL, E-MAIL VOICE MAIL. The Company shall promptly and regularly
forward to Carroll, unopened, any personal mail or mail marked "confidential"
received at the Company's offices for a period of six months. The Company shall
maintain Carroll's voice mail and e-mail message services at the Company's
facilities for the lesser of (i) the term of this Agreement or (ii) while
serving as a Director of the Company.
19. REFERENCES. All requests for references for Carroll shall be
directed to Rajendra Singh, whose comments concerning Carroll, with regard to
activities prior to the Effective Date, will be consistent with the press
release issued by the Company as of an even date herewith.
20. FURTHER ASSURANCE. The Company and Carroll shall at any time, and
from time to time, execute and deliver such further documents as the Company may
reasonably request to effect fully the purposes of this Agreement.
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<PAGE> 12
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on
October __, 1998 to be effective as of October 5, 1998
WITNESS: LCC INTERNATIONAL, INC.
/S/ RUTH TINSLEY BY: /S/ PETER A. DELISO
- ------------------------- -------------------------
Name: PETER A. DELISO
Title: VICE PRESIDENT AND
GENERAL COUNSEL
WITNESS:
/S/ GEOFFREY S. CARROLL
- ------------------------- ----------------------------
GEOFFREY S. CARROLL
12
<PAGE> 1
Exhibit 10.72
REVOLVING CREDIT FACILITY AND SECURITY AGREEMENT
THIS REVOLVING CREDIT FACILITY AND SECURITY AGREEMENT ("Agreement") is
made as of the 31st day of December, 1996 by and between LCC INTERNATIONAL,
INC., a Delaware corporation whose principal office is located at Courthouse
Plaza II, 2300 Clarendon Boulevard, Arlington, Virginia 22201 (the "Lender"),
and MICROCELL MANAGEMENT, INC., a Delaware corporation whose principal office is
located at 1300 Bellona Avenue, Timonium, Maryland 21093 (the "Borrower").
RECITALS
WHEREAS, Borrower is engaged in the business of the acquisition,
build-out and operation of wireless communications towers;
WHEREAS, Borrower is an eighty-three and seventy-five one hundredths
percent (83.75%) held subsidiary of Lender;
WHEREAS, Borrower and Lender desire to provide for certain loan advances
to be made by Lender to Borrower to finance Borrower's operations on the terms
and conditions set forth herein;
WHEREAS, each of the Borrower and Lender acknowledges that it will receive
substantial direct and indirect benefits by reason of the making of advances to
the Borrower as provided in this Agreement, including, without limitation, by
virtue of the interrelationship between the Borrower and the Lender;
NOW, THEREFORE, for the promises made herein and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions.
(a) General Terms. When used herein, the following terms shall
have the following meanings:
"Accounts" shall mean the Borrower's presently existing and
hereafter arising or acquired accounts, accounts receivable, book debts, notes,
drafts, acceptances, chattel paper, and other forms of obligations now or
hereafter owned or held by or payable to the Borrower relating in any way to
Inventory (as hereinafter defined) or arising from the sale of Inventory or the
rendering of services by the Borrower or howsoever otherwise arising, including
the right to payment of any interest or finance charges with respect thereto,
together with all merchandise represented by any of the foregoing; all such
merchandise that may be reclaimed or repossessed or returned to the Borrower;
all of the Borrower's rights as an unpaid vendor, including stoppage in transit,
reclamation, replevin, and
<PAGE> 2
sequestration; all pledged assets and all letters of credit, guaranty claims,
liens, and security interests held by or granted to the Borrower to secure
payment of any of the foregoing; all proceeds and products of all of the
foregoing described properties and interests in properties; all proceeds of
insurance with respect thereto, including the proceeds of any applicable credit
insurance or fidelity bond, whether payable in cash or in kind; and all ledgers,
books of account, records, computer programs, computer disks or tape files,
computer printouts, computer runs, and other computer prepared information
relating to any of the foregoing.
"Collateral" shall mean all property and interests in property
now owned or hereafter acquired by the Borrower in or upon which a security
interest, lien or mortgage is granted to the Lender by the Borrower under this
Agreement or under any other documents, instruments or writings executed by the
Borrower and delivered to the Lender, including, without limitation, Accounts,
General Intangibles, Inventory, Intellectual Property, Fixtures, Equipment and
Real Estate (each as defined herein).
"Default" shall mean an event which through the passage of
time or the service of notice or both would mature into an Event of Default (as
hereinafter defined).
"Equipment" shall mean Borrower's machinery and equipment,
including, without limitation, data processing and computer equipment with
software and peripheral equipment, and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, motor vehicles, rolling stock and other equipment of every kind and
nature, and Fixtures (as hereinafter defined) not forming a part of real estate,
all whether now owned or hereafter acquired, and wherever situated, together
with all additions and accessions thereto, replacements therefor, all parts
therefor, all substitutes for any of the foregoing, fuel therefor, and all
manuals, drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.
"Event of Default" shall mean the occurrence or existence of
any one or more of the following events: (i) the Borrower shall fail to pay
principal immediately when the same is due or declared due hereunder and the
same shall remain unpaid thirty (30) days after notice thereof by the Lender to
the Borrower; (ii) the Borrower shall fail to pay interest immediately when the
same is due or declared due hereunder and the same shall remain unpaid thirty
(30) days after notice thereof by the Lender to the Borrower; (iii) the Borrower
fails to pay any of its Obligations (as hereinafter defined) (other than as set
forth in clauses (i) or (ii) above) within ten (10) days after such Obligations
are due or are declared due in accordance herewith and the same shall remain
unpaid thirty (30) days after notice thereof by the Lender to the Borrower; (iv)
the Borrower fails or neglects to perform,
2
<PAGE> 3
keep or observe any of the covenants, conditions or agreements contained in this
Agreement for a period of thirty (30) days or more after notice thereof by the
Lender to the Borrower (other than occurrences referred to or embodied in other
provisions of this subsection which shall constitute immediate Events of
Default, unless a grace period is otherwise specified in the description
thereof); (v) any warranty or representation now or hereafter made by the
Borrower in connection with this Agreement is untrue or incorrect in any
material respect, or any written schedule, certificate, statement, report,
financial data, notice, or other writing required to be furnished hereunder at
any time by the Borrower to the Lender is untrue or incorrect in any material
respect as of the date on which the warranty, representation or the facts set
forth therein are stated, certified or deemed made; (vi) all or any part of the
Collateral or the assets (with a fair market value in excess of two hundred and
fifty thousand dollars ($250,000)) of the Borrower are attached, seized,
subjected to a writ or distress warrant, or levied upon, or come within the
possession or control of any creditor of the Borrower and on or before the
thirtieth (30th) day thereafter such Collateral or assets are not returned to
the Borrower, or such writ, distress warrant or levy is not dismissed, stayed or
lifted; (vii) the Borrower makes an assignment for the benefit of creditors;
convenes a meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts; commences
any bankruptcy, reorganization or insolvency proceeding or other proceeding
under any federal, state, provincial or other law for relief of debtors or
proposes, authorizes or consents to the taking of any of the foregoing actions;
(viii) the Borrower fails to obtain the dismissal, within thirty (30) days after
the commencement thereof, of any bankruptcy, reorganization or insolvency
proceeding, or other proceeding under any law for the relief of debtors
instituted against it; fails actively to oppose any such proceeding; or in any
such proceeding, defaults or files an answer admitting the material allegations
upon which the proceeding was based or states in any filing in such proceeding
its willingness to have an order for relief entered or its desire to seek
liquidation, reorganization or adjustment of any of its debts; (ix) any
receiver, trustee or custodian is appointed to take possession of all or any
substantial portion of the assets of the Borrower or any committee of the
Borrower's creditors is formed for the purpose of enforcing such creditors'
rights; (x) the Borrower voluntarily or involuntarily dissolves or is dissolved,
liquidates or is liquidated or ceases to be solvent or admits in writing that it
is not solvent or fails to pay all or any material portion of its debts as they
become due or admits in writing its present or prospective inability to pay its
debts as they become due; or (xi) any material term or provision of this
Agreement for any reason shall cease to be valid and binding on or become
unenforceable against the Borrower or the Borrower shall so state or assent in
writing. The occurrence or existence of any of the foregoing events shall
constitute an immediate Event of Default unless notice or further notice, as the
case may be, by the Lender or a cure period is specifically required by the
description of such event before such event matures into an Event of Default.
3
<PAGE> 4
"Fixtures" shall mean all "fixtures" as such term is defined
in the Uniform Commercial Code, now owned or hereafter acquired by the Borrower.
"General Intangibles" shall mean the Borrower's presently
owned or hereafter acquired goodwill, choses in action, causes of action,
franchises, methods, sales literature, drawings, specifications, descriptions,
confidential information, consulting agreements, employment agreements,
engineering contracts, leasehold interests in real and personal property,
insurance policies (including business interruption insurance, if any) and such
other assets which uniquely reflect the goodwill of the business of the
Borrower; deposit amounts, letters of credit, and general intangibles relating
to other items of Collateral, including without limitation, rights to refunds or
indemnification, reversionary or other rights of the Borrower to excess employee
benefit plan assets upon termination or amendment thereof; and proceeds of all
of the foregoing, including without limitation, insurance proceeds, including
proceeds of business interruption insurance, income tax refunds, and claims for
tax or other refunds against any city, county, state, or federal government, or
any agency or authority or other subdivision thereof.
"Intellectual Property" shall mean the Borrower's present and
future designs, patents, patent rights and applications therefor, trademarks and
registrations or applications therefor, trade names, service marks, inventions,
copyrights and all applications and registrations therefor, software or computer
programs, license rights, trade secrets, methods, processes, know-how, drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development, and any interest of the Borrower in the
foregoing, whether now owned or hereafter acquired by the Borrower and proceeds
of all of the foregoing, including, without limitation, proceeds of insurance
policies thereon.
"Inventory" shall mean all of the inventory of the Borrower of
every kind and description, now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of the Borrower, wherever
located, including, but not limited to, all merchandise, raw materials, parts,
supplies, work-in-process and finished goods intended for sale, together with
all the containers, packing, packaging, shipping and similar materials related
thereto, and including such inventory as is temporarily out of the Borrower's
custody or possession, including inventory on the premises of others and items
in transit, and including any returns and repossessions upon any accounts,
documents, instruments or chattel paper relating to or arising from the sale of
inventory, and all substitutions and replacements therefor, and all additions
and accessions thereto, and all ledgers, books of account, records, computer
printouts, computer runs, and other computer-prepared information relating to
any of the foregoing, and any and all proceeds of any of the foregoing,
including, without limitation, proceeds of insurance policies thereon.
4
<PAGE> 5
"Obligations" shall mean all of the Borrower's obligations,
liabilities and indebtedness to the Lender of any and every kind and nature,
whether heretofore, now or hereafter owing, arising, existing, due or payable
and howsoever evidenced, created, incurred, or owing, whether primary,
secondary, direct, indirect, contingent, fixed or otherwise (including
obligations of performance) in connection with this Agreement or by operation of
law.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code of the State of Delaware or of any other state which may be applicable in
connection with the issue of perfection or non-perfection of security interests
in the Collateral.
2. The Revolving Credit Facility.
(a) Subject to and upon the provisions of this Agreement, the Lender
establishes a revolving credit facility in favor of the Borrower. The aggregate
of all advances under the revolving credit facility are sometimes referred to in
this Agreement collectively as the "Revolving Loan." The maximum aggregate
principal amount of the Revolving Loan is Thirty-Five Million United States
Dollars (US$35,000,000).
(b) During the term of this Agreement, the Lender agrees to make
advances under the Revolving Loan as requested by the Borrower from time to
time; provided that, after giving effect to the Borrower's request to borrow,
the outstanding principal balance of the Revolving Loan would not exceed
Thirty-Five Million United States Dollars (US$35,000,000).
(c) The Borrower shall not make a request for an advance, and the
Lender shall not be obligated to make such advances, under the Revolving Loan
unless a majority of the Borrower's directors have voted in favor of making such
request.
3. Procedure for Making Advances Under the Revolving Loan. The Borrower
shall make any request for an advance under the Revolving Loan in writing to the
Lender and shall attach a copy of executed resolutions of the Borrower's
directors authorizing such request. The Lender shall have ten (10) business days
from the receipt of such written request to make such advance to the Borrower.
4. Revolving Credit Note. The obligation of the Borrower to pay the
Revolving Loan with interest shall be evidenced by a separate promissory note
payable to the Lender (as from time to time extended, amended, restated,
supplemented or otherwise modified, the "Revolving Credit Note") substantially
in the form of Exhibit A attached hereto, with appropriate insertions. The
Revolving Credit Note shall be dated as of the date of the first advance under
the Revolving Loan, shall be payable to the order of the Lender, at the times
provided in the
5
<PAGE> 6
Revolving Credit Note and shall be in the principal amount of Thirty-Five
Million United States Dollars (US$35,000,000).
5. Optional Prepayments of Revolving Loan. The Borrower may, at its
option, at any time and from time to time prepay the principal sum outstanding
under the Revolving Loan, in whole or in part, without premium or penalty. Any
amount of principal prepaid by Borrower shall then be available for the Borrower
to re-borrow in accordance with the provisions of Section 2, above.
6. Revolving Loan Account. The Lender will establish and maintain a
loan account on its books for the Borrower (the "Revolving Loan Account") to
which the Lender will (a) debit (i) the principal amount of the Revolving Loan
made by the Lender hereunder as of the date made, and (ii) the amount of any
interest accrued on the Revolving Loan made by the Lender as and when due, and
(b) credit all payments made by the Borrower to the Lender on account of the
Revolving Loan as of the date made. Absent manifest error, any and all periodic
or other statements or reconciliations, and the information contained in those
statements or reconciliations, of the Revolving Loan Account shall be presumed
conclusively to be correct and shall constitute an account stated between the
Borrower and the Lender.
7. Interest. Each advance made hereunder shall bear interest on the
unpaid principal amount thereof at a rate per annum equal to the prime rate as
published in the Wall Street Journal from time to time. Interest shall be
computed on the basis of a year of three hundred sixty (360) days for the actual
number of days elapsed and shall be payable monthly. All payments made hereunder
shall be applied first to accrued and unpaid interest, and then to principal.
8. Security Interest. In consideration of the Revolving Loan, the
Borrower hereby assigns, conveys, mortgages, pledges, hypothecates and transfers
and hereby grants to the Lender a right of setoff against and a continuing lien
upon and security interest in and to all of the Borrower's right, title and
interest in and to the following property and interests in property, whether now
owned or hereafter acquired by the Borrower and wheresoever located: (i)
Accounts; (ii) General Intangibles; (iii) Fixtures; (iv) Inventory; (v)
Equipment; (vi) Intellectual Property; (vii) all of the Borrower's deposit
accounts (general or special) with any financial institution with which the
Borrower maintains deposits; (viii) all of the Borrower's now owned or hereafter
acquired monies, chattel paper, notes, documents, instruments and any and all
other property and interests in property of the Borrower; (ix) all insurance
policies relating to any of the foregoing, including without limitation business
interruption insurance; (x) all of the Borrower's books and records relating to
any of the foregoing; (xi) all accessions and additions to, substitutions for,
and replacements of any of the foregoing; and (xii) all cash collections from,
and all other cash and non-cash proceeds of, any of the foregoing. In addition,
the Borrower shall grant and convey to the Lender mortgage liens on
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<PAGE> 7
all real property of the Borrower hereafter acquired. The Lender's liens and
security interests shall be first and prior perfected liens or security
interests with respect to all Collateral.
9. Preservation of Collateral and Perfection. Simultaneously with the
execution of this Agreement and at any time or times hereafter at the request of
the Lender, the Borrower shall execute and deliver all financing statements,
security agreements, mortgages, amendments thereto, assignments and notices
thereof or other documents (and pay the cost of delivering, filing or recording
the same in all public or private offices deemed necessary by the Lender), as
the Lender may request, in a form satisfactory to the Lender, to perfect and
maintain the security interests in the Collateral granted by the Borrower to the
Lender or to otherwise protect and preserve the Collateral and the Lender's
security interests therein or to continue to enforce the Lender's security
interests in the Collateral. Should Borrower fail to do so, the Lender is
authorized to sign any such financing statements or other documents as the
Borrower's agent. Borrower further agrees that a carbon copy, photocopy or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
10. Default and Acceleration of Obligations. If an Event of Default
shall exist or occur and be continuing, the Lender may terminate this Agreement
and upon notice of termination to the Borrower (a) the Obligations shall be
accelerated and all of the Obligations shall automatically, without further
notice of any kind, be immediately due and payable, provided that upon the
occurrence of any Event of Default referred to in paragraphs (vi), (vii), or
(viii), within the definition of "Event of Default," such termination and
acceleration shall be deemed to occur automatically without notice of any kind
being given to the Borrower or action of any kind being taken by the Lender.
11. Rights and Remedies Generally. Upon acceleration of the Obligations,
the Lender shall have, in addition to any other rights and remedies contained in
this Agreement, all of the rights and remedies of a secured party under the
Uniform Commercial Code or other applicable laws, all of which rights and
remedies shall be cumulative and non-exclusive, to the extent permitted by law.
In addition to all such rights and remedies, the Lender shall have the right to
sell, lease or otherwise dispose of all or any part of the Collateral and the
sale, lease or other disposition of the Collateral, or any part thereof, by the
Lender after an Event of Default may be for cash, credit or any combination
thereof, and the Lender may purchase all or any part of the Collateral at public
or, if permitted by law, private sale, and in lieu of actual payment of such
purchase price, may set-off the amount of such purchase price against the
Obligations then owing. Any sales of the Collateral may be adjourned from time
to time with or without notice. The Lender may, in its sole discretion, cause
the Collateral to remain on the Borrower's premises or otherwise or to be
removed and stored at premises owned by other persons, at the Borrower's
expense, pending sale or other disposition of the Collateral. The Lender shall
have
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<PAGE> 8
the right to conduct such sales on the Borrower's premises, at the Borrower's
expense, or elsewhere, on such occasion or occasions as the Lender may see fit.
12. Entry Upon Premises and Access to Information. Upon acceleration of
the Obligations, the Lender shall have the right to enter upon the premises of
the Borrower where the Collateral is located (or is believed to be located)
without any obligation to pay rent to the Borrower, or any other place or places
where the Collateral is believed to be located and kept, to render the
Collateral usable or salable, to remove the Collateral therefrom to the premises
of the Lender or any agent of the Lender for such time as the Lender may desire
in order effectively to collect or liquidate the Collateral, and/or to require
the Borrower to assemble the Collateral and make it available to the Lender at a
place or places to be designated by the Lender. Upon acceleration of the
Obligations, the Lender shall have the right to take possession of the
Borrower's original books and records, to obtain access to the Borrower's data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner the Lender deems appropriate.
13. Sale or Other Disposition of Collateral by the Lender. Any notice
required to be given by the Lender of a sale, lease or other disposition or
other intended action by the Lender with respect to any of the Collateral which
is deposited in the United States mails, postage prepaid and duly addressed to
the Borrower at least ten (10) days prior to such proposed action, shall
constitute fair and reasonable notice to the Borrower of any such action. The
net proceeds realized by the Lender upon any such sale or other disposition,
after deduction for the expenses of retaking, holding, storing, transporting,
preparing for sale, selling or otherwise disposing of the Collateral incurred by
the Lender in connection therewith, shall be applied as provided herein toward
satisfaction of the Obligations. The Lender shall account to the Borrower for
any surplus realized upon such sale or other disposition, and the Borrower shall
remain liable for any deficiency. The commencement of any action, legal or
equitable, or the rendering of any judgment or decree for any deficiency shall
not affect the Lender's security interest in the Collateral until the
Obligations are fully paid. The Borrower agrees that the Lender has no
obligation to preserve rights to the Collateral against any other parties. Upon
acceleration of the Obligations in accordance with Section 10, the Lender is
hereby granted a license or other right to use, without charge, the Borrower's
General Intangibles, Intellectual Property, Equipment, Real Estate and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale or lease and
selling or leasing any Inventory or other Collateral and the Borrower's rights
under all licenses, leases and franchise agreements shall inure to the Lender's
benefit until all Obligations are paid in full.
14. Waiver of Demand. DEMAND, PRESENTMENT, PROTEST AND NOTICE OF DEMAND,
PRESENTMENT, PROTEST AND NONPAYMENT ARE
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<PAGE> 9
HEREBY WAIVED BY THE BORROWER. THE BORROWER ALSO WAIVES THE BENEFIT OF ALL
VALUATION, APPRAISAL AND EXEMPTION LAWS TO THE EXTENT PERMITTED BY LAW.
15. Waiver of Notice. IN THE EVENT OF AN EVENT OF DEFAULT, THE BORROWER
HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE
BY THE LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS
OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR
HEARING. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS
CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.
16. Term and Termination. This Agreement shall remain in effect until
the earlier to occur of: (i) the dissolution and liquidation of the Borrower; or
(ii) the termination of this Agreement by the Lender one hundred and twenty
(120) days after written notice thereof to the Borrower, whereupon the
Obligations shall be accelerated and all of the Obligations shall automatically,
without further notice of any kind, be immediately due and payable.
17. Miscellaneous.
(a) This Agreement constitutes the complete and exclusive statement
of the terms and conditions between the parties with respect to the subject
matter hereof and supersedes and merges any prior understandings or agreements,
oral or written.
(b) This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware (other than the laws of the State
of Delaware governing choice of law).
(c) This Agreement shall be binding upon the parties and their
respective successors and assignees. No party may assign this Agreement, or any
of its rights, duties or obligations hereunder, in whole or in part, to any
person or entity without the prior written consent of the other party.
(d) The waiver or failure of any party to exercise any right in any
respect provided for herein shall not be deemed a waiver of any other or further
right hereunder.
(e) Any term or provision of this Agreement that is held invalid or
unenforceable by a court of competent jurisdiction in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or
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<PAGE> 10
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) This Agreement may not be amended, modified or altered except by
written instrument duly executed by each party expressly referencing this
Agreement and the parties' intent that it be so amended, modified or altered.
(g) Each party represents that such party has full power and
authority to enter into this Agreement and perform its obligations hereunder.
Each party represents that the person signing this Agreement on its behalf has
been properly authorized and empowered to enter into this Agreement.
(h) This Agreement may be executed in one or more counterparts and
may be executed by facsimile signature, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized on the date
first above written.
LCC INTERNATIONAL, INC.
By: /S/ PIYUSH SODHA
----------------------
Name: Piyush Sodha
Title: President & Chief Executive Officer
MICROCELL MANAGEMENT, INC.
By: /S/ ALBERT F. GRIMES
------------------------
Name: Albert F. Grimes
Title: President
11
<PAGE> 12
EXHIBIT 10.74
EXHIBIT A
REVOLVING CREDIT NOTE
US$35,000,000 December ___, 1996
FOR VALUE RECEIVED, MICROCELL MANAGEMENT, INC., a Delaware corporation
("Maker"), promises to pay to the order of LCC INTERNATIONAL, INC., a Delaware
corporation ("Holder"), at 2300 Clarendon Boulevard, Suite 800, Arlington,
Virginia 22201, or at such other place as the Holder hereof may from time to
time designate in writing, the principal sum of Thirty-Five Million United
States Dollars (US$35,000,000), or so much thereof as has been or may be
advanced or readvanced to the Maker and remains outstanding pursuant to the
terms and conditions of the Revolving Credit Facility (as hereinafter defined),
together with accrued but unpaid interest thereon at the rate hereinafter
provided, in accordance with the following:
1. Interest. Commencing as of the date of each advance under the
Revolving Credit Facility and continuing until repayment in full of all sums due
hereunder, the unpaid principal sum shall bear interest at a rate per annum
equal to the prime rate as published in the Wall Street Journal as in effect
from time to time. Interest shall be computed on the basis of a year of three
hundred sixty (360) days for the actual number of days elapsed.
2. Payments and Maturity. The unpaid principal sum, together with
interest thereon at the rate provided above, shall be payable as follows:
(a) Interest only on the unpaid principal sum shall be due and
payable monthly, commencing on the first day of the month following the month in
which this Revolving Credit Note is made, and on the first day of each month
thereafter to maturity; and
(b) Unless sooner paid, the unpaid principal sum, together with
interest accrued and unpaid thereon, shall be due and payable upon the
termination of the Revolving Credit Facility.
The advances made by the Holder to the Maker, all payments made on account
of principal hereof and all conversions of principal hereof, shall be recorded
by the Holder on the grid attached hereto which is a part of this Revolving
Credit Note. The fact that the balance hereunder may be reduced to zero from
time to time pursuant to the Revolving Credit Facility will not affect the
continuing validity of this Revolving Credit Note or the Revolving Credit
Facility, and the balance may be increased to the maximum principal sum of this
Revolving Credit Note after any such reduction to zero.
<PAGE> 13
3. Prepayment. The Maker may prepay the outstanding principal sum in
whole or in part at any time and from time to time without notice, premium or
penalty.
4. Revolving Credit Facility. This is the promissory note referred to
in the Revolving Credit Facility and Security Agreement dated of even date
herewith by and between the Maker and the Holder (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the "Revolving Credit Facility").
5. Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Revolving Credit Note:
(a) The failure of the Maker to pay to the Holder when due any and
all amounts payable by the Maker to the Holder under the terms of this Revolving
Credit Note, but only if the Maker fails to cure such default within thirty (30)
days after the Holder shall have sent the Maker written notice of such default
(to the Maker's last known address); or
(b) The occurrence of an event of default under the Revolving Credit
Facility.
6. Remedies. Upon the occurrence of an Event of Default, at the option
of the Holder, all amounts payable by the Maker to the Holder under the terms of
this Revolving Credit Note shall immediately become due and payable. Failure to
exercise this option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
7. Security. This Revolving Credit Note is secured pursuant to the
Revolving Credit Facility and reference is made thereto for a statement of the
terms and conditions of such security.
8. Waiver. Maker hereby waives demand, presentment, protest, notice of
demand, presentment, protest and nonpaymant. Maker also waives all rights to
notice and hearing of any kind upon the occurrence of an Event of Default prior
to the exercise by Holder of its rights to repossess the Collateral (as defined
in the Revolving Credit Facility) without judicial process or to replevy, attach
or levy upon the Collateral without notice or hearing.
9. Miscellaneous.
(a) Any term or provision of this Revolving Credit Note that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or
2
<PAGE> 14
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Revolving Credit Note shall
be enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(b) This Revolving Credit Note may not be changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought expressly referencing this
Revolving Credit Note and such party's intent that such waiver, change,
modification or discharge be effected.
(c) This Revolving Credit Note shall be interpreted in accordance
with the laws of the State of Delaware (other than the laws of the State of
Delaware governing choice of law).
(d) This Revolving Credit Note is not negotiable.
MAKER:
MICROCELL MANAGEMENT, INC.
By:
---------------------------
Name: Albert F. Grimes
Title: President
3
<PAGE> 15
ADVANCES AND PAYMENTS OF PRINCIPAL
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</TABLE>
<PAGE> 1
Exhibit 10.73
REVOLVING CREDIT NOTE
US$35,000,000 December 31, 1996
FOR VALUE RECEIVED, MICROCELL MANAGEMENT, INC., a Delaware corporation
("Maker"), promises to pay to the order of LCC INTERNATIONAL, INC., a Delaware
corporation ("Holder"), at 2300 Clarendon Boulevard, Suite 800, Arlington,
Virginia 22201, or at such other place as the Holder hereof may from time to
time designate in writing, the principal sum of Thirty-Five Million United
States Dollars (US$35,000,000), or so much thereof as has been or may be
advanced or readvanced to the Maker and remains outstanding pursuant to the
terms and conditions of the Revolving Credit Facility (as hereinafter defined),
together with accrued but unpaid interest thereon at the rate hereinafter
provided, in accordance with the following:
1. Interest. Commencing as of the date of each advance under the
Revolving Credit Facility and continuing until repayment in full of all sums due
hereunder, the unpaid principal sum shall bear interest at a rate per annum
equal to the prime rate as published in the Wall Street Journal as in effect
from time to time. Interest shall be computed on the basis of a year of three
hundred sixty (360) days for the actual number of days elapsed.
2. Payments and Maturity. The unpaid principal sum, together with
interest thereon at the rate provided above, shall be payable as follows:
(a) Interest only on the unpaid principal sum shall be due and
payable monthly, commencing on the first day of the month following the month in
which this Revolving Credit Note is made, and on the first day of each month
thereafter to maturity; and
(b) Unless sooner paid, the unpaid principal sum, together with
interest accrued and unpaid thereon, shall be due and payable upon the
termination of the Revolving Credit Facility.
The advances made by the Holder to the Maker, all payments made on account
of principal hereof and all conversions of principal hereof, shall be recorded
by the Holder on the grid attached hereto which is a part of this Revolving
Credit Note. The fact that the balance hereunder may be reduced to zero from
time to time pursuant to the Revolving Credit Facility will not affect the
continuing validity of this Revolving Credit Note or the Revolving Credit
Facility, and the balance may be
<PAGE> 2
increased to the maximum principal sum of this Revolving Credit Note after any
such reduction to zero.
3. Prepayment. The Maker may prepay the outstanding principal sum in
whole or in part at any time and from time to time without notice, premium or
penalty.
4. Revolving Credit Facility. This is the promissory note referred to
in the Revolving Credit Facility and Security Agreement dated of even date
herewith by and between the Maker and the Holder (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the "Revolving Credit Facility").
5. Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Revolving Credit Note:
(a) The failure of the Maker to pay to the Holder when due any and
all amounts payable by the Maker to the Holder under the terms of this Revolving
Credit Note, but only if the Maker fails to cure such default within thirty (30)
days after the Holder shall have sent the Maker written notice of such default
(to the Maker's last known address); or
(b) The occurrence of an event of default under the Revolving Credit
Facility.
6. Remedies. Upon the occurrence of an Event of Default, at the option
of the Holder, all amounts payable by the Maker to the Holder under the terms of
this Revolving Credit Note shall immediately become due and payable. Failure to
exercise this option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
7. Security. This Revolving Credit Note is secured pursuant to the
Revolving Credit Facility and reference is made thereto for a statement of the
terms and conditions of such security.
8. Waiver. Maker hereby waives demand, presentment, protest, notice of
demand, presentment, protest and nonpaymant. Maker also waives all rights to
notice and hearing of any kind upon the occurrence of an Event of Default prior
to the exercise by Holder of its rights to repossess the Collateral (as defined
in the Revolving Credit Facility) without judicial process or to replevy, attach
or levy upon the Collateral without notice or hearing.
9. Miscellaneous.
2
<PAGE> 3
(a) Any term or provision of this Revolving Credit Note that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Revolving Credit Note shall
be enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(b) This Revolving Credit Note may not be changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought expressly referencing this
Revolving Credit Note and such party's intent that such waiver, change,
modification or discharge be effected.
(c) This Revolving Credit Note shall be interpreted in accordance
with the laws of the State of Delaware (other than the laws of the State of
Delaware governing choice of law).
(d) This Revolving Credit Note is not negotiable.
MAKER:
MICROCELL MANAGEMENT, INC.
By:/S/ ALBERT F. GRIMES
--------------------------
Name: Albert F. Grimes
Title: President
3
<PAGE> 4
ADVANCES AND PAYMENTS OF PRINCIPAL
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</TABLE>
<PAGE> 1
Exhibit 10.74
SHAREHOLDERS' AGREEMENT
of
MICROCELL MANAGEMENT, INC.
by and among
LCC INTERNATIONAL, INC.,
ALBERT F. GRIMES,
DONALD G. MCCLURE, JR.,
R. MICHAEL GILL,
ROY R. MARKERT, III
JOSEPH D. CROFT, III
PAMELA H. O'NEIL, and
GARY L. GRIMES
December 31, 1996
<PAGE> 2
SHAREHOLDERS' AGREEMENT OF MICROCELL MANAGEMENT, INC.
THIS SHAREHOLDERS' AGREEMENT ("Agreement") of MICROCELL MANAGEMENT,
INC., a Delaware Corporation (the "Company"), is made on December 31, 1996 by
and among ALBERT F. GRIMES, DONALD G. MCCLURE, JR., R. MICHAEL GILL, ROY R.
MARKERT, III, JOSEPH D. CROFT, III, PAMELA H. O'NEIL and GARY L. GRIMES (each
an "Individual Party") and LCC INTERNATIONAL, INC., a Delaware corporation
("LCC") (the Individual Parties and LCC, collectively, the "Parties").
W I T N E S S E T H:
WHEREAS, Microcell Management, L.L.C., a Maryland limited liability company
("Microcell"), is engaged in the business of the acquisition, build-out and
operation of wireless communications towers (the "Business"); and
WHEREAS, certain of the Individual Parties and LCC are all of the
members of Microcell; and
WHEREAS, the Parties desire to secure funding for Microcell's operations
and to finance the expansion and growth of the Business; and
WHEREAS, LCC desires to provide such funding; and
WHEREAS, in connection with such funding, the Parties desire to restructure
Microcell by forming a Delaware corporation to engage in the Business and
dissolving Microcell; and
WHEREAS, the Parties desire to define their respective rights and
obligations as shareholders of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
<PAGE> 3
1.1. "Affiliate" of a Party shall mean a person or group of persons:
(a) which owns or controls, directly or indirectly, such Party;
(b) which is owned or controlled, directly or indirectly, by such
Party; or
(c) which is owned or controlled, directly or indirectly, by any
person qualifying as an Affiliate under Section 1.1 (a) or (b) hereof;
1.2. "Agreement" shall mean this Shareholders' Agreement, as the same
may be amended or supplemented from time to time;
1.3. "Board" shall mean the Board of Directors of the Company;
1.4. "Business Day" shall mean any day other than a Saturday, Sunday or
public holiday under the laws of the United States, or any other day on which
banking institutions are authorized to close in Arlington, Virginia, U.S.A.;
1.5. "By-laws" shall mean the By-laws of the Company, in the form
agreed to by the Shareholders, as the same may be amended or supplemented
from time to time;
1.6. "Class A Shareholder" shall mean a holder of Class A Shares;
1.7. "Class A Shares" shall mean Class A Shares of the Company's
capital stock, par value $0.01 per share;
1.8. "Class B Shareholder" shall mean a holder of Class B Shares;
1.9. "Class B Shares" shall mean Class B Shares of the Company's
capital stock, par value $0.01 per share;
1.10. "Confidential Information" shall have the meaning assigned to it
in Section 7.4(a) hereof;
1.11. "Control" shall mean the power, right or authority to direct or cause
the direction of the management and/or policies of a person, or to elect a
majority of the board of directors or similar governing body of a person,
whether through the ownership of securities or similar ownership interest, by
contract or otherwise, and references to "change of control" include the
transfer, disposition or relinquishment, whether directly or indirectly, of
control;
1.12. "Revolving Credit Facility" shall have the meaning assigned to it
in Section 4.3 hereof;
2
<PAGE> 4
1.13. "Fiscal Year" shall mean with respect to the Company the calendar
year ending December 31;
1.14. "LCC Software" shall mean (a) LCC's proprietary CellCAD II, ANET,
CellQUEST. PenCAT and CMA software (including any and all technology, technical
information, methods, know-how, trade secrets and copyrights related thereto) as
may be applied or used by LCC in connection with the LCC Services or which may
be licensed by LCC to the Company pursuant to Section 3.2 hereof and (b) the
Cell Manager workflow management software products distributed by LCC during the
Term;
1.15. "Laws" shall mean any statutes, laws, ordinances, rules,
requirements, decrees, orders or regulations of any governmental entity;
1.16. "Lien" shall mean any mortgage, claim, charge, lien, security
interest, easement, right of way, pledge, restriction, right of pledge, right of
first refusal or encumbrance of any nature whatsoever;
1.17. "Net Book Value" shall mean the net book value of the Shares as
determined by the auditors of the Company in accordance with generally accepted
accounting principles by reference to the accounting records of the Company;
1.18. "Offeror" shall have the meaning assigned to it in Section 8.3
hereof;
1.19. "Person" shall mean any individual, company, corporation, firm,
partnership, joint venture, association, organization or trust in each case
whether or not having a separate legal identity;
1.20. "Shareholder" shall mean each of LCC (in respect of Shares held
by LCC and its Affiliates), and the Individual Parties;
1.21. "Shares" shall mean the shares of authorized stated capital, par
value $0.01 per share, of the Company held by the Shareholders;
1.22. "Term" shall have the meaning assigned to it in Section 9.1
hereof;
1.23. "Termination for Cause" shall have the meaning assigned to it in
Section 8.6 hereof;
1.24. "Trademarks" shall mean certain marks, trade names and other
intellectual property owned by LCC, including LCC, LCC International, ANET,
CellCAD, CellQUEST, CellHOST, CMA, EXP-2000, RSAT, MSAT, PenCAT and any other
trademark, trade name or service mark used by LCC or its Affiliates in
connection with the marketing, sale and distribution of LCC's products and
services; and
3
<PAGE> 5
1.25. "Transfer" shall mean any sale, transfer, assignment or other
disposition of Shares or of rights in or associated with Shares.
ARTICLE II. THE COMPANY
2.1. Primary Purposes of the Company. The primary purposes of the Company
are to engage in the business of, among other things, the acquisition, build-out
and operation of wireless communications towers.
2.2. Distributions. Cash generated by the Company from its operations in
excess of the amount necessary to fund capital expenditures, working capital
requirements, interest and other expenses of the Company as determined by the
Board, may be distributed to the Shareholders as a dividend or other cash
shall be made at any time that any indebtedness under the Revolving Credit
Facility is outstanding.
ARTICLE III. OBLIGATIONS OF THE PARTIES
3.1. Assignment of Contracts. Simultaneously with the execution hereof or
as soon as reasonably practicable thereafter, the Parties shall cause Microcell
to assign to the Company all of Microcell's interests in and rights under the
contracts set forth on Schedule 3.1 hereto (the "Contracts") in consideration of
the Company's payment to Microcell of Three Hundred Forty-Two Thousand Six
Hundred Eighty-Five and Fifty-One Hundredths United States Dollars (U.S.
$342,685.51), proceeds of which will be used by Microcell to repay the principal
amount outstanding under that certain Promissory Note by and between Microcell
and LCC dated November 13, 1996 in the initial principal amount of U.S.
$342,685.51. The Shareholders shall cause the Company to assume the Contracts by
execution of an assignment and assumption agreement in substantially the form
attached hereto as Exhibit A.
3.2. Grant of Trademark License by LCC. LCC shall grant to the Company a
nonexclusive worldwide right and license to use the Trademarks in connection
with the marketing and provision of the Company's services. The Shareholders
shall cause the Company to execute a trademark license agreement substantially
in the form attached hereto as Exhibit B.
3.3. Dissolution and Liquidation of Microcell. The Parties shall vote on
the date hereof to dissolve Microcell, and hereby appoint the Board in its
discretion to take all subsequent or further actions as may be necessary or
advisable to be taken in order
4
<PAGE> 6
to complete the dissolution, liquidation and winding up of the business and
affairs of Microcell at such time as it determines to be reasonably practicable.
3.4. Employment of Certain Microcell Employees. The Shareholders shall
cause the Board to appoint and employ at-will the following Microcell employees
as officers or employees of the Company as of the date hereof:
<TABLE>
<S> <C>
Albert F. Grimes President
Roy R. Markert, III Vice President
Joseph D. Croft, III Vice President Finance
Pamela H. O'Neil Director - Administration
Gary L. Grimes Director - Operations
</TABLE>
Each Shareholder hereby acknowledges that in the absence of any written
agreement to the contrary the employment of the above-named individuals with the
Company is at-will and may be terminated by such individual or by the Company at
any time, for any reason, with or without cause or notice.
3.5. Other Services. The Shareholders acknowledge and agree that LCC or its
Affiliates may in the future provide services, technology, facilities and
personnel to the Company on such terms and conditions as shall be mutually
agreed by the Company, LCC and its Affiliates, provided that such terms and
conditions shall be negotiated in good faith, in an arm's length transaction,
and shall in no event be less favorable to the Company than those which could
have been obtained by the Company from an independent third party.
ARTICLE IV. CAPITALIZATION OF THE COMPANY
4.1. Initial Capitalization. The Company shall have an authorized minimum
capital without right of withdrawal of one thousand United States Dollars (U.S.
$1,000) divided into one hundred thousand (100,000) Shares of capital stock with
a par value of $0.01, of which eighty-three and seventy-five one hundredths
percent (83.75%) shall be designated as Class A Shares, and sixteen and
twenty-five one hundredths percent (16.25%) shall be designated as Class B
Shares. Upon formation of the Company in accordance with Section 2.1 hereof, LCC
will subscribe for and purchase all of the Class A Shares, and the Individual
Parties will subscribe for and purchase all of the Class B Shares as follows:
<TABLE>
<S> <C>
LCC 83,750 Class A Shares
Albert F. Grimes 3,594 Class B Shares
Donald G. McClure, Jr. 3,328 Class B Shares
</TABLE>
5
<PAGE> 7
<TABLE>
<S> <C>
R. Michael Gill 3,328 Class B Shares
Roy R. Markert, III 2,500 Class B Shares
Joseph D. Croft, III 2,500 Class B Shares
Pamela H. O'Neil 500 Class B Shares
Gary L. Grimes 500 Class B Shares
</TABLE>
4.2 Additional Shareholder Capital. In the event that the Board shall at
any time determine that the Company will require additional capital
contributions from the Shareholders, the Board shall promptly notify each of the
Shareholders of the amount of such proposed capital contribution and the amount
which each Shareholder would be required to contribute (which amount shall be in
proportion to such Shareholder's ownership of Shares as of the date of such
notice), the proposed use thereof, the price per share, and the date on which
such capital contribution would be required to be delivered to the Company,
which date shall be no later than forty-five (45) days following the date of
such notice; provided, that (i) LCC shall be solely responsible for all capital
contributions up to an aggregate amount of Ten Million United States Dollars
(U.S.$10,000,000), (ii) no Individual Party shall be required to make a capital
contribution until LCC has contributed such amount of capital to the Company,
and (iii) no additional Shares shall be issued to LCC with respect to such
capital contribution.
4.3. Revolving Credit Facility. The Shareholders recognize that as a new
startup, the Company's operations will not generate sufficient cashflow to
finance its cash requirements in the foreseeable future. LCC shall provide a
revolving credit facility to the Company as set forth in the form of the
Revolving Credit Facility and Security Agreement attached hereto as Exhibit C
(the "Revolving Credit Facility"). Each Shareholder hereby affirms that the
Revolving Credit Facility is commercially reasonable and on arm's length terms
and agrees to cause the Company to execute the Revolving Credit Facility
simultaneously with the execution hereof.
4.4. Failure to Contribute. In the event that the Board shall at any time
determine, with the consent of the holders of a majority of the Class B Shares
issued and outstanding, that the Company will require additional capital
contributions and any Shareholder fails to deliver to the Company its full
proportionate share of any such capital contribution by the due date set forth
in the notice described in Section 4.2 hereof, the Company, at the direction of
the Shareholders who made the required capital contribution, shall, within ten
(10) Business Days after the due date, determine whether to (a) proceed with the
proposed use of such capital contribution, but using only the capital
contributions already provided to the Company by the contributing Shareholders,
(b) borrow funds in an amount not greater than the amount which the
non-contributing Shareholders failed to contribute, with the interest payable
thereon to be paid by such non-contributing Shareholders or (c) provide each
6
<PAGE> 8
Shareholder that delivered its full proportionate share of such capital
contribution an opportunity to either (i) contribute additional capital pro rata
in an amount not greater than the aggregate amount which the non-contributing
Shareholders failed to contribute or (ii) lend funds to the Company pro rata in
an amount not greater than the aggregate amount which the non-contributing
Shareholders failed to contribute, such loan to bear interest at a rate per
annum equal to the prime rate of Citibank, N.A. as adjusted from time to time
and to be on such other teens and subject to such conditions as shall be
mutually agreed upon by such lending Shareholders and the Company, with the
interest payable thereon to be paid by such non-contributing Shareholders.
4.5. Evidence of Shares. The number of Shares held by each of the
Shareholders shall be adjusted to reflect all amounts delivered to the Company
pursuant to Sections 4.2 (other than amounts up to an aggregate of Ten Million
United States Dollars (U.S.$10,000,000) delivered to the Company by LCC) and 4.4
hereof (other than loans made pursuant to Section 4.4(b) or 4.4(c)(ii) hereof).
ARTICLE V. MANAGEMENT OF THE COMPANY
5.1 Board of Directors. Except where the approval of the Shareholders is
required by applicable Laws, the By-laws or this Agreement, the management and
control of the business and affairs of the Company shall be vested in the Board.
The Board shall have the power to set policies and exercise all such authority
that is not inconsistent with applicable Laws, this Agreement or the By-laws.
All actions of the Board shall require the affirmative approval of a majority of
the members of the entire Board.
5.2 Composition of the Board. The Board shall consist of five (5) members.
No change shall be made in the size of the Board without the consent of
Shareholders representing a majority of the Shares issued and outstanding. The
holders of the Class A Shares shall designate four (4) members of the Board and
the holders of Class B Shares shall designate one (1) member of the Board. Each
Shareholder class shall have the right to replace any director designated by
such Shareholder class and to designate a substitute director in the event that
a director previously designated by it shall resign, retire, die or otherwise be
unavailable to serve. LCC shall appoint the Chairman of the Board.
5.3. Meetings; Quorum. Meetings of the Board shall be held in Arlington,
Virginia. At least three (3) Business Days' advance written notice of each Board
meeting stating the purpose thereof shall be provided by the Chairman of the
Board or the secretary to each director in writing, by facsimile or by
telephone; provided, that any such director
7
<PAGE> 9
may waive compliance with such notice requirement. Any director may be
represented at a meeting of the Board by means of conference telephone, video or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by directors of the
Board in a meeting by means of a conference telephone, video or similar
communications equipment shall constitute presence in person at a meeting. Three
directors shall constitute a quorum at any meeting of the Board. If any meeting
of the Board is adjourned because of the absence of a quorum, such meeting will
be reconvened on the fifth Business Day following such adjournment and three
directors shall constitute a quorum at such reconvened meeting.
5.4. Board's Specified Powers. Without limiting the generality of the
foregoing, the Board shall have full authority over the following actions:
(a) the approval of any additional capital contributions;
(b) the borrowing by the Company of any sum or the issuance of any
debt securities of the Company;
(c) the making of any loan or advance or the giving of any credit by
the Company (other than normal trade credit) to any person or the giving of any
guarantee or indemnity to secure the liabilities or obligations of any person or
the creation of any Lien over the whole or any part of the property or assets of
the Company;
(d) the sale, transfer, lease, assignment or other disposal of a
material part of the property or assets of the Company or contracting to do so,
otherwise than in the ordinary and proper course of its business;
(e) the merger, consolidation, liquidation, or dissolution of the
Company, the entering into of a composition with creditors or the authorization
of any filing for bankruptcy by the Company, or the transformation of the
Company into another type of legal entity;
(f) the entering into any contract, agreement, commitment,
transaction or series of transactions requiring the expenditure by the Company,
or the making of any investment, which would exceed U.S.$100,000 in the
aggregate;
(g) the issuance of any shares of the authorized capital of the
Company or the authorization or issuance of any new class or series of capital
of the Company or any securities convertible into or exchangeable for any class
or series of capital of the Company;
8
<PAGE> 10
(h) the recapitalization, reclassification, consolidation,
subdivision or conversion of, or the alteration of any rights attaching to, any
class or series of authorized capital of the Company;
(i) the appointment of any committee of the Board or the delegation
of any power of the Board to such committee;
(j) the appointment or dismissal of the president of the Company;
(k) the entering into of any joint venture, partnership or
profit-sharing agreement with any third party otherwise than in the ordinary and
proper course of its business;
(l) the entering into of any contract or transaction with a
Shareholder or any Affiliate of a Shareholder;
(m) the amendment or repeal of any provision of the By-laws or other
constituent documents of the Company, including, without limitation, the
changing of the business purpose of the Company; and
(n) the amount of any dividend or distribution to be paid in
accordance with Section 2.2 hereof.
5.5. Appointment of Officers. As soon as practicable following the
execution of this Agreement, the Board shall appoint the officers listed in
Section 3.4 hereof and such other officers and assistant officers as the Board
shall deem necessary to operate the Company.
5.6. Authority of Officers. All matters and decisions set forth in Section
5.4 shall be referred by the officers of the Company to the Board for its
approval prior to any decision or action with respect thereto. The Board shall
remove or suspend any officers or other personnel if the Board determines that
such persons have taken an unauthorized action or decision in contravention of
this provision.
5.7. Consent of Class B Shareholders. The Board shall obtain the consent of
the holders of a majority of the issued and outstanding Class B Shares prior to
authorizing any merger or sale of substantially all the assets of the Company
with or into any entity which is at least eighty percent (80%) owned by LCC.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
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6.1. Representations and Warranties of LCC. LCC represents and warrants to
the Individual Parties that:
(a) Organization and Power. LCC is a corporation duly organized and
validly existing under the laws of the State of Delaware, United States of
America, with all requisite power and authority to own its properties and to
conduct its business as presently owned and conducted;
(b) Authorization. This Agreement has been duly authorized, executed
and delivered by LCC and constitutes a valid and binding obligation of LCC;
(c) No Conflicts. The execution and delivery of this Agreement by
LCC and the consummation of the transactions herein contemplated will not
violate or conflict with or constitute a default or breach or result in the
creation or imposition of any Lien, under any of the terms of provisions of (i)
LCC's certificate of incorporation, (ii) any contract, agreement, lease or
mortgage or other agreement to which LCC is a party or by which LCC is bound, or
(iii) any Law binding upon LCC or its property;
(d) Microcell Membership. It is a member of Microcell and it and the
Individual Parties (except Pamela H. O'Neil and Gary L. Grimes) together
constitute all of the members of Microcell.
6.2. Representations and Warranties of the Individual Parties. Each
Individual Party represents and warrants to LCC that:
(a) Power and Authority. He or she has all requisite power and
authority to enter into this Agreement and perform his or her obligations
hereunder;
(b) Authorization. This Agreement has been duly authorized, executed
and delivered by him or her and constitutes his or her valid and binding
obligation;
(c) No Conflicts. The execution and delivery of this Agreement by
him or her and the consummation of the transactions herein contemplated will not
violate or conflict with or constitute a default or breach or result in the
creation or imposition of any Lien, under any of the terms or provisions of (i)
any contract, agreement, lease or mortgage or other agreement to which he or she
is a party or by which he or she may be bound, or (ii) any Law binding upon such
Individual Party or his or her property;
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(d) Microcell Membership. With the exception of Pamela H. O'Neil and
Gary L. Grimes, he is a member of Microcell and he and the other Parties
together constitute all of the members of Microcell.
6.3. Investment Representations and Warranties. Each Party hereby
represents and warrants that:
(a) Such Party will acquire the Shares solely for investment
purposes and with no present intention to sell or otherwise dispose of the
Shares or any part thereof;
(b) Such Party neither has knowledge of nor anticipates any
circumstance, condition or event which might hereafter occur which would cause
the sale of the Shares by such Party;
(c) Upon the delivery of a certificate evidencing the Shares, such
Party will execute and deliver to and for the benefit of the Company such
additional instruments as the Company may require to evidence such intent; and
(d) Such Party will acquire the Shares with the understanding that
the Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), or the equivalent securities laws of any state and may not be
transferred in the absence of such registration or an exemption therefrom under
such Act or any such laws. Such Shares may be transferred only in compliance
with the Act or such laws or pursuant to the provisions hereof. Such Party
understands that the Company has no present intention to register the Shares
under the Act or any such laws.
ARTICLE VII. COVENANTS AND AGREEMENTS OF THE PARTIES
7.1. LCC Technology. If, at any time during the Term, any Party learns of
or suspects any infringement by a third party of LCC's proprietary rights in the
LCC Software or any copyright, patent, trademark, trade secret, mask work or
other intellectual property right of LCC, such Party shall promptly notify LCC,
and shall cause the Company to take such action as LCC, at its sole cost and
expense, shall reasonably request in connection with said infringement or breach
(including the commencement of proceedings and instruction of counsel).
7.2. Competition - Individual Party Restrictions. (a) Each Individual Party
hereby covenants in favor of the Company and LCC that, except with the prior
written consent of the Company and LCC, such Individual Party shall not within
the
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territory of North America, and shall cause his or her Affiliates not to, for so
long as he or she is a Shareholder and for a period of two (2) years following
the Transfer of all of his or her Shares:
(i) except in connection with his or her ownership of Shares
and participation in the management of the Company, engage,
participate, assist, invest, lend money to or have an
equity interest, directly or indirectly, whether as
partner, owner, consultant, agent or otherwise, in any
business, enterprise or activity involving the acquisition,
lease, sale-leaseback, build-to-suit or operation of
wireless communications towers in North America
(collectively, the "Competitive Activities"), unless (i)
such business, enterprise or activity conducts or involves
a Competitive Activity in addition to other activities
which are not Competitive Activities, and the particular
involvement of the Individual Party or his or her
Affiliates is separate and unrelated to the Competitive
Activity, or (ii) the Individual Party or his or her
Affiliates possesses an ownership interest equal to five
percent (5%) or less of the total outstanding voting shares
or equity of such business, enterprise or activity and does
not take any active role in the management or operations of
such business, enterprise or activity;
(ii) engage, hire, suggest or assist in or influence the
engagement or hiring by any competing organization of, any
salesman, distributor, supplier, employee or officer of the
Company, LCC or any Affiliate of LCC, or otherwise cause or
encourage any person having a business relationship with
the Company or LCC to sever such relationship with, or
commit any act inimical to, the Company, LCC or any
Affiliate of LCC; or
(iii) cause or permit any person directly or indirectly under their
Control to do any of the foregoing acts or things.
7.3. Indemnification. (a) Each Party agrees to indemnify, defend and hold
harmless the Company and the other Parties, their lawful successors and assigns,
from and against any and all losses, liabilities, claims, damages, costs and
expenses including reasonable legal fees and disbursements in connection
therewith (collectively, "Claims") asserted against or incurred by the Company
or such other Party which arise out of, result from or may be payable by virtue
of, any breach of any material representation, warranty, covenant or agreement
made or material obligation required to be performed by the indemnifying Party
pursuant to this Agreement.
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(b) In the case of a third party Claim which is subject to
indemnification under this Section 7.3, the indemnifying Party shall be notified
promptly in writing of the existence of any such Claim at any time instituted
against or made upon the indemnified Party or the Company by any third party,
and shall be given the opportunity to defend the same with counsel of its
choice, in which defense the indemnified Party or the Company, as the case may
be, shall cooperate. If the indemnifying Shareholder fails promptly to undertake
such defense, then the indemnified Party, or the Company, as the case may be,
may undertake the defense with counsel of its choice, in which case the
indemnifying Party shall bear the cost of such defense, including reasonable
legal fees and disbursements in connection therewith, and shall pay the amount
of any judgment or settlement.
7.4. Confidentiality. (a) All information, whether written or oral,
relating to the Company, the Parties or their Affiliates, or their respective
businesses or operations ("Confidential Information"), disclosed by any Party
(the "Disclosing Party") to any other Party (or its directors, officers,
employees or representatives) shall be kept strictly secret and confidential and
shall not be disclosed to any person except to the extent that any such
disclosure is necessary in connection with the performance of this Agreement,
and except to the extent that (i) such information is known to such other Party
when received or is or subsequently becomes lawfully obtained from other
sources; (ii) the duty as to confidentiality and non-use is waived in writing by
the Disclosing Party; or (iii) disclosure of such information is required by
applicable Laws or is validly ordered by a governmental entity. The Parties
further agree that they shall not use, nor permit their respective Affiliates to
use, any Confidential Information for any purpose whatsoever except in the
manner expressly provided or contemplated in this Agreement.
(b) Each of the Parties agrees to take, and to cause its respective
Affiliates and the Company to take, adequate security and precautionary measures
to effect compliance with this Section 7.4 by directors, officers, employees and
agents of each of the Parties, its respective Affiliates and the Company who are
given access to Confidential Information. Procedures for the handling and
safeguarding of Confidential Information shall be as determined from time to
time by the Board.
(c) Each of the Parties hereby acknowledges that the Disclosing
Party would be irreparably harmed by a breach of this Section 7.4 and it would
not be possible to estimate damages resulting from such a breach. The Parties
agree that the Disclosing Party shall be entitled to injunctive relief to
prevent a breach or continued breach of this Section 7.4, or any part of it, and
to secure the enforcement of this Section 7.4, and shall be entitled to recover
from the breaching Party reasonable legal fees and all costs and expenses
incurred in connection with such an action.
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ARTICLE VIII. SHARE TRANSFERS
8.1. Restrictions on Transfers. No Shareholder shall or shall attempt to
Transfer or grant a Lien upon any of its Shares, or rights in or associated with
such Shares, except in compliance with the provisions of this Article VIII, and
any Transfer by a Shareholder of its Shares in violation of this Article VIII
shall be invalid and of no force and effect. Except as otherwise permitted
herein, no Transfer of Class B Shares shall be permitted prior to the third
anniversary of the date hereof. The share certificates evidencing the Shares
shall contain an appropriate legend to reflect the restrictions on Transfer set
forth herein. It shall be a condition to any Transfer of the Shares that the
Shareholders make appropriate adjustment to the number of members of the Board
to be designated by each class of Shareholders so as to reflect the ownership of
the Shares after giving effect to such transfer. In no event shall any
Shareholder Transfer Shares to any Person that is in competition with any
business activity of the Company, LCC or any Affiliate of LCC.
8.2. Certain Transfers by Class B Shareholders. Any Class B Shareholder may
Transfer Class B Shares (a) to another Class B Shareholder, (b) to a trust for
estate planning purposes, provided that the transferee shall be bound by this
Agreement and shall execute an undertaking to such effect in form and substance
satisfactory to the Company, or (c) in the event of the death of a Class B
Shareholder, to such Shareholder's legatees and heirs, who shall be bound by
this Agreement.
8.3. Right of First Refusal. If at any time after the third anniversary of
the date hereof, any Class B Shareholder (the "Transferring Shareholder")
desires to Transfer any of its Shares other than in an underwritten public
offering pursuant to the provisions of the Registration Rights Agreement (as
defined below) or pursuant to Section 8.2 above, such Transfer shall take place
only in accordance with the following procedures:
(a) The Transferring Shareholder shall give written notice to the
Class A Shareholder (the "Other Shareholder") within thirty (30) days after
receipt of a written, bona fide offer (the "Offer") from a third party (the
"Offeror"), which is signed by the Offeror to purchase all or part of the Shares
that are the subject of the Offer. Such written notice shall specify the name of
the Offeror, the identity of those persons Controlling the Offeror and the terms
of the Offer, and shall be accompanied by existing copies of any agreement or
documents executed or delivered, or to be executed or delivered, by the
Transferring Shareholder and the Offeror.
(b) The Other Shareholder shall have the exclusive right for a
period of sixty (60) days after receipt of such notice from the Transferring
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Shareholder to purchase all of the Shares that are the subject of the Offer upon
the same terms and conditions contained in the Offer.
(c) In the event that the Other Shareholder elects not to purchase
the Shares which are the subject of the Offer within said sixty (60) day period,
the Transferring Shareholder shall have the right during the ensuing ninety (90)
day period to Transfer to the Offeror the Shares offered to the Other
Shareholder on terms which are not more favorable to the Offeror than the terms
set forth in the notice to the Other Shareholder. The Offeror shall as a
condition to such purchase agree in writing to be bound by this Agreement to the
same extent that the Transferring Shareholder was bound. If such Transfer is not
completed within such ninety (90) day period the Transferring Shareholder shall
be required, before transferring its Shares, to re-offer the Shares to the Other
Shareholder in the manner set forth in this Article VIII.
(d) The Transfer of the Shares resulting from the acceptance of the
Offer by the Other Shareholder in accordance with this Section 8.3 shall take
place at a closing to be held within ten (10) Business Days following the
earlier to occur of: (i) the acceptance of the Offer by such Other Shareholder,
or (ii) at such other time as the Transferring Shareholder and the Other
Shareholder shall mutually agree. At such closing, the Other Shareholder shall
pay the purchase price for the Shares against delivery by the Transferring
Shareholder of (i) documentary evidence reasonably satisfactory to the Other
Shareholder of the Transfer of all of the Shares by the Transferring Shareholder
to the Other Shareholder; (ii) a sales agreement in form reasonably satisfactory
to the Other Shareholder containing, among other things, a representation and
warranty of the Transferring Shareholder that the Transferring Shareholder is,
and Other Shareholder shall be, the record and beneficial owner of such Shares
with good title thereto, free and clear of all Liens; and (iii) resignations of
those members of the Board designated by the Transferring Shareholder (if any)
as shall be necessary to effect the adjustment required by Section 8.1 hereof.
8.4. Transfers by LCC; Rights of Class B Shareholders. If LCC transfers its
Shares by way of sale, the Class B Shareholders shall have the right of co-sale
provided in this Section 8.4. In the event that LCC receives a bona fide offer
to purchase at least fifty-one percent (51%) but less than one hundred percent
(100%) of all issued and outstanding Shares of the Company from any prospective
purchaser (a "Purchaser") and should LCC desire to sell such Shares, it shall
give to the Class B Shareholders written notice thereof specifying the name of
the Purchaser, the terms of the offer, and the number of Shares that are subject
to the offer. LCC shall either decline such offer, or prior to accepting any
such offer, arrange for the Purchaser to make in lieu of the offer a substitute
offer to purchase the same number of Shares that were the subject of the offer,
and upon the same terms as the offer, from LCC and the Class B Shareholders. In
the event a
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substitute offer is made, LCC, on the one hand, and the Class B Shareholders as
a class, on the other hand, shall be entitled to sell the following number of
Shares to the Purchaser: (i) the total number of Shares proposed to be sold,
multiplied by (ii) a fraction, the denominator of which shall be the number of
Shares owned by both classes of Shareholders, and the numerator of which shall
be, in the case of LCC, the number of Shares owned by LCC, or in the case of the
Class B Shareholders, the number of Shares owned by the Class B Shareholders.
8.5. Transfers by LCC; Rights of LCC. If LCC transfers all of its Class A
Shares by way of sale, it shall have the right to require the Class B
Shareholders to sell all of their Class B Shares as provided in this Section
8.5. In the event that LCC receives a bona fide third party offer to purchase
one hundred percent (100%) of its Class A Shares from any Purchaser, it shall
give to the Class B Shareholders written notice thereof specifying the name of
the Purchaser, and the terms of the offer. LCC may decline such offer or require
the Class B Shareholders as a class to sell all of the Class B Shares to the
Purchaser upon the same terms as the offer.
8.6. Redemption of Class B Shares Upon Certain Events. (a) The Shareholders
agree that the Company shall have the right to redeem all Shares held by an
Individual Party who shall be an officer or employee of the Company upon
termination of such Individual Party's employment in accordance with the
following procedures:
(i) In the event that an Individual Party resigns prior to the first
anniversary of the date hereof, or is Terminated for Cause at
any time, such Individual Party's Shares may be redeemed at any
time thereafter, at the Company's option, at a purchase price
equal to the Net Book Value of such Shares as of the date of the
Company's notice of redemption.
(ii) In the event that an Individual Party resigns on or after the
first anniversary of the date hereof, the Company may at any
time thereafter, at its option, redeem such Individual Party's
Shares at a purchase price equal to the fair market value of
such Shares as of the date of the Company's notice of
redemption.
(iii) In the event that an Individual Party's employment is terminated
other than as set forth in Section 8.6(a)(i) or (ii) hereof, the
Company may, at any time after January 1, 1999, redeem such
Individual Party's Shares at a purchase price equal to the fair
market value of such Shares as of the date of the Company's
notice of redemption.
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(iv) Fair market value of an Individual Party's Shares shall be
determined by the Chairman of the Board and such Individual
Party or, if they are unable to agree on fair market value
within fifteen (15) days of such Individual Party's termination,
the Chairman of the Board and such Individual Party shall
appoint an independent appraiser to determine fair market value
of such Shares. The determination of such appraiser shall be
conclusive. For purposes of determining fair marker value
pursuant to this Section 8.6(a)(iv): (A) if, during the first
twelve months during which this Agreement is in effect, there
are loans outstanding under the Revolving Credit Facility in the
aggregate amount of up to seven million dollars ($7,000,000.00),
a capital contribution of seven million dollars ($7,000,000.00)
shall be deemed to have been made to the Company by LCC as of
the date hereof; and (B) if, at any time subsequent to the first
twelve months during which this Agreement is in effect, there
are loans outstanding under the Revolving Credit Facility in the
aggregate amount of at least ten million dollars
($10,000,000.00), then in addition to the deemed capital
contribution as set forth in Section 8.6(a)(iv)(A), an
additional capital contribution of three million dollars
($3,000,000.00) shall be deemed to have been made to the Company
by LCC as of the first day of the thirteenth month after the
date hereof.
(v) For purposes of this Section 8.6, "Termination for Cause" shall
mean termination of an Individual Party's employment for a
material breach of this Agreement by such Individual Party;
material neglect or abdication by such Individual Party of his
or her duties, including such Individual Party's refusal to
perform work assigned to him or her; commission of a crime or
breach of fiduciary duty by such Individual Party or involvement
of such Individual Party in fraud, deceit, dishonesty,
misappropriation of funds or any intentional act that materially
impairs the goodwill or business of the Company if the same is
not cured within five (5) business days after notice thereof by
the Company to the Individual Party.
8.7. Class B Shareholders' Put Option Right. (a) The holders of at least
eighty percent (80%) of the issued and outstanding Class B Shares shall have the
right at any time after the third anniversary of the date hereof to request by
written notice to the Company signed by such Class B Shareholders that the
Company engage an investment banker to determine the economic feasibility of an
initial underwritten public offering of shares of the Company's common stock (an
"Initial Public
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Offering"). The Company shall select and engage an investment banker within
thirty (30) days following receipt of such request.
(b) If the investment banker determines that in its opinion an
Initial Public Offering can be completed such that (i) the proceeds of such
Initial Public Offering would be greater than Twenty Million United States
Dollars (U.S. $20,000,000) and the anticipated price per share would imply a
valuation of the Company prior to consummation of such Initial Public Offering
of at least Sixty Million United States Dollars (U.S. $60,000,000) (a "Qualified
Initial Public Offering"), the holders of at least eighty percent (80%) of the
issued and outstanding Class B Shares may request by written notice to the
Company signed by such Class B Shareholders that the Company proceed to attempt
to consummate such Qualified Initial Public Offering.
(c) If the Company determines that it is not advisable for it to
proceed with such Qualified Initial Public Offering, it shall so notify such
Class B Shareholders in writing within thirty (30) days following receipt of the
request to proceed with the Qualified Initial Public Offering.
(d) Following receipt of such notice of refusal to proceed with such
Qualified Initial Public Offering, the holders of at least eighty percent (80%)
of the issued and outstanding Class B Shares may elect by written notice to the
Company signed by such Class B Shareholders (the "Redemption Election") to
redeem all of their Class B Shares at the price per share implied by the
pre-closing valuation of the Qualified Initial Public Offering.
8.8. Procedure for Redemption.
(a) Redemption Date. Subject to the Company having funds legally
available, the closing of any redemption of Class B Shares (the "Redemption
Date") shall occur on or about ninety (90) days following the date of (i) in the
case of a redemption pursuant to Sections 8.6(a)(i), (ii) or (iii), the
Company's determination to redeem such Shares, or (ii) in the case of a
redemption pursuant to Section 8.7, receipt by the Company of a Redemption
Election.
(b) Redemption Notice. Upon (i) the Company's determination to
redeem Shares pursuant to Sections 8.6(a)(i), (ii) or (iii), or (ii) receipt by
the Company of a Redemption Election pursuant to Section 8.7(d), the Company
shall mail, postage prepaid, not less than sixty (60) days nor more than ninety
(90) days prior to the Redemption Date, written notice thereof (the "Redemption
Notice"), to such Class B Shareholder to be redeemed, at the post office address
last shown on the records of the Company. Each such Redemption Notice shall
state:
(i) The Class B Shares that the Company shall redeem on the
Redemption Date specified in the Redemption Notice;
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(ii) The Redemption Date and applicable redemption price;
(iii) That the holder is to surrender to the Company, in that
manner and at the place designated, his or her
certificate or certificates representing the Class B
Shares to be redeemed.
(c) Surrender of Certificates; Payment. On or before each Redemption
Date, each Class B Shareholder holding Class B Shares to be redeemed on such
Redemption Date shall surrender the certificate or certificates representing
such Class B Shares to the Company, in the manner and at the place designated in
the Redemption Notice, along with a written representation and warranty that he
or she is the record and beneficial owner of such Shares with good title
thereto, free and clear of all Liens, and thereupon the redemption price for
such Class B Shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired.
(d) Rights Subsequent to Redemption. If the Redemption Notice shall
have been duly given, and if on each Redemption Date the applicable redemption
price therefore is paid or made available for payment, then notwithstanding that
the certificates evidencing any of the Class B Shares so called for redemption
shall not have been surrendered, any distributions with respect to such Class B
Shares shall cease to accrue after the applicable Redemption Date and all rights
with respect to such Class B Shares shall terminate after the applicable
Redemption Date, except only the right of the holders to receive the applicable
redemption price without interest upon surrender of their certificate or
certificates.
8.9. Registration Rights. Each of the Shareholders shall execute and shall
cause the Company to execute simultaneously with the execution hereof a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit D (the "Registration Rights Agreement"). Notwithstanding the foregoing
restrictions on Transfer, the Shareholders may Transfer Shares in an
underwritten public offering of the Company's common stock in accordance with
the provisions of the Registration Rights Agreement.
8.10. Termination of Transfer Restrictions on Initial Public Offering. The
restrictions and conditions to the Transfer of Shares set forth in Sections 8.1,
8.3, 8.4, 8.5, and 8.6(a) above shall terminate upon the consummation of an
Initial Public Offering.
ARTICLE IX. TERM
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9.1. Term. The term of this Agreement (the "Term") shall commence as of the
date hereof and shall terminate (except to the extent any provisions of this
Agreement shall expressly survive the termination hereof) upon the occurrence of
any of the following events: (a) the date of completion of the winding up of the
Company in accordance with Section 9.2 hereof, or (b) the date that all of the
Individual Parties or LCC shall cease to hold Shares as a consequence of the
proper exercise of rights set forth in Article VIII or Section 9.3 hereof.
9.2. Dissolution and Winding-up. The Shareholders may agree in writing to
dissolve and wind up the Company on such terms and conditions as they shall
determine. In the event that the Company is dissolved, unless otherwise agreed
by the Parties:
(a) This Agreement shall be automatically terminated and of no
further force and effect (except to the extent any provisions hereof shall
expressly survive the termination hereof); and
(b) upon the dissolution of the Company, the president or another
person designated by the Board (in either case being referred to herein as the
"Liquidating Party"), shall wind up the Company, cause its assets to be sold and
apply the proceeds in the following order:
(i) first, to the payment of creditors, including the
Shareholders and their Affiliates to the extent they are
creditors;
(ii) second, to the establishment of any reserves that the
Liquidating Party, in accordance with sound business
judgment, deems reasonably necessary to provide for
the payment when due of any contingent or unforeseen
liabilities or obligations of the Parties in
connection with the Company, which reserves are to be
paid over to a trustee or escrow agent to be held for
purposes of distributing such reserves in payment of
the aforementioned contingencies and distributing the
balance of such reserves, if any, in the manner
provided herein upon the expiration of such period as
the Liquidating Party may deem advisable; and
(iii) third, upon receipt by the Shareholders of a final
accounting statement prepared by the auditors regularly
engaged by the Company, whose determination shall be
final, conclusive and binding on the Shareholders
(acting as experts, not arbitrators), pro-rata to the
Class A Shareholders and Class B Shareholders to the
extent of
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the amount of capital invested in the Company by such
Shareholders; and
(iv) fourth, pro rata to the Class A Shareholders and the
Class B Shareholders.
9.3. Shareholder Calls Upon Bankruptcy. In the event of (a) any distress,
execution, sequestration or other process being levied or enforced upon a
Shareholder; (b) the adjudication of a Shareholder as a bankrupt or insolvent
subject to any insolvency or bankruptcy law; (c) the making by a Shareholder of
an assignment for the benefit of creditors; (d) the suspension of payments or a
moratorium on payments to creditors; or (e) the appointment of a receiver or
judicial manager or trustee for the business or properties of a Shareholder,
then the other Shareholders shall have the right to purchase the Shares of such
Shareholder in the same manner and subject to the same terms and conditions as
specified in Section 8.3 hereof.
9.4. Cooperation. Each Shareholder shall cooperate with the other
Shareholders and shall take all actions necessary in order to consummate any
sale and purchase of Shares, or dissolution and winding up of the Company,
pursuant to this Article IX.
ARTICLE X. MISCELLANEOUS
10.1. No Partnership. None of the provisions of this Agreement shall be
deemed to constitute a partnership between the Shareholders and they shall have
no authority to bind one another or the Company in any way.
10.2. Limitations on Shareholders' Authority. None of the Shareholders
shall have, or hold himself or herself out as having, any right, authority or
agency to act on behalf of the other Shareholder or the Company in any capacity
or in any manner except as specifically authorized in this Agreement, and none
of the Shareholders shall become liable to any other Shareholder or to any other
person by reason of any representation, action or omission of the other
Shareholder contrary to this provision. Without limiting the generality of the
foregoing, in no event shall any Shareholder have any liability or obligation
for any debts, liabilities or contractual obligations of any other Shareholder
to any other person, and each Shareholder agrees to indemnify and hold harmless
the other Shareholder as to such debts, liabilities and contractual obligations.
10.3. Survival of Representations, Warranties and Covenants.. Each of the
Shareholders hereby agrees that all representations and warranties
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made by or on behalf of it in Article VI hereof and all covenants and agreements
made by or on behalf of it in Article VII hereof shall survive the termination
of this Agreement.
10.4. Expenses. All costs and expenses incurred by each Shareholder in
connection with the preparation, execution and delivery of this Agreement, the
Assignment and Assumption Agreement, the Trademark License Agreement, the
Revolving Credit Facility, and the Registration Rights Agreement shall be borne
by the Shareholder incurring them, except that costs of independent counsel for
the Individual Parties shall be borne by the Company up to an aggregate amount
of Ten Thousand United States Dollars ($US10,000). All costs and expenses
incurred in connection with the organization of the Company shall be borne by
the Company.
10.5. Access To Company Records. Each of the Shareholders shall be entitled
to examine the separate books and accounts to be kept by the Company and to be
supplied with all relative information, including monthly management reports and
operating statistics and such other trade and financial information, as such
Shareholder deems necessary or appropriate in order to keep properly informed
about the business of the Company.
10.6. Notices. All notices, waivers and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given two (2) Business Days after delivery by registered mail, when dispatched
by telex, telegram or electronic facsimile transmission with reasonable
confirmation of receipt, or three (3) days after being sent by nationally
recognized express courier service, addressed to the Party to whom the notice is
intended to be given at the addresses specified below:
(a) If to LCC:
LCC International, Inc.
Arlington Courthouse Plaza II
2300 Clarendon Boulevard
Suite 800
Arlington, Virginia 22201
Facsimile: 703-527-9433
Attention: Piyush Sodha, President and Chief Executive Officer
22
<PAGE> 24
with copy to:
Arlington Courthouse Plaza II
2300 Clarendon Boulevard
Suite 800
Arlington, Virginia 22201
Facsimile: 703-527-9433
Attention: Peter A. Deliso, General Counsel
(b) If to Albert F. Grimes:
4625 Willowgrove Drive
Ellicott City, Maryland 21042
Facsimile No.: (410) 740-5395
(c) If to Donald G. McClure, Jr.:
c/o Americom
1300 Bellona Avenue
Timonium, Maryland 21093
Facsimile No.: (410) 823-1860
(d) If to R. Michael Gill:
c/o Americom
1300 Bellona Avenue
Timonium, Maryland 21093
Facsimile No.: (410) 823-1860
(e) If to Roy R. Markert, III
316 Taplow Road
Baltimore, Maryland 21212
Facsimile No.: (410) 433-1011
(f) If to Joseph D. Croft, III
4460 N. 38th Street
Arlington, Virginia 22207
Facsimile No.: (703) 241-2889
(g) If to Pamela H. O'Neil:
c/o Americom
1300 Bellona Avenue
Timonium, Maryland 21093
Facsimile No.: (410) 823-1860
23
<PAGE> 25
(h) If to Gary L. Grimes:
c/o Americom
1300 Bellona Avenue
Timonium, Maryland 21093
Facsimile No.: (410) 823-1860
or to such other address or addresses as any such Party may from time to time
designate by written notice.
10.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Shareholders and the Company and their permitted
successors and assigns. Notwithstanding the foregoing, no rights, obligations or
liabilities hereunder shall be assignable by a Shareholder without prior written
consent of the other Shareholders; provided, however, that LCC may at any time
without such consent assign to an Affiliate its rights hereunder and Transfer
any of its Shares to such Affiliates.
10.8. Waiver. A Shareholder by written notice to the other Shareholders may
(a) extend the time for performance of any of the obligations or other actions
of the other Shareholders under this Agreement, (b) waive any inaccuracies in
the representations or warranties of the other Shareholders contained in this
Agreement, or (c) waive or modify performance of any of the covenants or
obligations of the other Shareholders hereunder. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement shall be deemed
to constitute a waiver of compliance with any representation, warranty, covenant
or agreement contained in this Agreement and shall not operate or be construed
as a waiver or continuing waiver of any subsequent breach thereof, whether of a
similar or dissimilar nature.
10.9. Announcements. The Shareholders shall consult and confer with each
other prior to making any public announcement concerning any of the transactions
contemplated in this Agreement.
10.10. Entire Agreement. This Agreement supersedes any previous agreement,
whether written or oral, that may have been made or entered into by and among
the Shareholders or any of them or their representatives relating to the matters
contemplated hereby. This Agreement constitutes the entire agreement by and
among the Shareholders with respect to the subject matter hereof.
10.11. Amendments. This Agreement may be amended or supplemented at any
time by additional written agreements, as may mutually be determined by the
Shareholders to be necessary, desirable or expedient to further the purposes of
this Agreement, or to clarify the intention of
24
<PAGE> 26
the Shareholders, but neither this Agreement nor any term hereof may be amended,
released, discharged, abandoned, changed or modified in any manner except by an
instrument in writing which refers to this Agreement and which is executed by
each of the Shareholders.
10.12. Limitations on Rights of Third Persons. Nothing expressed or implied
in this Agreement is intended or shall be construed to confer upon or give any
person other than the Shareholders any rights or remedies under or by reason of
this Agreement or any transaction contemplated hereby, except the permitted
assigns of the Shareholders.
10.13. Governing Law. The legal relations between the Shareholders and the
Company shall in all respects be interpreted, construed and governed by and in
accordance with the laws of the State of Delaware, without reference to its
conflict of laws principles.
10.14. Further Assurances. The Shareholders hereby agree to execute and
deliver all documents and instruments and to take or cause to be taken such
other actions that are reasonably necessary or appropriate to consummate the
transactions contemplated by this Agreement.
10.15. Remedies to be Cumulative. The remedies provided for in this
Agreement shall be in addition to, and not in lieu of, any other remedies to
which any of the Shareholders is entitled for any breach of or non-compliance
with the provisions of this Agreement.
10.16. Severability. Each section and sub-section of this Agreement
constitutes a separate and distinct undertaking, covenant and/or provision
hereof. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable Laws. In the event
that any provision of this Agreement shall finally be determined by a competent
court or tribunal to be unlawful or unenforceable, such provision shall be
deemed severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect, and in substitution for any such
provision held unenforceable, there shall be substituted a provision of similar
import reflecting the original intent of the Shareholders to the extent
permissible under applicable Laws. In particular, but without limiting the
generality of this Section 10.16, each covenant contained in Section 7.2 hereof
shall be read and construed independently of the other covenants and while the
covenants contained therein are considered by the Shareholders to be reasonable
in all the circumstances as of the date hereof it is acknowledged that covenants
of such a nature may be invalid because of changing circumstances or other
unforeseen reasons and accordingly it is hereby agreed and declared that if any
one or more
25
<PAGE> 27
such covenants shall be judged to be void as going beyond what is reasonable in
all the circumstances for the protection of the interests of the Company or the
Shareholder in question, the validity of any other covenants and provisions
contained therein shall not be affected, provided that if such covenants would
be valid if part of the wording thereof was deleted or the period thereof
reduced or the range of activities or area covered thereby reduced in scope then
said covenants shall be deemed to apply with such modifications as may be
necessary to make them valid and effective and any such modification shall not
thereby affect the validity of any other covenants contained herein.
10.17. Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
10.18. Titles and Headings. Titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
[SIGNATURE PAGE FOLLOWS]
26
<PAGE> 28
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
LCC INTERNATIONAL, INC.
By: /S/ PIYUSH SODHA
----------------
Name: Piyush Sodha
Title: President and Chief
Executive Officer
/S/ ALBERT F. GRIMES
--------------------
Albert F. Grimes
/S/ DONALD G. MCCLURE, JR.
---------------------------
Donald G. McClure, Jr.
/S/ R. MICHAEL GILL
--------------------
R. Michael Gill
/S/ ROY R. MARKERT, III
------------------------
Roy R. Markert, III
/S/ JOSEPH D. CROFT, III
-------------------------
Joseph D. Croft, III
/S/ PAMELA H. O'NEILL
----------------------
Pamela H. O'Neill
/S/ GARY L. GRIMES
-------------------
Gary L. Grimes
27
<PAGE> 1
Exhibit 10.75
[LCC LETTERHEAD]
November 7, 1996
MCI Telecommunications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn.: Mr. William Armistead
Re Subordination and Intercreditor Agreement, dated as of September 30,
1996, among The Chase Manhattan Bank ("Chase"), MCI
Telecommunications Corporation ("MCI"), and LCC International, Inc.
("LCC") (the "Intercreditor Agreement").
Dear Mr. Armistead:
This is to confirm our recent discussions with respect to the Intercreditor
Agreement. (All terms not defined in this letter shall have the meaning given to
them in the Intercreditor Agreement.)
MCI hereby agrees that (i) the maximum aggregate principal amount of Debt which
the Company may incur under the Senior Note Documents shall be increased from
$20,000,000 to $60,000,000 and (ii) the Intercreditor Agreement shall be amended
hereby in all respects to reflect such permitted increase including, without
limitation, by substituting the amount of $60,000,000 for the amount of
$20,000,000 in each place where such amount appears in Section 4 thereof.
In addition, MCI hereby acknowledges that the Company has entered into
preliminary negotiations with lenders (e.g., NationsBank, N.A.) to replace the
Chase credit facility with a new credit facility in the principal amount of
$60,000,000. MCI agrees that, upon request by the Company, MCI shall enter into
a new intercreditor agreement with the Company and any other party designated by
the Company (the "New Intercreditor Agreement") on substantially the same terms
set forth in the Intercreditor Agreement, as amended by this letter, provided
that the Intercreditor Agreement shall terminate on or prior to the effective
date of the New Intercreditor Agreement.
<PAGE> 2
Please indicate MCI's consent to the foregoing by executing this letter and the
enclosed copy in the space provided below. Kindly return one fully executed copy
to me for the Company's files.
Thank you for your continued cooperation with respect to these matters.
Sincerely,
/s/ RICHARD HOZIK
Richard Hozik
Senior Vice President
& Chief Financial Officer
Acknowledged and Agreed to this 7th day of November, 1996.
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ WILLIAM S. ARMISTEAD
----------------------------
Name: William S. Armistead
--------------------------
Title: Vice President
-------------------------
<PAGE> 1
LCC Internatioal, Inc.
Net Income (Loss) per share calculation
Exhibit 11
(in 000's, except for per share amounts)
<TABLE>
<CAPTION>
1996 1997 1998
------------------------------ --------------------------- --------------------------
PRO FORMA PER
NET PER SHARE NET PER SHARE NET SHARE
(LOSS) SHARES AMOUNT INCOME SHARES AMOUNT (LOSS) SHARES AMOUNT
--------- ------ --------- ------ ------ --------- -------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income (loss) available
to common shareholders:
Continuing operations........ $(18,693) $5,390 $ (6,958)
Discontinued Operations...... (2,076) 2,185 (17,785)
-------- ------ --------
Total........................ $(20,769) 12,211 $7,575 14,740 $(24,743) 15,509
======== ====== ========
Continuing Operations........ $(1.53) $0.37 $(0.45)
Discontinued Operations...... (0.17) 0.15 (1.15)
------ ----- ------
Total........................ $(1.70) $0.51 $(1.60)
====== ===== ======
EFFECTIVE OF DILUTIVE
SECURITIES
Convertible debt........... -- --
Stock option plans......... -- 1,215 --
------ ------ ------
DILUTIVE EPS
Net income (loss) available
to common stockholders
and assumed conversions:
Continuing Operations...... $(18,693) $(1.53) $5,390 $0.34 $ (6,958) $(0.45)
Discontinued Operations.... (2,076) (0.17) 2,185 0.14 (17,785) (1.15)
-------- ------ ------ ----- -------- ------
Total...................... $(20,769) 12,211 $(1.70) $7,575 15,955 $0.47 $(24,743) 15,509 $(1.60)
======== ====== ====== ====== ====== ===== ======== ====== ======
</TABLE>
NOTES: 1. The Company's convertible subordinated debt, which is exchangeable
into 2.8 million shares of the Company's Class A Common Stock, was
outstanding during calendar 1996, 1997 and 1998, but was not
included in the computation of diluted earnings per share because
the effect of which would have been anti-dilutive.
2. Options to purchase 2.8 million and 2.2 million shares of Class A
Common Stock were outstanding during 1996 and 1998, respectively,
but were not included in the computation of earnings per share
because the effect of which would have been anti-dilutive.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation or
----------------- --------------------------------
Organization
------------
<S> <C>
1. LCC Design Services, L.L.C. Delaware
2. LCC Europe Gmbh Germany
3. Eurofon de France S.A.R.L. France
4. LCC, United Kingdom, Ltd. United Kingdom
5. LCC Development Company, L.L.C. Delaware
6. Microcell Management Inc. Delaware
7. LCC do Brazil Ltda. Brazil
8. Koll Telecommunications Services, L.L.C Delaware
9. LCC Asia Pacific LTD PTE Singapore
10. LCC Europe AS Norway
11. LCC International Holdings NL, Inc. Delaware
12. LCC International Holdings, Belgium, Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23.1
The Board of Directors
LCC International, Inc.
We consent to the incorporation by reference in the registration statement (No.
333-17803) on Form S-8 of LCC International, Inc. of our report dated March 26,
1999, relating to the consolidated balance sheets of LCC International, Inc.
and subsidiaries as of December 31, 1997 and 1998, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1998, and related
schedule, which report appears in the December 31, 1998 annual report on Form
10-K of LCC International, Inc.
KPMG LLP
Washington, DC
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,240
<SECURITIES> 0
<RECEIVABLES> 13,028
<ALLOWANCES> 10,453
<INVENTORY> 0
<CURRENT-ASSETS> 48,331
<PP&E> 22,132
<DEPRECIATION> 15,462
<TOTAL-ASSETS> 84,204
<CURRENT-LIABILITIES> 33,860
<BONDS> 0
0
0
<COMMON> 157
<OTHER-SE> 72
<TOTAL-LIABILITY-AND-EQUITY> 84,204
<SALES> 0
<TOTAL-REVENUES> 87,188
<CGS> 0
<TOTAL-COSTS> 66,759
<OTHER-EXPENSES> 29,933
<LOSS-PROVISION> 2,047
<INTEREST-EXPENSE> 2,295
<INCOME-PRETAX> (11,519)
<INCOME-TAX> (4,561)
<INCOME-CONTINUING> (6,958)
<DISCONTINUED> (17,785)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,743)
<EPS-PRIMARY> (1.60)
<EPS-DILUTED> (1.60)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,878
<SECURITIES> 0
<RECEIVABLES> 10,216
<ALLOWANCES> 11,929
<INVENTORY> 0
<CURRENT-ASSETS> 84,163
<PP&E> 7,691
<DEPRECIATION> 13,091
<TOTAL-ASSETS> 95,420
<CURRENT-LIABILITIES> 25,008
<BONDS> 0
0
0
<COMMON> 151
<OTHER-SE> 20,051
<TOTAL-LIABILITY-AND-EQUITY> 95,420
<SALES> 0
<TOTAL-REVENUES> 91,289
<CGS> 0
<TOTAL-COSTS> 62,263
<OTHER-EXPENSES> 20,810
<LOSS-PROVISION> 3,206
<INTEREST-EXPENSE> 3,289
<INCOME-PRETAX> 6,938
<INCOME-TAX> 1,548
<INCOME-CONTINUING> 5,390
<DISCONTINUED> 2,185
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,575
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.47
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,313
<SECURITIES> 0
<RECEIVABLES> 13,740
<ALLOWANCES> 13,769
<INVENTORY> 0
<CURRENT-ASSETS> 79,919
<PP&E> 4,034
<DEPRECIATION> 9,969
<TOTAL-ASSETS> 89,363
<CURRENT-LIABILITIES> 30,079
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 8,331
<TOTAL-LIABILITY-AND-EQUITY> 89,363
<SALES> 0
<TOTAL-REVENUES> 93,156
<CGS> 0
<TOTAL-COSTS> 61,581
<OTHER-EXPENSES> 52,311
<LOSS-PROVISION> 1,661
<INTEREST-EXPENSE> 3,050
<INCOME-PRETAX> (20,476)
<INCOME-TAX> (8,745)
<INCOME-CONTINUING> (11,731)
<DISCONTINUED> 447
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,284)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> (1.70)
</TABLE>
